Columbia Sportswear Co: Form 10-Q for the period ended Sep 30, 2025

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with "Special Note Regarding Forward-Looking Statements", Part I, Item 1 and Part II, Item 1A of this Quarterly Report on Form 10-Q.

OVERVIEW

As a global leader in designing, developing, marketing, and distributing outdoor, active and lifestyle products, our mission is to connect active people with their passions. We provide our products through our four brands: Columbia, SOREL, Mountain Hardwear, and prAna; and two major product categories: apparel, accessories and equipment products and footwear products. Apparel, accessories and equipment products are provided by our Columbia, Mountain Hardwear and prAna brands. Footwear products are provided by our Columbia and SOREL brands. We sell our products in more than 110 countries and operate in four geographic segments: U.S., LAAP, EMEA, and Canada.

Our business is affected by the general seasonal trends common to the industry, including seasonal weather and discretionary consumer shopping and spending patterns. Our products are marketed on a seasonal basis, and our sales are weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed throughout the year.

ACCELERATE Growth Strategy

Last year, we announced the Columbia brand (the "Brand") ACCELERATE Growth Strategy. At its core, the ACCELERATE Growth Strategy is intended to elevate the Brand to target a younger and more active consumer while maintaining those consumers that have known and trusted Columbia to offer high quality products at an exceptional value. It is a multi-year initiative centered around several consumer-centric shifts to the Brand, product and marketplace strategies, as well as enhanced ways of working. We believe successful execution of the ACCELERATE Growth Strategy can elevate the Brand and drive profitable growth.

The third quarter of 2025 was an important milestone in this journey. In August 2025, the Columbia brand launched its new brand platform "Engineered for Whatever" through a global brand campaign in print, on social and in-person. The Columbia brand also released certain new products designed with a younger, more active consumer in mind, such as the Amaze Puff. Additionally, the Columbia brand re-launched the U.S. Columbia.com website, with enhanced features and photography.

Through the ACCELERATE Growth Strategy, we are focused on achieving the following objectives:

• steward existing consumer segments while focusing on bringing new younger and active consumers into the Brand;
• elevate consumers' perception of the Brand;
• create product based on a consumer-centric product construct;
• enhance the positioning of the Brand globally, particularly in the U.S. marketplace; and
• deliver integrated full-funnel marketing.

In addition, we are committed to investing in our company-wide strategic priorities with a renewed emphasis to:

• accelerate profitable growth;
• create iconic products that are differentiated, functional and innovative;
• drive brand engagement through increased, focused demand creation investments;
• enhance consumer experiences by investing in capabilities to delight and retain consumers;
• amplify marketplace excellence, with digitally-led, omni-channel, global distribution; and
• empower talent that is driven by our core values.

Ultimately, we expect our investments to enable market share capture across our brand portfolio, expand gross margin, improve selling, general and administrative expense efficiency, and drive improved operating margin over the long-term.

Profit Improvement Program

Concurrent with the ACCELERATE Growth Strategy, we continue to make progress on our multi-year Profit Improvement Program to accelerate profitable growth and improve the efficiency of our operations. The Profit Improvement Program focuses on four areas of cost reduction and realignment, including:

• operational cost savings;
• organizational cost savings;
• operating model improvements; and
• indirect, or non-inventory, spending.

In 2024, our Profit Improvement Program resulted in approximately $90 million of annualized cost savings. In early 2025, in response to ongoing SG&A expense and operating profit pressures, we initiated a review of our cost structure to pursue additional cost savings, beyond the previously stated $125 to $150 million target. On a cumulative basis, actions executed in 2024 and through the third quarter of 2025 yield annualized cost savings exceeding $150 million. Despite achieving our target, we continue to pursue profit improvement opportunities. Our Profit Improvement Program is intended to lower the Company's SG&A expenses as a percentage of consolidated net sales and to increase the Company's operating margin, over time.

Business Environment and Trends

The Columbia brand in the U.S. | The Columbia brand in the U.S. has been under pressure due to numerous factors. The Columbia brand's ACCELERATE Growth Strategy is intended to overcome certain of these headwinds, elevate the consumers' perception of the Brand, and to fuel future growth.

Wholesale sales for the Columbia brand in the U.S. are expected to be down for full year 2025 and extending into first half 2026. The Columbia brand's U.S. direct-to-consumer ("DTC") e-commerce channel has also experienced reduced sales year-over-year as we strategically positioned the site to represent a more premium expression of the Brand. The Columbia brand’s U.S. DTC brick-and-mortar business primarily consists of outlet stores, and was supplemented in 2024 by temporary clearance stores to clear excess inventory. To help change consumers’ perception of the Columbia brand from a solely value-oriented proposition at physical retail, the Brand is investing in in-store marketing at key wholesale partners, enhancing our channel segmentation strategies and opening a small number of premium stores in high-traffic shopping malls in North America.

Elevating consumers’ perception of the Columbia brand will take time. The Brand’s product refresh is still underway, with different segments of the Brand’s global line being updated over time to resonate more with younger and more active consumers while still serving our value-oriented consumers. The Columbia brand’s ACCELERATE Growth Strategy and increased investment in demand creation began in the second half of this year and we expect will continue in seasons to come. Over time, we expect these investments and improvements to elevate the Brand in the marketplace and eventually stimulate consumer demand in the U.S.

Tariffs Uncertainty | We are headquartered in the U.S. and are subject to the laws and regulations governing companies operating in the U.S. Incremental tariffs on products imported into the U.S. from most countries are now in place, in addition to the product-based tariffs the Company has historically paid for its imported goods into the U.S. Certain of these incremental tariff levels have changed with little notice, making it difficult to predict product costs and market impacts. We expect Vietnam, Bangladesh, Indonesia, and India to represent approximately 42 percent, 23 percent, 11 percent, and 9 percent, respectively, of our finished goods imports into the U.S. in 2025. Additionally, we expect for China to represent a minimal percentage of our finished goods imports into the U.S. in 2025.

Higher tariffs on U.S. imports are already adversely impacting our U.S. product input costs. We estimate that the 2025 unmitigated financial impact of the incremental tariffs will be approximately $35 to $40 million. On an annualized basis utilizing an approximation of our 2024 imports of finished goods inventory, we estimate that the unmitigated financial impact of the incremental tariffs will be approximately $160 million.

For Fall 2025, in an effort to mitigate the impact of further potential tariff increases, we have partnered with our finished goods vendors and logistics providers to accelerate the timing of inventory receipts. Additionally, we have worked with our wholesale customers to ship Fall 2025 orders earlier than initially planned, which has helped alleviate storage capacity constraints within our distribution center network. We also continue to be focused on maximizing our marketplace opportunity. We are working with our wholesale partners to deliver value to consumers and keep inventory and wholesale partner margins healthy. We are absorbing the incremental tariff cost related to Fall 2025 as the underlying inventory is sold.

For 2026, we intend to continue to take actions to offset the impact of higher U.S. tariffs on our business. For Spring 2026, we increased U.S. pricing by a high-single digit percent, and we are maintaining similar price increases for the Fall 2026 season. When combined with other mitigation tactics, our goal in 2026 is to offset the dollar impact of higher tariffs. Longer-term, our goal is to restore our product margin percentage to historical levels through a combination of actions, including price increases, vendor negotiations, re-sourcing product, and other mitigation tactics.

We intend to balance these actions with our overall growth strategy, seeking to minimize the impact to consumer demand and maximize our market share potential. We expect these incremental tariffs may also impact demand for our products as end consumers weigh discretionary spending and wholesale customers rationalize their open to buy budgets. We expect our inventories to also be impacted by a reduction in consumer and customer demand, and have rationalized Fall 2025 inventory buys and Spring 2026 inventory plans, while seeking to preserve our strategic sourcing relationships, in order to reduce the risk of holding excess inventory.

Heightened Geopolitical Risk | We sell our products in more than 110 countries and our ability to sell, import into and produce in certain markets may be impacted by ongoing geopolitical tensions. We believe these tensions will remain elevated and will continue to manifest themselves in certain regions where we operate.

International Trends | We have not seen a meaningful change in trends in the majority of our international businesses, which were quite healthy for the first nine months of 2025. Across our EMEA and LAAP markets, our product offerings, marketing activations and marketplace strategies are working to create a more premium Columbia brand experience. However, it is not possible to predict the extent to which U.S. tariff actions will impact international economic growth and consumer demand for our products globally.

RESULTS OF OPERATIONS

The following discussion of our results of operations and liquidity and capital resources should be read in conjunction with Part I, Item 1 of this Quarterly Report on Form 10-Q.

Non-GAAP Financial Measure

To supplement financial information reported in accordance with U.S. GAAP, we disclose constant-currency net sales information, which is a non-GAAP financial measure, to provide a framework to assess how the business performed excluding the effects of changes in foreign currency exchange rates against the U.S. dollar between comparable reporting periods. We calculate constant-currency net sales by translating net sales in foreign currencies for the current period into U.S. dollars at the exchange rates that were in effect during the comparable period of the prior year. Management believes that this non-GAAP financial measure reflects an additional and useful way of viewing an aspect of our operations that, when viewed in conjunction with our GAAP results, provides a more comprehensive understanding of our business and operations. In particular, investors may find the non-GAAP measure useful by reviewing our net sales results without the volatility of foreign currency exchange rates. This non-GAAP financial measure also facilitates management's internal comparisons to our historical net sales results and comparisons to competitors' net sales results. Constant-currency financial measures should be viewed in addition to, and not in lieu of or superior to, our financial measures calculated in accordance with GAAP.

The following discussion includes references to constant-currency net sales, and we provide a reconciliation of this non-GAAP measure to the most directly comparable financial measure calculated in accordance with GAAP below.

Results of Operations — Consolidated

The following table presents the items in our unaudited Condensed Consolidated Statements of Operations, both in dollars and as a percentage of net sales:

(in thousands, except for percentage of net sales and per share amounts)

COLUMBIA SPORTSWEAR COMPANY | Q3 2025 FORM 10-Q | 27

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Net Sales. Net sales by brand, product category and channel are summarized in the following table:

(in thousands, except for percentages)

(1) Constant-currency net sales is a non-GAAP financial measure. See "Non-GAAP Financial Measure" above for further information.

Our global net sales increase was driven by growth within our EMEA, LAAP and Canada regions, partially offset by declines in the U.S., as compared to the same period in 2024. The growth in EMEA and LAAP net sales was largely driven by the strength of the Columbia brand within our wholesale business across many markets. We attribute the international strength of the Columbia brand to the execution of our business strategies and brand positioning, as well as to the benefit of certain trends and/or factors favorably impacting the outdoor apparel and footwear sector. The growth in Canada net sales reflects the impact of favorable timing of wholesale shipments and modest growth in our Fall 2025 orders, partially offset by declines in our Canada DTC business.

