Columbia Sportswear (COLM) Q3 2025: $160M Tariff Exposure Spurs Price Hikes and Brand Reset
Columbia Sportswear’s Q3 2025 was marked by resilient international growth offsetting U.S. softness, as the company absorbed rising tariff costs and doubled down on its Accelerate Growth Strategy. Management is confronting a projected $160 million tariff headwind in 2026 with high single-digit price increases and manufacturing shifts, while new products and a bold brand campaign aim to reenergize demand. The next quarters will test Columbia’s ability to balance margin recovery, operational efficiency, and consumer response to higher pricing in a volatile retail landscape.
Summary
- Tariff Pressure Drives Strategic Reset: Columbia faces a $160 million annualized tariff impact, prompting aggressive mitigation actions and price hikes.
- Brand Revitalization Underway: The “Engineered for Whatever” campaign and new product launches are energizing global consumer engagement.
- Margin and Demand in Focus: Management must navigate U.S. demand softness and SG&A pressure while restoring profitability and channel momentum.
Performance Analysis
Columbia Sportswear delivered 1% year-over-year net sales growth to $943 million in Q3 2025, outperforming guidance on the back of earlier wholesale shipments, even as U.S. sales declined 4%. International markets demonstrated robust growth, especially in Europe direct (low double-digit percent), Latin America (6%), and Canada (7%). The U.S. wholesale business was flat, with direct-to-consumer (DTC) sales down high single digits, primarily due to the closure of temporary clearance stores and lower e-commerce traffic. Gross margin contracted 20 basis points to 50%, pressured by higher tariffs and foreign exchange, partially offset by lower clearance activity. SG&A rose 5%, driven by increased marketing investment to support the brand relaunch.
Brand and product innovation provided bright spots, with the Amaze Puff jacket and Rock Pant showing strong initial sell-through and the limited-edition Bugaboo 1 boot selling out rapidly. Emerging brands Sorel and Prana posted 10% and 6% growth, respectively, while Mountain Hardware declined 5% on lower clearance sales but saw healthy full-price momentum. Inventory levels in wholesale channels remain healthy, and management highlighted positive feedback on new digital and in-store brand activations.
- International Expansion Offsets U.S. Weakness: Europe, Latin America, and distributor markets delivered double-digit growth, supporting overall results despite U.S. headwinds.
- Tariff Costs and SG&A Deleverage Press Margins: Higher tariffs and stepped-up marketing spend eroded margin, with Q3 seeing $15 million in tariff expense and a notable SG&A increase.
- Product and Brand Initiatives Show Early Traction: New product franchises and the “Engineered for Whatever” campaign are driving engagement, but U.S. DTC remains pressured by traffic and promotional pullbacks.
While Columbia’s international business is a clear growth engine, the core U.S. segment remains challenged, and the next several quarters will be critical for demonstrating that brand and pricing initiatives can restore sustainable growth and margin expansion.
Executive Commentary
"Our strong financial performance in these markets demonstrates our ability to effectively reach younger and more active consumers and highlights the growth potential of the Columbia brand. In the U.S., we're working to restore growth and revitalize the Columbia brand through our Accelerate Growth Strategy. The third quarter was an important milestone in this journey."
Tim Boyle, Chairman, President, and Chief Executive Officer
"Our goal going into next year would be to get the business growing and achieve leverage. And SG&A leverage in particular, if not operating margin leverage, knowing that we've got to overcome the impact of the tariffs. So we're hard at that. We've implemented a series of cost reductions that will yield benefit over time here."
Jim Swanson, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Tariff Mitigation and Pricing Power
Columbia is facing a dramatic escalation in tariff exposure, with a projected $160 million annualized impact in 2026. The company is responding with high single-digit price increases in the U.S. for both Spring and Fall 2026, aggressive vendor negotiations, and production resourcing to lower tariff costs. Management’s confidence is rooted in their historical expertise as a top U.S. duty payer and their ability to engineer products for tariff advantages. However, they acknowledge that these actions will reduce unit volumes as higher prices flow through the channel.
2. Accelerate Growth Strategy and Brand Revitalization
The “Engineered for Whatever” brand platform, launched in August, is central to Columbia’s effort to reenergize its U.S. business and reconnect with younger, active