The decline in U.S. net sales was driven primarily by our U.S. DTC brick-and-mortar and e-commerce businesses. U.S. wholesale net sales were relatively flat reflecting earlier shipments of Fall 2025 orders, offset by decreased wholesale customer demand and lower closeout sales. The underlying business trends within our U.S. business remain under pressure.

Gross Profit. Gross profit is summarized in the following table:

(in thousands, except for percentages and basis points)

Gross margin contracted primarily due to an approximate 160 bps decrease in channel profitability resulting from unmitigated incremental tariffs, which more than offset higher channel profitability from lower clearance and promotional activity.

Selling, General and Administrative Expenses. SG&A expenses are summarized in the following table:

(in thousands, except for percentages and basis points)

SG&A expenses increased primarily due to the following factors:

• higher demand creation expenses of $11.6 million, reflecting increased investment in demand creation in line with our ACCELERATE Growth Strategy;
• higher omni-channel expenses, reflecting higher DTC brick-and-mortar expenses associated with new stores, partially offset by temporary clearance location closures; and
• higher other expenses, reflecting higher supply chain costs, partially offset by lower technology expenses.

Impairment of Goodwill and Intangible Assets. During the third quarter of 2025, we recognized $29.0 million of impairment charges as a result of our interim quantitative impairment tests for the prAna and Mountain Hardwear indefinite-lived intangible assets (which consists of trade names and trademarks) (collectively, "trade names") and goodwill reporting units. These charges consisted of a $12.2 million impairment charge related to the Mountain Hardwear goodwill reporting unit, comprising the full Mountain Hardwear goodwill balance, an $8.8 million impairment charge related to the prAna goodwill reporting unit, and an $8.0 million impairment charge related to the prAna trade name.

Refer to Note 6 in Part I, Item 1 and our Critical Accounting Estimates in Part I, Item 2 of this Quarterly Report on Form 10-Q for further information regarding these impairments.

Interest Income, Net. Interest income, net is summarized in the following table:

(in thousands, except for percentages)

Interest income, net decreased, primarily reflecting lower yields on decreased levels of cash, cash equivalents and short-term investments.

Income Tax Expense. Income tax expense and the related effective income tax rate are summarized in the following table:

(in thousands, except for percentages)

Our effective income tax rate increased primarily due to the impact of non-deductible impairment charges.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Net Sales. Net sales by brand, product category and channel are summarized in the following table:

(in thousands, except for percentages)

(1) Constant-currency net sales is a non-GAAP financial measure. See "Non-GAAP Financial Measure" above for further information.

Our global net sales increase was driven by growth within our EMEA, LAAP and Canada regions, partially offset by declines in the U.S., as compared to the same period in 2024. The growth in EMEA and LAAP net sales was largely driven by the strength of the Columbia brand across both wholesale and DTC channels across many markets. We attribute the international strength of the Columbia brand to the execution of our business strategies and brand positioning, as well as to the benefit of certain trends and/or factors favorably impacting the outdoor apparel and footwear sector. The growth in Canada net sales reflects the impact of favorable timing of wholesale shipments, partially offset by declines in our Canada DTC business.

The decline in U.S. net sales was driven primarily by our U.S. DTC brick-and-mortar and e-commerce businesses, partially offset by a modest increase in our U.S. wholesale business, which benefitted from earlier shipments of Fall 2025 orders, partially offset by lower closeout sales and decreased wholesale customer demand. The underlying business trends within our U.S. business remain under pressure.

Gross Profit. Gross profit is summarized in the following table:

(in thousands, except for percentages and basis points)

Gross margin expanded primarily due to a favorable increase in channel profitability resulting from healthier overall inventory composition which enabled higher product margins across our wholesale and DTC channels, partially offset by unmitigated incremental tariffs. Higher wholesale margins were driven by lower closeout sales with higher margins. Higher DTC margins were driven by less promotional activity and lower outbound freight costs.

Selling, General and Administrative Expenses. SG&A expenses are summarized in the following table:

(in thousands, except for percentages and basis points)

SG&A expenses increased primarily due to the following factors:

• higher omni-channel expenses of $25.4 million, reflecting higher DTC brick-and-mortar expenses associated with new stores, partially offset by temporary clearance location closures; and
• higher demand creation expenses of $22.4 million, reflecting our increased investment in demand creation in line with our ACCELERATE Growth Strategy.

Impairment of Goodwill and Intangible Assets. During the third quarter of 2025, we recognized $29.0 million of impairment charges as a result of our interim quantitative impairment tests for the prAna and Mountain Hardwear trade names and goodwill reporting units. These charges consisted of a $12.2 million impairment charge related to the Mountain Hardwear goodwill reporting unit, comprising the full Mountain Hardwear goodwill balance, an $8.8 million impairment charge related to the prAna goodwill reporting unit, and an $8.0 million impairment charge related to the prAna trade name.

Refer to Note 6 in Part I, Item 1 and our Critical Accounting Estimates in Part I, Item 2 of this Quarterly Report on Form 10-Q for further information regarding these impairments.

Interest Income, Net. Interest income, net is summarized in the following table:

(in thousands, except for percentages)

Interest income, net, decreased, primarily reflecting lower yields on decreased levels of cash, cash equivalents and short-term investments.

Income Tax Expense. Income tax expense and the related effective income tax rate are summarized in the following table:

(in thousands, except for percentages)

Our effective income tax rate decreased primarily due to a tax benefit associated with foreign currency losses, partially offset by the impact of non-deductible impairment charges.

Results of Operations — Segment

Segment operating income includes net sales, cost of sales, segment SG&A expenses, and other segment items for each of our four reportable segments. For each reportable segment, other segment items include certain corporate expenses and net licensing income allocated to each of the reportable segments, as well as net licensing income directly attributable to each of the reportable segments. Refer to Note 3 in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information.

Three Months Ended September 30, 2025 Compared to Three Months Ended September 30, 2024

Net sales by geographic segment are summarized in the following table:

(in thousands, except for percentage changes)

(1) Constant-currency net sales is a non-GAAP financial measure. See "Non-GAAP Financial Measure" above for further information.

Segment operating income for each reportable segment and unallocated corporate expenses are summarized in the following table:

(in thousands)

U.S.

U.S. segment operating income decreased $18.3 million to $97.1 million, or 17.8% of net sales, for the third quarter of 2025 from $115.4 million, or 20.2% of net sales, for the comparable period in 2024. The decrease in U.S. segment operating income was driven primarily by decreased net sales and increased segment SG&A expenses. U.S. net sales decreased $24.6 million, or 4%, for the third quarter of 2025, compared to the same period in 2024, driven primarily by our U.S. DTC brick-and-mortar and e-commerce businesses. The decline in U.S. DTC brick-and-mortar net sales was primarily attributable to the closure of temporary clearance locations and, to a lesser degree, decreased productivity from existing stores, partially offset by contributions from new stores. As of September 30, 2025, our U.S. business operated 172 retail stores and 8 temporary clearance locations, compared to 169 retail stores and 42 temporary clearance locations for the comparable period in 2024. The decline in U.S. DTC e-commerce net sales was attributable to a challenging e-commerce environment for outdoor brands and increased competition within the outdoor lifestyle category, coupled partially with ongoing efforts to refine and evolve our online promotions and marketing strategies. U.S. wholesale net sales were relatively flat, reflecting a shift of Fall 2025 shipments into the third quarter of 2025 out of the fourth quarter of 2025, partially offset by lower Fall 2025 orders and lower closeout sales. The underlying business trends within our U.S. business remain under pressure. U.S. segment gross margin expanded to 49.5% for the third quarter of 2025 from 49.4% for the comparable period in 2024, driven primarily by higher channel profitability from lower clearance and promotional activity, partially offset by an approximate 160 bps decrease in channel profitability resulting from unmitigated incremental tariffs. U.S. segment SG&A expenses increased as a percentage of net sales to 28.7% for the third quarter of 2025, compared to 25.8% for the same period in 2024, driven primarily by fixed SG&A expense deleverage on decreased net sales. In total, U.S. segment SG&A expenses increased 6.4% for the three months ended September 30, 2025, as compared to the same period in 2024, driven primarily by our investment in demand creation in line with our ACCELERATE Growth Strategy.

LAAP

LAAP segment operating income increased $0.7 million to $21.1 million, or 14.7% of net sales, for the third quarter of 2025 from $20.4 million, or 15.1% of net sales, for the comparable period in 2024. LAAP net sales increased $8.4 million, or 6% (6% constant-currency), for the third quarter of 2025, compared to the same period in 2024, driven primarily by our LAAP distributor and China businesses, partially offset by declines in our Japan and Korea businesses. The growth in LAAP distributor net sales was driven by growth in our Fall distributor orders as compared to the same period in the prior year. The growth in China net sales reflected continued healthy demand, which we believe was attributable to the execution of our marketplace strategies, including premium offerings and unique marketing activations. The decline in Japan net sales was driven primarily by decreased Japan wholesale net sales, reflecting a shift of Fall 2025 shipments into the fourth quarter of 2025, partially offset by growth in Japan DTC net sales which we believe was attributable to the execution of our marketplace strategies, including localized product offerings. The decline in Korea net sales was driven primarily by decreased Korea wholesale net sales, partially offset by modest growth in Korea DTC net sales. LAAP segment gross margin contracted to 53.8% for the third quarter of 2025 from 54.5% for the comparable period in 2024, driven primarily by unfavorable region and channel net sales mix and lower channel profitability reflecting unfavorable input costs, partially offset by higher channel profitability reflecting favorable product mix. LAAP segment SG&A expenses increased as a percentage of net sales to 35.1% for the third quarter of 2025, compared to 34.1% for the same period in 2024, driven primarily by higher personnel and DTC brick-and-mortar expenses associated with new stores. In total, LAAP segment SG&A expenses increased 9.3% for the three months ended September 30, 2025, as compared to the same period in 2024.

EMEA

EMEA segment operating income increased $5.0 million to $38.2 million, or 23.2% of net sales, for the third quarter of 2025 from $33.2 million, or 23.4% of net sales, for the comparable period in 2024. EMEA net sales increased $22.7 million, or 16% (10% constant-currency), for the third quarter of 2025, compared to the same period in 2024, driven primarily by our Europe-direct business. The growth in Europe-direct net sales was driven by robust demand across both wholesale and DTC channels, which we believe was attributable to the execution of our marketplace strategies, including marketing activations and partnership with strategic wholesale partners and brand authenticators. EMEA distributor net sales decreased modestly, reflecting a shift of Fall 2025 shipments out of the third quarter of 2025 into the second quarter of 2025, partially offset by growth in Fall distributor orders, as compared to the same period in 2024. EMEA segment gross margin expanded to 49.7% for the third quarter of 2025 from 49.6% for the comparable period in 2024, driven primarily by higher channel profitability from lower clearance and promotional activity, partially offset by unfavorable input costs. EMEA segment SG&A expenses increased as a percentage of net sales to 24.2% for the third quarter of 2025, compared to 23.4% in 2024, driven primarily by higher personnel and demand creation expenses. In total, EMEA segment SG&A expenses increased 20.1% for the three months ended September 30, 2025, as compared to the same period in 2024.

Canada

Canada segment operating income increased $0.5 million to $22.8 million, or 25.7% of net sales, for the third quarter of 2025 from $22.4 million, or 26.7% of net sales, for the comparable period in 2024. Canada net sales increased $5.2 million, or 6% (7% constant-currency), for the third quarter of 2025, compared to the same period in 2024, driven primarily by our Canada wholesale business, partially offset by declines in our Canada DTC business. The growth in our Canada wholesale business reflected a shift of Fall 2025 shipments into the third quarter of 2025 out of the fourth quarter of 2025 and modest growth of Fall orders. Canada segment gross margin contracted to 47.4% for the third quarter of 2025 from 49.4% for the comparative period in 2024, driven primarily by lower channel profitability from unfavorable input costs and unfavorable effects from foreign exchange hedge rates, partially offset by higher channel profitability from lower clearance and promotional activity. Canada segment SG&A expenses increased as a percentage of net sales to 17.2% for the third quarter of 2025, compared to 16.9% for the same period in 2024. In total, Canada segment SG&A expenses increased 8.1% for the three months ended September 30, 2025, as compared to the same period in 2024.

Unallocated corporate expenses

Unallocated corporate expenses increased by $33.0 million to $111.8 million in the third quarter of 2025, from $78.9 million for the comparable period in 2024, driven primarily by $29.0 million of impairment charges related to Mountain Hardwear and prAna goodwill and the prAna trade name.

Nine Months Ended September 30, 2025 Compared to Nine Months Ended September 30, 2024

Net sales by reportable segment are summarized in the following table:

(in thousands, except for percentage changes)

(1) Constant-currency net sales is a non-GAAP financial measure. See "Non-GAAP Financial Measure" above for further information.

Segment operating income for each reportable segment and unallocated corporate expenses are summarized in the following table:

(in thousands)

U.S.

U.S. segment operating income decreased $31.5 million to $180.3 million, or 13.3% of net sales, for the nine months ended September 30, 2025 from $211.8 million, or 15.3% of net sales, for the comparable period in 2024. The decrease in U.S. segment operating income was driven primarily by decreased net sales and increased segment SG&A expenses. U.S. net sales decreased $33.0 million, or 2%, for the nine months ended September 30, 2025, compared to the same period in 2024, driven primarily by our U.S. DTC brick-and-mortar and e-commerce businesses, partially offset by a modest increase in U.S. wholesale net sales. The decline in U.S. DTC brick-and-mortar net sales was attributable to the closure of temporary clearance locations and decreased productivity from existing stores, partially offset by contributions from new stores. As of September 30, 2025, our U.S. business operated 172 retail stores and 8 temporary clearance locations, compared to 169 retail stores and 42 temporary clearance locations for the comparable period in 2024. The decline in U.S. DTC e-commerce net sales was attributable to a challenging e-commerce environment for outdoor brands and increased competition within the outdoor lifestyle category, coupled with a difficult macroeconomic environment weighing on consumer sentiment. Our U.S. DTC e-commerce business was also partially impacted by ongoing efforts to refine and evolve our online promotions and marketing strategies. The modest increase in U.S. wholesale net sales reflected a shift of Fall 2025 shipments into the first nine months of 2025, partially offset by lower closeout sales and lower Fall 2025 orders. The underlying business trends within our U.S. business remain under pressure. U.S. segment gross margin expanded to 49.6% for the nine months ended September 30, 2025 from 48.9% for the comparable period in 2024, driven primarily by higher channel profitability from lower clearance and promotional activity, partially offset by unmitigated incremental tariffs. U.S. segment SG&A expenses increased as a percentage of net sales to 32.4% for the nine months ended September 30, 2025, compared to 29.3% for the same period in 2024, driven primarily by fixed SG&A deleverage on decreased net sales. In total, U.S. segment SG&A expenses increased 7.8% for the nine months ended September 30, 2025, as compared to the same period in 2024, driven primarily by our investment in demand creation in line with our ACCELERATE Growth Strategy.

LAAP

LAAP segment operating income increased $6.1 million to $54.5 million, or 13.4% of net sales, for the nine months ended September 30, 2025 from $48.3 million, or 13.0% of net sales, for the comparable period in 2024. LAAP net sales increased $34.8 million, or 9% (10% constant-currency), for the nine months ended September 30, 2025, compared to the same period in 2024, driven primarily by our China, LAAP distributor and Japan businesses, partially offset by a decline in our Korea business. The growth in China net sales reflected continued strong demand, which we believe was attributable to the execution of our marketplace strategies throughout the first nine months of 2025, including premium product offerings and unique marketing strategies. The growth was further aided by positive outdoor category trends, as compared to the same period in 2024. The growth in LAAP distributor net sales was driven by growth in our distributor orders as compared to the same period in the prior year. The growth in Japan net sales was driven by healthy demand across all channels, which we believe was attributable to the execution of our marketplace strategies, as well as the effect of increased inbound international tourism through most of the first nine months of 2025, as compared to the same period in 2024. The decline in Korea net sales reflected unfavorable effects from foreign currency fluctuation, which more than offset constant-currency net sales growth within our Korea wholesale business, partially offset by a decline in our Korea DTC business. LAAP segment SG&A expenses decreased as a percentage of net sales to 36.3% for the nine months ended September 30, 2025, compared to 36.7% for the same period in 2024, primarily driven by fixed SG&A leverage on increased net sales. In total, LAAP segment SG&A expenses increased 8.2% for the nine months ended September 30, 2025, as compared to the same period in 2024.

EMEA

EMEA segment operating income increased $12.0 million to $78.8 million, or 19.6% of net sales, for the nine months ended September 30, 2025 from $66.8 million, or 19.1% of net sales, for the comparable period in 2024. The increase in EMEA segment operating income was driven primarily by increased net sales and gross profit, partially offset by increased segment SG&A expenses. EMEA net sales increased $52.3 million, or 15% (13% constant-currency), for the nine months ended September 30, 2025, compared to the same period in 2024, driven by our Europe-direct and EMEA distributor businesses. The growth in Europe-direct net sales was driven by robust demand across all channels, which we believe was attributable to the execution of our marketplace strategies so far this year, including marketing activations, elevating the online and in-store customer experience, and partnership with strategic wholesale partners and brand authenticators. The growth in EMEA distributor net sales was primarily driven by growth in our distributor orders as compared to the same period in the prior year. EMEA segment gross margin expanded to 47.9% for the nine months ended September 30, 2025 from 47.3% for the comparable period in 2024, driven primarily by favorable region and channel mix and higher channel profitability from favorable product mix. EMEA segment SG&A expenses increased as a percentage of net sales to 25.3% for the nine months ended September 30, 2025, compared to 24.6% for the same period in 2024, primarily driven by higher personnel and DTC brick-and-mortar expenses associated with new stores. In total, EMEA segment SG&A expenses increased 18.1% for the nine months ended September 30, 2025, as compared to the same period in 2024.

Canada

Canada segment operating income decreased $3.7 million to $29.8 million, or 18.2% of net sales, for the nine months ended September 30, 2025 from $33.5 million, or 20.6% of net sales, for the comparable period in 2024. Canada net sales increased $1.0 million, or 1% (4% constant-currency), for the nine months ended September 30, 2025, compared to the same period in 2024, driven primarily by our Canada wholesale business, partially offset by declines in our Canada DTC business. Canada segment gross margin contracted to 48.6% for the nine months ended September 30, 2025 from 49.4% for the comparable period in 2024, driven primarily by unfavorable channel mix, partially offset by higher channel profitability from lower clearance and promotional activity. Canada segment SG&A expenses increased as a percentage of net sales to 23.2% for the nine months ended September 30, 2025, compared to 20.9% for the same period in 2024. In total, Canada segment SG&A expenses increased 11.6% for the nine months ended September 30, 2025, as compared to the same period in 2024.

Unallocated corporate expenses

Unallocated corporate expenses increased by $26.1 million to $253.2 million for the nine months ended September 30, 2025 from $227.1 million for the comparable period in 2024, driven primarily by $29.0 million of impairment charges related to Mountain Hardwear and prAna goodwill and the prAna trade name.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity include cash, cash equivalents, short-term investments, and available committed credit lines. Our liquidity is affected by the general seasonal trends common to the industry. Our products are marketed on a seasonal basis and our sales are weighted substantially toward the third and fourth quarters, while our operating costs are more equally distributed throughout the year. Our cash and cash equivalents and short-term investments balances generally are at their lowest level just prior to the start of the U.S. holiday season and increase during the fourth quarter from collection of wholesale business receivables and fourth quarter DTC sales. This trough cash position is impacted by the amount of product we order from our contract manufacturers in anticipation of customer demand and is more heavily impacted in advance of periods of expected high demand. Our cash position is also impacted by incremental tariff costs for U.S. product. While we currently project having adequate liquidity to meet our short-term and long-term working capital needs, we have a $500.0 million committed credit facility on which we can draw, should it be needed, until we receive cash receipts in the fourth quarter.

Cash Flow Activities

Cash flows are summarized in the following table:

(in thousands)

The change in cash flows used in operating activities for the nine months ended September 30, 2025 was primarily driven by a $256.3 million increase in cash used in changes in assets and liabilities. The most significant comparative changes in assets and liabilities included Accounts payable, Inventories, and Prepaid expenses and other current assets. A $129.9 million increase in cash used in Accounts payable and $43.9 million increase in cash used in Inventories were primarily driven by earlier timing of inventory receipts and payments, in part to proactively mitigate the impact of further incremental tariffs. A $32.9 million decrease in cash provided by Prepaid expenses and other current assets was primarily driven by an increase in U.S. prepaid income taxes.

Net cash provided by investing activities was $239.1 million for the nine months ended September 30, 2025, compared to $321.1 million for the nine months ended September 30, 2024. The decrease in cash provided by investing was primarily driven by lower sales and maturities of short-term investments for the nine months ended September 30, 2025, as compared to the same period in 2024.

Net cash used in financing activities was $221.8 million for the nine months ended September 30, 2025, compared to $284.6 million for the nine months ended September 30, 2024. The decrease in cash used in financing was primarily driven by lower share repurchases of common stock for the nine months ended September 30, 2025, as compared to the same period in 2024.

Sources of Liquidity

Cash and cash equivalents and short-term investments

As of September 30, 2025, we had cash and cash equivalents of $228.8 million and short-term investments of $7.2 million, compared to $531.9 million and $283.6 million, respectively, as of December 31, 2024 and $306.7 million and $67.2 million, respectively, as of September 30, 2024.

Committed credit facilities

As of September 30, 2025, we had available an unsecured, committed revolving credit facility, which provides for borrowings up to $500.0 million. We were in compliance with all associated covenants and there was no balance outstanding under the facility. Refer to Note 6 in Part II, Item 8 of our Annual Report on Form 10-K for further information regarding our domestic credit facility.

Further, as of September 30, 2025, our European subsidiary had available an unsecured, committed line of credit, which is guaranteed by the Company and provides for borrowings up to €5.0 million (approximately US$5.9 million). There was no balance outstanding under the facility.

Uncommitted credit facilities

As of September 30, 2025, collectively, our international subsidiaries had unsecured, uncommitted lines of credit, credit facilities and overdraft facilities, providing for borrowings up to approximately US$101.2 million. There were no balances outstanding under these facilities.

Capital Requirements

Our expected short-term and long-term cash needs are primarily for working capital and capital expenditures. We expect to meet these short-term and long-term cash needs primarily with cash and cash equivalents, short-term investments, cash flows from operations and, if needed, borrowings from our existing credit facilities.

Our working capital management goals include maintaining an optimal level of inventory necessary to deliver goods on time to our customers and to satisfy end consumer demand, alleviating manufacturing capacity constraints, and driving efficiencies to minimize the cycle time from the purchase of inventory from our suppliers to the collection of accounts receivable balances from our customers. Inventory balances may be elevated in advance of periods of expected high demand. As of September 30, 2025, our inventory balance was relatively flat at $800.4 million, compared to $798.2 million as of September 30, 2024, as earlier timing of Fall 2025 inventory receipts, in part to proactively mitigate the impact of further incremental tariffs, was offset by earlier wholesale shipments. We believe older season inventories represent a manageable portion of our total inventory mix.

We have planned full-year 2025 capital expenditures of approximately $65 to $75 million. This includes investments in our DTC operations, including new stores and supply chain and digital capabilities to support our strategic priorities. Our actual capital expenditures may differ from the planned amounts depending on factors such as the timing of system implementations and new store openings and related construction.

Our long-term goal is to maintain a strong balance sheet and a disciplined approach to capital allocation. Dependent upon our financial position, market conditions and our strategic priorities, our capital allocation approach includes:

• investing in organic growth opportunities to drive long-term profitable growth;
• returning at least 40% of free cash flow to shareholders through dividends and share repurchases; and
• considering opportunistic mergers and acquisitions.

Free cash flow is a non-GAAP financial measure. Free cash flow is calculated by reducing net cash flow from operating activities by capital expenditures. Management believes free cash flow provides investors with an important perspective on the cash available for shareholders and acquisitions after making the capital investments required to support ongoing business operations and long-term value creation. Free cash flow does not represent the residual cash flow available for discretionary expenditures since it excludes certain mandatory expenditures. Management uses free cash flow as a measure to assess both business performance and overall liquidity.

Other cash commitments

Our inventory purchase obligations were $404.2 million as of September 30, 2025, compared to $473.0 million and $437.2 million as of December 31, 2024 and September 30, 2024, respectively.

There have been no other significant changes to our other cash commitments as described in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2024.

CRITICAL ACCOUNTING ESTIMATES

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Other than described below, there have been no significant changes in our significant accounting policies described in Note 2 in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2024.

Indefinite-Lived Intangible Assets and Goodwill

During the third quarter of 2025, the Company identified triggering events related to the prAna and Mountain Hardwear trade names and goodwill reporting units. As a result, we performed interim quantitative impairment tests where the Company compared the estimated fair values of the prAna and Mountain Hardwear trade names and goodwill reporting units to their carrying values. Refer to Note 6 in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding these impairments.

In our interim quantitative impairment test of the prAna trade name, the fair value of the prAna trade name was less than its carrying value of $51.8 million and, therefore, an impairment charge of $8.0 million was recorded. In our interim quantitative impairment test of the Mountain Hardwear trade name, the fair value of the Mountain Hardwear trade name exceeded its carrying value of $15.0 million by approximately 75 percent and, therefore, no impairment charge was recorded. As part of our evaluation, we performed a sensitivity analysis on the trade name impairment model. A 300 basis point decline in the compound annual growth rate for net sales assumed over the first five years would reduce the excess of the fair value over the carrying value to approximately 51 percent. Separately, a 100 basis point increase in the assumed discount rate would reduce the excess of the fair value over the carrying value to approximately 57 percent. A separate 50 basis point decline in the assumed royalty rate would reduce the excess of the fair value over the carrying amount to approximately 31 percent.

In our interim quantitative impairment test of the prAna reporting unit, the fair value of the prAna reporting unit was less than its carrying value of $12.2 million and, therefore, an impairment charge of $8.8 million was recorded. In our interim quantitative impairment test of the Mountain Hardwear reporting unit, the fair value of the Mountain Hardwear reporting unit was less than its carrying value and, therefore, an impairment charge of $12.2 million was recorded, comprising the full Mountain Hardwear goodwill balance.

Our impairment tests and related fair value estimates are based on a number of factors, including assumptions and estimates for projected net sales, income, cash flows, discount rates, market-based multiples, and other operating performance measures. Changes in estimates or the application of alternative assumptions could produce significantly different results. These assumptions and estimates may change in the future due to changes in economic conditions, changes in our ability to meet sales and profitability objectives, or changes in our business operations or strategic direction.

RECENT ACCOUNTING PRONOUNCEMENTS

Refer to Note 1 in Part I, Item 1 of this Quarterly Report on Form 10-Q.

In the normal course of business, our financial position, results of operations, and cash flows are subject to a variety of risks, including risks associated with global financial and capital markets, primarily currency exchange rate risk and, to a lesser extent, interest rate risk. We regularly assess these risks and have established policies and business practices designed to mitigate their effects. We do not engage in speculative trading in any financial or capital market.

FOREIGN EXCHANGE RISK

Our primary currency exchange rate risk management objective is to mitigate the uncertainty of anticipated cash flows attributable to changes in exchange rates. We focus on mitigating changes in functional currency equivalent cash flows resulting from anticipated U.S. dollar denominated inventory purchases by subsidiaries that use European euro, Canadian dollar, Japanese yen, Chinese renminbi, or Korean won as their functional currency. We also mitigate changes in functional currency equivalent cash flows resulting from anticipated non-functional currency denominated sales for subsidiaries that use U.S. dollar and European euro as their functional currency. We manage this risk primarily by using currency forward contracts. Additionally, we hedge net balance sheet exposures related primarily to non-functional currency denominated monetary assets and liabilities using foreign currency forward contracts in European euro, Japanese yen, Canadian dollar, Swiss franc, Chinese renminbi, Korean won, British pound sterling, Danish krone, Norwegian krone, Polish zloty, Swedish krona, and Czech koruna. Non-functional currency denominated monetary assets and liabilities consist of cash and cash equivalents, short-term investments, receivables, payables, deferred income taxes, and intercompany loans and dividends.

The net fair value of our derivative contracts was unfavorable by $8.4 million as of September 30, 2025. A 10% unfavorable exchange rate change in the euro, franc, Canadian dollar, yen, renminbi, won, pound sterling, krone, zloty, krona and koruna against the U.S. dollar would have resulted in the net fair value declining by approximately $94.0 million as of September 30, 2025. Changes in the fair value of derivative contracts resulting from foreign exchange rate fluctuations would be substantially offset by the change in value of the underlying hedged transactions.

There have been no other material changes in the market risk disclosure contained in Part II, Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2024.

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

We have evaluated, under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as of the end of the period covered by this report. These disclosure controls and procedures require information to be disclosed in our Exchange Act reports to be (1) recorded, processed, summarized, and reported in a timely manner and (2) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer.

Based on our evaluation, we, including our Chief Executive Officer and Chief Financial Officer, have concluded that as of September 30, 2025 our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There have not been any changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In addition to the other information contained in this Quarterly Report on Form 10-Q, the following risk factors should be considered carefully in evaluating our business. Our business, financial condition, results of operations, or cash flows may be materially adversely affected by these and other risks. Please note that additional risks not presently known to us or that we currently deem immaterial may also impair our business and operations.

The following risk factors include changes to and supersede the description of the risk factors associated with our business previously disclosed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2024.

Rapidly Evolving U.S. Global Trade Policy Has Had and May Continue to Have an Adverse Impact on Our Business, Operating Results and Financial Condition.

Our imported products are subject to duties, tariffs or import limitations that affect the cost and quantity of various types of goods imported into the U.S. and other markets. The changes in U.S. global trade policy, and ongoing uncertainty around future tariffs, have had and may continue to have, an adverse impact on our business, financial condition and operating results and may (and in many cases, have):

• Reduce our ability to achieve planned consumer demand at our stores, (see "We May Not Realize Returns on Our Fixed Cost Investments in Our DTC Business Operations");
• Lead to a decline in discretionary spending by consumers (see "We are Subject to a Number of Risks Which May Adversely Affect Consumer and/or Wholesale Customer Demand for Our Products and Lead to a Decline in Sales and/or Earnings");
• Result in canceled orders, non-payment for orders received and/or delayed payment for orders received (see "Our Orders from Wholesale Customers are Subject to Cancellation, Which Could Lead to a Decline in Sales or Gross Profit, Write-downs of Excess Inventory, Increased Discounts or Extended Credit Terms to Our Wholesale Customers");
• Impair the financial health of certain of our wholesale customers (see "We are Subject to a Number of Risks Which May Adversely Affect Consumer and/or Wholesale Customer Demand for Our Products and Lead to a Decline in Sales and/or Earnings");
• Result in a misalignment between demand and supply (see "Our Inability to Accurately Predict Consumer and/or Customer Demand for Our Products Could Lead to a Build-up of Inventory or a Lack of Inventory and Affect Our Gross Margin");
• Impact global economic conditions and contribute to an economic slowdown, possibly resulting in a U.S. or global recession (see "We are Subject to a Number of Risks Which May Adversely Affect Consumer and/or Wholesale Customer Demand for Our Products and Lead to a Decline in Sales and/or Earnings" and "We May Incur Additional Expenses, Be Unable to Obtain Financing, or Be Unable to Meet Financial Covenants of Our Financing Agreements as a Result of Downturns in the Global Markets");
• Cause disruptions in the supply chain, including the timeliness of product deliveries and the ability to deliver product (see “Our Reliance on Contract Manufacturers, Including Our Ability to Enter Into Purchase Order Commitments with Them and Maintain Quality Standards of Our Products and Standards of Manufacturing Processes at Contract Manufacturers, May Result in Lost Sales and Impact Our Gross Margin and Results of Operations”, “For Certain Materials We Depend on a Limited Number of Suppliers, Which May Cause Increased Costs or Production Delays”, "Volatility in the Availability of and Prices for Raw Materials We Use in Our Products Could Have a Material Adverse Effect on Our Revenues, Costs, Gross Margins and Profitability", and “Our Success Depends on Our Third-Party Logistics Providers and Our Third-Party Distribution Facilities”);
• Impact previous business assumptions (see "Acquisitions Are Subject to Many Risks", "We May Have Additional Tax Liabilities or Experience Increased Volatility in Our Effective Tax Rate" and "Our Inability to Accurately Predict Consumer and/or Customer Demand for Our Products Could Lead to a Build-up of Inventory or a Lack of Inventory and Affect Our Gross Margin");
• Cause the implementation of cost containment measures and reductions in capital expenditures, including those relating to strategic priorities (see “We May Be Unable to Execute Our Strategic Priorities, Which Could Limit Our Ability to Invest in and Grow Our Business”);
• Restrict global business and travel (see “Global Regulation and Economic and Political Conditions, as well as Potential Changes in Regulations, Legislation and Government Policy, May Negatively Affect Our Business”);
• Cause currency rate fluctuations (see “Fluctuations in Inflation and Currency Exchange Rates Could Result in Lower Revenues, Higher Costs and/or Decreased Margins and Earnings”);
• Result in rising costs across our U.S. operations, as the prices of goods ranging from building materials to automobiles increase in response to new tariffs;
• Result in supply chain finance issues or otherwise impair the financial health of our contract manufacturers (see “Our Reliance on Contract Manufacturers, Including Our Ability to Enter Into Purchase Order Commitments with Them and Maintain Quality Standards of Our Products and Standards of manufacturing Processes at Contract Manufacturers, May Result in Lost Sales and Impact our Gross Margin and Results of Operations”);
• Cause any number of other disruptions to our business, the risks of which may be otherwise identified herein.

In addition, the impact of U.S. global trade policy changes may also exacerbate other risks discussed in this Item 1A, any of which could have a material adverse effect on our results of operations, financial condition or cash flows. New or increased tariffs or other trade restrictions, retaliatory actions, or anti-American sentiment could also exacerbate the risks outlined above and in this Item 1A. Changes in tariffs may also affect our ability to compete globally, including the risk of international markets being impacted by the influx of goods originally planned for U.S. consumption by our competitors, or cause a change to our sourcing strategy, which we may or may not be able to implement based on timing and availability. The current trade environment is dynamic in nature, including uncertainties relating to the duration, magnitude and scope of the U.S. tariffs.

CHANGES IN PRODUCT DEMAND CAN ADVERSELY AFFECT OUR FINANCIAL RESULTS

We are Subject to a Number of Risks Which May Adversely Affect Consumer and/or Wholesale Customer Demand for Our Products and Lead to a Decline in Sales and/or Earnings.

These risks include, but are not limited to:

• Volatile Economic Conditions. We are a consumer products company and are highly dependent on consumer discretionary spending. Consumer discretionary spending behavior is inherently unpredictable. Consumer demand, and related wholesale customer demand, for our products may not support our sales targets, or may decline, especially during periods of heightened economic uncertainty in our key markets.
• Highly Competitive Markets. In each of our geographic markets, we face significant competition from global and regional branded apparel, footwear, accessories, and equipment companies. More recently this competition has extended to emerging brands that may not be viewed as outdoor brands but are participating in the outdoor apparel and footwear industry. Retailers who are our wholesale customers often pose a significant competitive threat by designing, marketing and distributing apparel, footwear, accessories, and equipment under their own private labels. We also experience direct competition in our DTC business from retailers that are our wholesale customers. This is particularly the case in the digital marketplace, where increased consumer expectations and competitive pressure related to various aspects of our e-commerce business, including speed of product delivery, shipping charges, return privileges, and other evolving expectations are key factors.
• Consumer Preferences and Fashion/Product Trends. Changes in consumer preferences, consumer interest in outdoor activities, and fashion/product trends may have a material adverse effect on our business. We also face risks because our success depends on our and our customers' abilities to anticipate consumer preferences and our ability to respond to changes of such preferences in a timely manner. Product development and/or production lead times for many of our products may make it more difficult for us to respond rapidly to new or changing fashion/product trends or consumer preferences.
• Brand Images. Our brands have wide recognition, and our success has been due in large part to our ability to maintain, enhance and protect our brand image and reputation and our consumers' and customers' connection to our brands. Our continued success

depends in part on our ability to adapt to a rapidly changing media environment, including our increasing reliance on social media and online dissemination of advertising campaigns. In addition, consumer and customer sentiment could be shaped by our sustainability policies and related design, sourcing and operational decisions. Finally, demand in certain channels may be impacted in the short term as we seek to bring additional consumer segments to our brands by proactively managing the promotional activity of the brands in the marketplace.

• Weather Conditions, Including Global Climate Change Trends. Our sales are affected by weather conditions. Our DTC sales are dependent in part on the weather and our DTC sales growth is likely to be adversely impacted or may even decline in years in which weather conditions do not stimulate demand for our products. Unseasonably warm weather also impacts future sales to our wholesale customers, who may hold inventory into subsequent seasons in response to unseasonably warm weather. Our results may be negatively impacted if management is not able to adjust expenses in a timely manner in response to unfavorable weather conditions and the resulting impact on consumer and customer demand. The magnitude of climate change and whether resulting weather patterns continue to trend warmer will influence the extent to which consumer and customer demand for our outerwear and cold weather footwear products will be negatively affected.
• Shifts in Retail Traffic Patterns. Shifts in consumer purchasing patterns in our key markets may have an adverse effect on our DTC operations and the financial health of certain of our wholesale customers, some of whom may reduce their brick and mortar store fleet, file for protection under bankruptcy laws, restructure, or cease operations. These related business impacts have already occurred at certain of our wholesale customers. We face increased risk of order reduction and cancellation when dealing with financially ailing wholesale customers. We also extend credit to our wholesale customers based on an assessment of the wholesale customer's financial condition, generally without requiring collateral. We may choose (and have chosen in the past) to limit our credit risk by reducing our level of business with wholesale customers experiencing financial difficulties and may not be able to replace those revenues with other customers or through our DTC businesses within a reasonable period or at all.
• Innovation. To distinguish our products in the marketplace and achieve commercial success, we rely on product innovations, including new or exclusive technologies, inventive and appealing design or other differentiating features. If we fail to introduce innovative products that appeal to consumers and customers, we could suffer reputational damage to our brands and demand for our products could decline.

Our Orders from Wholesale Customers are Subject to Cancellation, Which Could Lead to a Decline in Sales or Gross Profit, Write-downs of Excess Inventory, Increased Discounts or Extended Credit Terms to Our Wholesale Customers.

We do not have long-term contracts with any of our wholesale customers. We do have contracts with our independent international distributors; although these contracts may have annual purchase minimums that must be met in order to retain distribution rights, the distributors are not otherwise obligated to purchase products from us. Sales to our wholesale customers (other than our international distributors) are generally on an order-by-order basis and are subject to rights of cancellation and rescheduling prior to shipment of orders. We place the majority of our orders for products with our contract manufacturers for our wholesale customers based on these advance orders. We consider the timing of delivery dates in our wholesale customer orders when we forecast our sales and earnings for future periods. If any of our major wholesale customers experience a significant downturn in business or fail to remain committed to our products or brands, or if we are unable to deliver products to our wholesale customers in the agreed upon manner or reach mutually agreeable accommodations, these customers could postpone, reduce, cancel, or discontinue purchases from us, including after we have begun production on any order, or seek to impose chargebacks.

Our Inability to Accurately Predict Consumer and/or Customer Demand for Our Products Could Lead to a Build-up of Inventory or a Lack of Inventory and Affect Our Gross Margin.

We place orders for our products with our contract manufacturers in advance of the related selling season and, as a result, are vulnerable to changes in consumer and/or customer demand for our products. Therefore, we must accurately forecast consumer and/or customer demand for our products well in advance of the selling season. We are subject to numerous risks relating to consumer and/or customer demand (see “We are Subject to a Number of Risks Which May Adversely Affect Consumer and/or Customer Demand for our Products and Lead to a Decline in Sales and/or Earnings” and “Our Orders from Wholesale Customers are Subject to Cancellation, Which Could Lead to a Decline in Sales or Gross Profit, Write-downs of Excess Inventory, Increased Discounts or Extended Credit Terms to Our Wholesale Customers” for additional information). Our ability to accurately predict consumer and/or customer demand well in advance of the selling season for our products is impacted by these risks, as well as our reliance on manual processes and judgments that are subject to human error. These risks are heightened during periods of macroeconomic and geopolitical volatility.

Our failure to accurately forecast consumer and/or customer demand could result in inventory levels in excess of demand, which may cause inventory write-downs and/or the sale of excess inventory at discounted prices through our outlet stores, temporary clearance locations, or third-party liquidation channels and could have a material adverse effect on our brand image and gross margin. In addition, we may experience additional costs and margin pressure relating to the storage and processing of excess inventory, including through our outlet stores.

Conversely, if we underestimate consumer and/or customer demand for our products or if our contract manufacturers or third-party logistics providers are unable to supply or deliver products when we need them, we may experience inventory shortages, which may prevent us from fulfilling product orders or having optimal inventory assortments for our DTC channels resulting in lost sales, negatively affect our wholesale customer and consumer relationships, result in increased costs to expedite production and delivery, or diminish our ability to build brand loyalty.

WE ARE SUBJECT TO VARIOUS RISKS IN OUR SUPPLY CHAIN

Our Reliance on Contract Manufacturers, Including Our Ability to Enter Into Purchase Order Commitments with Them and Maintain Quality Standards of Our Products and Standards of Manufacturing Processes at Contract Manufacturers, May Result in Lost Sales and Impact our Gross Margin and Results of Operations.

Our products are manufactured by contract manufacturers worldwide, primarily in the Asia Pacific region. Although we enter into purchase order commitments with these contract manufacturers each season, we generally do not maintain long-term manufacturing commitments with them, and various factors could interfere with our ability to source our products. Without long-term commitments, there is no assurance that we will be able to secure adequate or timely production capacity and our competitors may obtain production capacities that effectively limit or eliminate the availability of our contract manufacturers. If we are unable to obtain necessary production capacities, we may be unable to meet consumer demand, resulting in lost sales.

In addition, contract manufacturers may fail to perform as expected. If a contract manufacturer fails to ship orders in a timely manner or is unable to produce contracted for goods (including as a result of third-party supply chain financing issues), we could experience supply disruptions that result in missed delivery deadlines, which may cause our customers to cancel their orders, refuse to accept deliveries or demand a reduction in purchase price or cause us to incur additional freight costs. We may also not be able to produce the goods necessary to meet our demand and experience lost sales.

Reliance on contract manufacturers also creates quality control risks. Contract manufacturers may need to use sub-contracted manufacturers to fulfill our orders, which could result in compromised quality of our products. A failure in our quality control program, or a failure of our contract manufacturers or their subcontractors to meet our quality control standards, may result in diminished product quality, which in turn could result in increased order cancellations, price concessions, product returns, decreased consumer and customer demand for our products, non-compliance with our product standards or regulatory requirements, or product recalls or other regulatory actions.

We impose standards of manufacturing practices on our contract manufacturers for the benefit of workers and require compliance with our restricted substances list and product safety and other applicable laws, including environmental, health and safety and forced labor laws. We also require that our contract manufacturers impose these practices, standards and laws on their subcontractors. If a contract manufacturer or subcontractor violates labor or other laws or engages in practices that are not generally accepted as safe or ethical, we may experience production disruptions, lost sales or significant negative publicity that could result in long-term damage to our reputation. In some circumstances, parties may assert that we are liable for our contract manufacturers' or subcontractors' labor and operational practices, which could have a material adverse effect on our brand image, results of operations and our financial condition.

Volatility in the Availability of and Prices for Raw Materials We Use in Our Products Could Have a Material Adverse Effect on Our Revenues, Costs, Gross Margins and Profitability.

Our products are derived from raw materials that are subject to both disruptions to supply availability and price volatility. If there are supply disruptions or price increases for raw materials we use in our products and we are unable to obtain sufficient raw materials to meet production needs or offset rising costs by increasing the price of our products or achieving efficiency improvements, we could experience negative impacts to our sales and profitability. Additionally, should U.S. tariffs be imposed based on origin of raw materials, the tariffs applicable to us might meaningfully increase. For our Spring 2025 and Fall 2025 inventory combined, we sourced roughly 32% of our footwear raw materials and roughly 31% of our apparel raw materials for the U.S. market from China. We may need to seek sourcing of raw materials in alternative countries, which may not be available at all or in a timely manner.

For Certain Materials We Depend on a Limited Number of Suppliers, Which May Cause Increased Costs or Production Delays.

As an innovative company, some of our materials are highly technical and/or proprietary and may be available from only one source or a very limited number of sources. As a result, from time to time, we may have difficulty satisfying our material requirements. Although we believe that we can identify and qualify additional contract manufacturers to produce or supply these materials or alternative materials as necessary, there are no guarantees that additional contract manufacturers will be available. In addition, depending on the timing, any changes in sources or materials may result in increased costs or production delays.

Our Success Depends on Our Third-Party Logistics Providers and Our Third-Party Distribution Facilities.

The majority of our products are manufactured outside of our principal sales markets, which requires these products to be consolidated and transported, sometimes over large geographical distances. A small number of third-party logistics providers currently consolidate, deconsolidate and/or transload almost all of our products. Any disruption in the operations of these providers or changes to the costs they charge, due to capacity constraints, volatile fuel prices or otherwise, could materially impact our sales and profitability. A prolonged disruption in the operations of these providers could also require us to seek alternative distribution arrangements, which may not be available on attractive terms and could lead to delays in distribution of products, either of which could have a significant and material adverse effect on our business, results of operations and financial condition.

In addition, the ability to move products over larger geographical distances could be negatively affected by ocean, air and trucking cargo capacity constraints or labor disruptions, or such constraints or disruptions at ports or borders, or geopolitical conflicts (such as is occurring currently in the Red Sea). These constraints, conflicts and disruptions could hinder our ability to satisfy demand through our wholesale and DTC businesses, and we may miss delivery deadlines, which may cause our customers to cancel their orders, refuse to accept deliveries or demand a reduction in purchase price. Furthermore, increases in distribution costs, including but not limited to freight costs, could adversely affect our costs, which we may not be able to offset through price increases or decreased promotions.

We receive our products from third-party logistics providers at our owned distribution centers in the U.S., Canada and France. The fixed costs associated with owning, operating and maintaining such distribution centers during a period of economic weakness or declining sales can result in lower operating efficiencies, financial deleverage and potential impairment in the recorded value of distribution assets.

We also receive and distribute our products through third-party operated distribution facilities internationally and domestically. We depend on these third-parties to manage the operation of their distribution facilities as necessary to meet our business needs. If the third-parties fail to manage these responsibilities, our international and domestic distribution operations could face significant disruptions or we could incur additional expense. Transitions within our distribution network amongst third-party distribution partners exacerbates this risk.

Our ability to meet consumer and customer expectations, manage inventory, complete sales, and achieve our objectives for operating efficiencies depends on the proper operation of our existing distribution facilities, as well as the facilities of third-parties, the development or expansion of additional distribution capabilities and services, and the timely performance of services by third-parties, including those involved in moving products to and from our distribution facilities and facilities operated by third-parties. The uneven flow of inventory receipts during peak times at our distribution centers may cause us to miss delivery deadlines, as we work through inventory, which in turn may cause our customers to cancel their orders, refuse to accept deliveries or demand a reduction in purchase price.

OUR INVESTMENT IN STRATEGIC PRIORITIES EXPOSES US TO CERTAIN RISKS

We May Be Unable to Execute Our Strategic Priorities, Which Could Limit Our Ability to Invest in and Grow Our Business.

Our strategic priorities are to drive brand awareness and sales growth through increased, focused demand creation investments, enhance consumer experience and digital capabilities in all of our channels and geographies, expand and improve global DTC operations with supporting processes and systems and invest in our people and optimize our organization across our portfolio of brands.

To implement our strategic priorities, we must continue to, among other things, modify and fund various aspects of our business, effectively prioritize our initiatives and execute effective change management. These efforts, coupled with a continuous focus on expense discipline, may place strain on internal resources, and we may have operating difficulties as a result.

Our strategic priorities also generally involve increased expenditures, which could cause our profitability or operating margin to decline if we are unable to offset our increased spending with increased sales or gross profit or comparable reductions in other operating costs (as is currently occurring). This could result in a decision to delay, modify, or terminate certain initiatives related to our strategic priorities.

Initiatives to Upgrade Our Business Processes and Information Technology Systems to Optimize Our Operational and Financial Performance Involve Many Risks Which Could Result in, Among Other Things, Business Interruptions, Higher Costs and Lost Profits.

We regularly implement business process improvement and information technology initiatives intended to optimize our operational and financial performance. Transitioning to these new or upgraded processes and systems requires significant capital investments and personnel resources. Implementation is also highly dependent on the coordination of numerous employees, contractors and software and system providers. The interdependence of these processes and systems is a significant risk to the successful completion and continued refinement of these initiatives, and the failure of any aspect could have a material adverse effect on the functionality of our overall business. We may also experience difficulties in implementing or operating our new or upgraded business processes or information technology systems, including, but not limited to, ineffective or inefficient operations, significant system failures, system outages, delayed implementation and loss of system availability, which could lead to increased implementation and/or operational costs, loss or corruption of data, delayed shipments, excess inventory and interruptions of operations resulting in lost sales and/or profits.

We May Not Realize Returns on Our Fixed Cost Investments in Our DTC Business Operations.

We continue to make investments in our digital capabilities and our DTC operations, including new stores. (See “Initiatives to Upgrade Our Business Processes and Information Technology Systems to Optimize Our Operational and Financial Performance Involve Many Risks Which Could Result in, Among Other Things, Business Interruptions, Higher Costs and Lost Profits”.) Since many of the costs of our DTC operations are fixed, we may be unable to reduce expenses in order to avoid losses or negative cash flows if we have insufficient sales. We may not be able to exit DTC brick and mortar locations and related leases at all or without significant cost or loss, renegotiate the terms thereof, or effectively manage the profitability of our existing brick and mortar stores. In addition, obtaining real estate and effectively renewing real estate leases for our DTC brick and mortar operations is subject to the real estate market and we may not be able to secure adequate new locations or successfully renew leases for existing locations.

WE ARE SUBJECT TO CERTAIN INFORMATION TECHNOLOGY RISKS

We Rely on Information Technology Systems, including Third-Party Cloud-based Solutions, and Any Failure of These Systems or Interruption in Services Provided by the Systems May Result in Disruptions or Outages in Our E-Commerce and In-Store Retail Platforms, Loss of Processing Capabilities, and/or Loss of Data, Any of Which May Have a Material Adverse Effect on Our Financial Condition, Results of Operations or Cash Flow.

Our reputation and ability to attract, retain and serve consumers and customers is dependent upon the reliable performance of our underlying technology infrastructure and external service providers, including third-party cloud-based solutions. The services these systems provide are vulnerable to interruption, in particular during a period of transition of systems, and we have experienced interruptions in the past.

We rely on cloud-based solutions furnished by third-parties primarily to allocate resources, pay vendors, collect from customers, manage loyalty programs, process transactions, develop demand and supply plans, manage product design, production, transportation, and distribution, forecast and report operating results, meet regulatory requirements and administer employee payroll and benefits, among other functions. In addition, our DTC operations, both in-store and online, rely on cloud-based solutions to process transactions. We have also designed a significant portion of our software and computer systems to utilize data processing and storage capabilities from third-party cloud solution providers. Our existing cloud-based solution providers have broad discretion to change and interpret their terms of service and other policies with respect to our use of their systems, and they may take actions beyond our control that could harm our business. We also may not be able to control the quality of the systems and services we receive from our third-party cloud-based solution providers. Some transitions of the cloud-based solutions currently provided to different cloud providers would be difficult to implement and may cause us to incur significant time and expense, or an interruption in services.

Both our on-premises and cloud-based infrastructure may be susceptible to outages due to any number of reasons, including human error, fire, floods, power loss, telecommunications failures, terrorist attacks and similar events. Despite the implementation of security measures that we believe to be reasonable, both our on-premises and our cloud-based infrastructure may also be vulnerable to hacking, computer viruses, the installation of malware and similar disruptions either by third-parties or employees, which may result in outages. We do not have redundancy for all of our systems and our disaster recovery planning may not account for all eventualities.

If we or our existing third-party cloud-based solution providers experience interruptions in service regularly or for a prolonged basis, or other similar issues, our business could be seriously harmed and, in some instances, our consumers and customers may not be able to purchase our products, which could significantly and negatively affect our sales. While we maintain cyber liability insurance policies for coverage in the event of a cybersecurity incident, we cannot be certain that our existing coverage will continue to be available on acceptable terms or will be available, and in sufficient amount, to cover the potentially significant losses that could result from a cybersecurity incident or that the insurer will not deny coverage as to any future claims.

If we and/or our cloud-based solution providers are not successful in preventing or effectively responding to outages or cyberattacks, our financial condition, results of operations and cash flow could be materially and adversely affected.

A Security Breach of Our or Our Third-Parties' Systems, Exposure of Personal or Confidential Information or Increased Government Regulation Relating to Handling of Personal Data, Could, Among Other Things, Disrupt Our Operations or Cause Us to Incur Substantial Costs or Negatively Affect Our Reputation.

We and many of our third-party vendors manage and maintain various types of proprietary information and sensitive and confidential data relating to our business, such as personally identifiable information of our consumers, our customers, our employees, and our business partners, as well as payment information in certain instances. Unauthorized parties may attempt to gain access to these systems or information through fraud or other means of deceiving our employees or third-party service providers. The methods used to obtain unauthorized access, disable or degrade service or sabotage systems are constantly changing and evolving, and may be difficult to anticipate or detect for long periods of time. The ever-evolving threats mean we and our third-parties must continually evaluate and adapt our systems and processes, and there is no guarantee that these efforts will be adequate to safeguard against all data security breaches or misuses of data. Any breaches of our or our third-parties’ systems could expose us, our customers, our consumers, our suppliers, our employees, or other individuals to a risk of loss or misuse of this information, result in litigation and potential liability for us, damage our reputation, or otherwise harm our business.

In addition, as the regulatory environment related to information security, data collection and use and privacy becomes increasingly rigorous, with new and constantly changing requirements applicable to our business, compliance with those requirements could also result in additional costs or liabilities. Non-U.S. data privacy and data security laws and regulations, various U.S. federal and state laws and other information privacy and security standards may be and are applicable to us. Violations of these requirements could result in significant penalties, investigations or litigation. Significant legislative, judicial or regulatory changes have been and could be issued in the future. As new requirements are issued, new processes must be implemented to ensure compliance. In addition, previously implemented processes must be continually refined. This work is accomplished through significant efforts by our employees. The diverted attention of these employees may impact our operations and there may be additional costs incurred by us for third-party resources to advise on the constantly changing landscape. Limitations on the use of data may also impact our future business strategies. Additionally, our DTC business depends on customers' willingness to entrust us with their personal information. Events that adversely affect that trust could adversely affect our brand and reputation.

We Depend on Certain Legacy Information Technology Systems, Which May Inhibit Our Ability to Operate Efficiently.

Our legacy product development, retail and other systems, on which we continue to manage a portion of our business activities, depend on the availability of limited internal and external resources with the expertise to maintain the systems. In addition, our legacy systems, including aged systems in our Korean business, may not support desired functionality for our operations and may inhibit our ability to operate efficiently and cost effectively. The continued use of these legacy systems also increases the risk of service disruption and can complicate recovery effort when issues arise. Moreover, our continued transition from these legacy systems to new ones is complex and requires significant change management, including extensive coordination and integration with third-parties and their systems. Consequently, these transitions could result in the interruption of our operations.

WE ARE SUBJECT TO LEGAL AND REGULATORY RISKS

Our Success Depends on the Protection of Our Intellectual Property Rights.

Our registered and common law trademarks, our patented or patent-pending designs and technologies, trade dress and the overall appearance and image of our products have significant value and are important to our ability to differentiate our products from those of our competitors.

As we strive to achieve product innovations, extend our brands into new product categories and expand the geographic scope of our marketing, we face a greater risk of inadvertent infringements of third-party rights or compliance issues with regulations applicable to products with technical features or components. We may become subject to litigation based on allegations of infringement or other improper use of intellectual property rights of third-parties. In addition, failure to successfully obtain and maintain patents on innovations could negatively affect our ability to market and sell our products.

We regularly discover products that are counterfeit reproductions of our products or that otherwise infringe on our proprietary rights. Increased instances of counterfeit manufactured products and sales may adversely affect our sales and the reputation of our brands and result in a shift of consumer preference away from our products. The actions we take to establish and protect trademarks and other proprietary rights may not be adequate to prevent imitation of our products by others or to prevent others from seeking to block sales of our products as violations of proprietary rights. In markets outside of the U.S., it may be more difficult for us to establish our proprietary rights and to successfully challenge use of those rights by other parties.

Litigation is often necessary to defend against claims of infringement or to enforce and protect our intellectual property rights. Intellectual property litigation may be costly and may divert management's attention from the operation of our business. Adverse determinations in any litigation may result in the loss of our proprietary rights, subject us to significant liabilities or require us to seek licenses from third-parties, which may not be available on commercially reasonable terms, if at all.

Certain of Our Products Are Subject to Product Regulations and/or Carry Warranties, Which May Cause an Increase to Our Expenses in the Event of Non-Compliance and/or Warranty Claims.

Our products are subject to increasingly stringent and complex domestic and foreign product labeling, performance, environmental and safety standards, laws and other regulations, including those pertaining to perfluoroalkyl and polyfluoroalkyl substances and other environmental impacts. These requirements could result in greater expense associated with compliance efforts, and failure to comply with these regulations could result in a delay, non-delivery, recall, or destruction of inventory shipments during key seasons, a loss of advance orders from wholesale customers or in other financial penalties. Significant or continuing noncompliance with these standards and laws could disrupt our business and harm our reputation.

Our products are generally used in outdoor activities, sometimes in severe conditions. Product recalls or product liability claims resulting from the failure, or alleged failure, of our products could have a material adverse effect on the reputation of our brands and result in additional expenses. Most of our products carry limited warranties for defects in quality and workmanship. We maintain a warranty reserve for estimated future warranty claims, but the actual costs of servicing future warranty claims may exceed the reserve.

We May Have Additional Tax Liabilities or Experience Increased Volatility in Our Effective Tax Rate.

As a global company, we determine our income tax liability in various tax jurisdictions and our effective tax rate based on an analysis and interpretation of local tax laws and regulations and our financial projections. This analysis requires a significant amount of judgment and estimation and is often based on various assumptions about the future, which, in times of economic disruptions, are highly uncertain. These determinations are the subject of periodic domestic and foreign tax audits. Although we accrue for uncertain tax positions, our accruals may be insufficient to satisfy unfavorable findings. Unfavorable audit findings and tax rulings may result in payment of taxes, fines and penalties for prior periods and higher tax rates in future periods.

Other changes in the tax laws of the jurisdictions where we do business, including an increase in tax rates or an adverse change in the treatment of an item of income or expense, could result in a material increase in our tax expense. For example, changes in the tax laws of foreign jurisdictions could arise as a result of the Base Erosion and Profit Shifting project undertaken by the Organization for Economic Co-operation and Development ("OECD"). The OECD, which represents a coalition of member countries, has recommended changes to numerous long-standing tax principles. The OECD Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024. On February 2, 2023, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax. Under a transitional safe harbor released July 17, 2023, the undertaxed profits rule top-up tax in the jurisdiction of a company's ultimate parent entity will be zero for each fiscal year of the transition period if that jurisdiction has a corporate tax rate of at least 20%. The safe harbor transition period will apply to fiscal years beginning on or before December 31, 2025 and ending before December 31, 2026. We are closely monitoring developments and evaluating the impact these new rules are anticipated to have on our tax rate, including eligibility to qualify for these safe harbor rules. As these changes are adopted by countries, tax uncertainty could increase and may adversely affect our provision for income taxes.

Due to the nature of the findings in the Korea 2009 through 2014 income tax audits, the Company has invoked the Mutual Agreement Procedures outlined in the U.S.-Korean income tax treaty. The Company does not anticipate that adjustments relative to these findings will result in material changes to its financial condition, results of operations or cash flows.

WE OPERATE GLOBALLY AND ARE SUBJECT TO SIGNIFICANT RISKS IN MANY JURISDICTIONS

Global Regulation and Economic and Political Conditions, as well as Potential Changes in Regulations, Legislation and Government Policy, May Negatively Affect Our Business.

We are subject to risks generally associated with doing business internationally. These risks include, but are not limited to, the burden of complying with, and unexpected changes to, foreign and domestic laws and regulations, such as anti-corruption and forced labor regulations and sanctions regimes, sustainability regulations, the effects of fiscal and political crises and political and economic disputes, changes in diverse consumer preferences, foreign currency exchange rate fluctuations, managing a diverse and widespread workforce, political unrest, terrorist acts, military operations, disruptions or delays in shipments, disease outbreaks, natural disasters, and changes in economic conditions in countries in which we contract to manufacture, source raw materials or sell products. Our ability to sell products in certain markets, demand for our products in certain markets, our ability to collect accounts receivable, our contract manufacturers' ability to procure raw materials or manufacture products, distribution and logistics providers' ability to operate, our ability to operate brick and mortar stores, our workforce, and our cost of doing business (including the cost of freight and logistics) may be impacted by these events should they occur and laws and regulations that are enacted in response to such events. Our exposure to these risks is heightened in Vietnam, where a significant portion of our contract manufacturing is located, as well as in China, where a large portion of the raw materials used in our products is sourced by our contract manufacturers. Should certain of these events occur in Vietnam or China, they could cause a substantial disruption to our business and have a material adverse effect on our financial condition, results of operations or cash flows. In addition, goods suspected of being manufactured with forced labor could be blocked from importation into the U.S. or other countries, which could materially impact sales.

In connection with the United Kingdom's exit from the European Union (commonly referred to as "Brexit"), on December 24, 2020, the European Union ("E.U.") and the United Kingdom ("U.K.") reached an agreement, the E.U.-U.K. Trade and Cooperation Agreement, to govern aspects of the relationship of the E.U. and U.K. following Brexit. As a result of no longer having "free circulation" between the U.K. and the E.U., we have incurred and will continue to incur additional duties. We are investigating alternatives to mitigate these additional costs in the future.

Fluctuations in Inflation and Currency Exchange Rates Could Result in Lower Revenues, Higher Costs and/or Decreased Margins and Earnings.

We derive a significant portion of our sales from markets outside the U.S., which consist of sales to wholesale customers and directly to consumers by our entities in Europe, Asia, and Canada and sales to independent international distributors who operate within EMEA and LAAP. The majority of our purchases of finished goods inventory from contract manufacturers are denominated in U.S. dollars, including purchases by our foreign entities. These purchase and sale transactions expose us to the volatility of global economic conditions, including fluctuations in inflation and foreign currency exchange rates. Our international revenues and expenses generally are derived from sales and operations in foreign currencies, and these revenues and expenses could be and have been affected by currency fluctuations, specifically amounts recorded in foreign currencies and translated into U.S. dollars for consolidated financial reporting, as weakening of foreign currencies relative to the U.S. dollar adversely affects the U.S. dollar value of the Company’s foreign currency-denominated sales and earnings.

Our exposure is increased with respect to our wholesale customers, where, in order to facilitate solicitation of advance orders for the spring and fall seasons, we establish local-currency-denominated wholesale and retail price lists in each of our foreign entities approximately six to nine months prior to U.S. dollar-denominated seasonal inventory purchases. As a result, our consolidated results are directly exposed to transactional foreign currency exchange risk and have been and could be further impacted by the U.S. dollar strengthening during the six to nine months between when we establish seasonal local-currency prices and when we purchase inventory. In addition to the direct currency exchange rate exposures described above, our wholesale business is indirectly exposed to currency exchange rate risks. Weakening of a wholesale customer’s functional currency relative to the U.S. dollar makes it more expensive for it to purchase finished goods inventory from us, which may cause a wholesale customer to cancel orders or increase prices for our products, which may make our products less price-competitive in those markets. In addition, in order to make purchases and pay us on a timely basis, our international distributors must exchange sufficient quantities of their functional currency for U.S. dollars through the financial markets and may be limited in the amount of U.S. dollars they are able to obtain.

We employ several strategies in an effort to mitigate this transactional currency risk, but these strategies may not fully mitigate the negative effects of adverse foreign currency exchange rate fluctuations on the cost of our finished goods in a given period and there is no assurance that price increases will be accepted by our wholesale customers, international distributors or consumers. Our gross margins are adversely affected whenever we are not able to offset the full extent of finished goods cost increases caused by adverse fluctuations in foreign currency exchange rates.

Currency exchange rate fluctuations may also create indirect risk to our business by disrupting the business of independent finished goods manufacturers from which we purchase our products. When their functional currencies weaken in relation to other currencies, the raw materials they purchase on global commodities markets become more expensive and more difficult to finance. Although each manufacturer bears the full risk of fluctuations in the value of its currency against other currencies, our business can be and has been indirectly affected when adverse fluctuations cause a manufacturer to raise the prices of goods it produces for us, disrupt the manufacturer's ability to purchase the necessary raw materials on a timely basis, or disrupt the manufacturer's ability to function as an ongoing business.

WE ARE SUBJECT TO NUMEROUS OPERATIONAL RISKS

Our Ability to Manage Fixed Costs Across a Business That is Affected by Seasonality May Impact Our Profits.

Our business is affected by the general seasonal trends common to the outdoor industry. Our products are marketed on a seasonal basis and our annual net sales are weighted heavily toward the fall/winter season, while our operating expenses are more equally distributed throughout the year. As a result, often a majority of our operating profits are generated in the second half of the year. If we are unable to manage our fixed costs in the seasons where we experience lower net sales, our profits may be adversely impacted.

Labor Matters, Changes in Labor Laws and Our Ability to Meet Our Labor Needs May Reduce Our Revenues and Earnings.

Our business depends on our ability to source and distribute products in a timely manner. While a majority of our own operations are not subject to organized labor agreements, certain of our operations in Europe include a formal representation of employees by a Works Council and the application of a collective bargaining agreement. Matters that may affect our workforce at contract manufacturers where our goods are produced, shipping ports, transportation carriers, retail stores, or distribution centers create risks for our business, particularly if these matters result in work shut-downs (with little to no notice), slowdowns, lockouts, strikes, or other disruptions. The foregoing includes potential impacts to our business as a result of the International Longshore and Warehouse Union and Teamsters negotiations. Labor matters may have a material adverse effect on our business, potentially resulting in canceled orders by customers, inability to fulfill potential e-commerce demand, unanticipated inventory accumulation and reduced net sales and net income.

In addition, our ability to meet our labor needs at our distribution centers, retail stores, corporate headquarters, and regional subsidiaries, including our ability to find qualified employees while controlling wage and related labor costs, is generally subject to numerous external factors, including the availability of a sufficient number of qualified people in the work force of the markets in which our operations are located, unemployment levels within those markets, absenteeism, prevailing wage rates, changing demographics, parental responsibilities, health and other insurance costs, and adoption of new or revised employment and labor laws and regulations. Our ability to source, distribute and sell products in a timely and cost-effective manner may be negatively affected to the extent we experience these factors. Our ability to comply with labor laws, including our ability to adapt to rapidly changing labor laws, as well as provide a safe working environment may increase our risk of litigation and cause us to incur additional costs.

We May Incur Additional Expenses, Be Unable to Obtain Financing, or Be Unable to Meet Financial Covenants of Our Financing Agreements as a Result of Downturns in the Global Markets.

Our vendors, wholesale customers, licensees and other participants in our supply chain may require access to credit markets in order to do business. Credit market conditions may slow our collection efforts as our wholesale customers find it more difficult to obtain necessary financing, leading to higher than normal accounts receivable. This could result in greater expense associated with collection efforts and increased bad debt expense. Credit conditions and/or supply chain disruptions may impair our vendors' ability to finance the purchase of raw materials or general working capital needs to support our production requirements, resulting in a delay or non-receipt of inventory shipments during key seasons.

Historically, we have limited our reliance on debt to finance our working capital, capital expenditures and investing activity requirements. We expect to fund our future capital expenditures with existing cash, expected operating cash flows and credit facilities, but, if the need arises to finance additional expenditures, we may need to seek additional funding. Our ability to obtain additional financing will depend on many factors, including prevailing market conditions, our financial condition and our ability to negotiate favorable terms and conditions. Financing may not be available on terms that are acceptable or favorable to us, if at all.

Our credit agreements have various financial and other covenants. If an event of default were to occur, the lenders could, among other things, declare outstanding amounts due and payable. If we were to borrow under our credit agreements, we would be subject to market interest rates and may incur additional interest expense when borrowing in a high interest rate environment.

Acquisitions Are Subject to Many Risks.

From time to time, we may pursue growth through strategic acquisitions of assets or companies. Acquisitions are subject to many risks, including potential loss of significant customers or key personnel of the acquired business as a result of the change in ownership, difficulty integrating the operations of the acquired business or achieving targeted efficiencies, the incurrence of substantial costs and expenses related to the acquisition effort, and diversion of management's attention from other aspects of our business operations.

Acquisitions may also cause us to incur debt or result in dilutive issuances of our equity securities. Our acquisitions may cause large one-time expenses or create goodwill or other intangible assets that could result in significant impairment charges in the future (as has recently occurred with the prAna brand). We also make various estimates and assumptions in order to determine purchase price allocation and estimate the fair value of assets acquired and liabilities assumed. If our estimates or assumptions used to value these assets and liabilities vary from actual or future projected results, we may be exposed to losses, including impairment losses, that could be material.

We do not provide any assurance that we will be able to successfully integrate the operations of any acquired businesses into our operations or achieve the expected benefits of any acquisitions. The failure to successfully integrate newly acquired businesses or achieve the expected benefits of strategic acquisitions in the future could have an adverse effect on our financial condition, results of operations or cash flows. We may not complete a potential acquisition for a variety of reasons, but we may nonetheless incur material costs in the preliminary stages of evaluating and pursuing such an acquisition that we cannot recover.

Extreme Weather Conditions, Climate Change, and Natural Disasters Could Negatively Impact Our Operating Results and Financial Condition.

Extreme weather conditions in the areas in which our retail stores, suppliers, consumers, customers, distribution centers, headquarters and vendors are located could adversely affect our operating results and financial condition. Moreover, climate change and natural disasters such as wildfires, earthquakes, hurricanes and tsunamis, whether occurring in the U.S. or abroad, and their related consequences and effects, including energy shortages and public health issues, could disrupt our operations, the operations of our vendors and other suppliers or result in economic instability and changes in consumer preferences and spending that may negatively impact our operating results and financial condition.

An Outbreak of Disease or Similar Public Health Threat, Such as a Pandemic, Could Have an Adverse Impact on Our Business, Operating Results and Financial Condition.

An outbreak of disease or similar public health threat, such a pandemic, could have an adverse impact on our business, financial condition and operating results, including in the form of lowered net sales and the delay of inventory production and fulfillment in impacted regions.

Our Investment Securities May Be Adversely Affected by Market Conditions.

Our investment portfolio is subject to a number of risks and uncertainties. Changes in market conditions, such as those that accompany an economic downturn or economic uncertainty, may negatively affect the value and liquidity of our investment portfolio, perhaps significantly. Our ability to find diversified investments that are both safe and liquid and that provide a reasonable return may be impaired, potentially resulting in lower interest income, less diversification, longer investment maturities, or other-than-temporary impairments.

We Depend on Certain Key Personnel.

Our future success will depend in part on our ability to attract, retain and develop certain key talent and to effectively manage succession. We face intense competition for these individuals worldwide, and there is a significant concentration of well-funded apparel and footwear competitors near our headquarters in Portland, Oregon. We may not be able to attract qualified new employees or retain existing employees, which may have a material adverse effect on our financial condition, results of operations or cash flows.

We License our Proprietary Rights to Third Parties and Could Suffer Reputational Damage to Our Brands if We Fail to Choose Appropriate Licensees.

We currently license, and expect to continue licensing, certain of our proprietary rights, such as trademarks or copyrighted material, to third-parties. We rely on our licensees to help preserve the value of our brands. Although we attempt to protect our brands through approval rights, we cannot completely control the use of our licensed brands by our licensees. The misuse of a brand by or negative publicity involving a licensee could have a material adverse effect on that brand and on us.

In addition, from time to time we license the right to operate retail stores for our brands to third-parties, primarily to our independent international distributors. We provide training to support these stores and set operational standards. However, these third-parties may not operate the stores in a manner consistent with our standards, which could cause reputational damage to our brands or harm these third-parties' sales.

RISKS RELATED TO OUR SECURITIES

Our Common Stock Price May Be Volatile.

Our common stock is traded on the NASDAQ Global Select Market. Factors such as general market conditions, actions by institutional investors to rapidly accumulate or divest of a substantial number of our shares, fluctuations in financial results, variances from financial market expectations, changes in earnings estimates or recommendations by analysts, or announcements by us or our competitors may cause the market price of our common stock to fluctuate, perhaps substantially.

Certain Shareholders Have Substantial Control Over Us and Are Able to Influence Corporate Matters.

As of September 30, 2025, three related shareholders, Timothy P. Boyle, Joseph P. Boyle, and Molly E. Boyle, controlled just over 50% of our common stock outstanding. As a result, if acting together, Timothy P. Boyle, Joseph P. Boyle, and Molly E. Boyle are able to exercise significant influence over all matters requiring shareholder approval. These holdings could be significantly diminished (and with them the related effective control percentage) to satisfy any applicable estate or unrealized gains tax obligations of the holders.

The Sale or Proposed Sale of a Substantial Number of Shares of Our Common Stock Could Cause the Market Price of Our Common Stock to Decline.

Shares held by Timothy P. Boyle, Joseph P. Boyle, and Molly E. Boyle, are available for resale, subject to the requirements of, and the rules under, the Securities Act of 1933 and the Securities Exchange Act of 1934. The sale or the prospect of the sale of a substantial number of these shares may have an adverse effect on the market price of our common stock.

We also may issue our capital stock or securities convertible into our capital stock from time to time in connection with a financing, acquisition, investment, or otherwise. Any such issuance could result in substantial dilution to our existing shareholders and cause the market price of our common stock to decline.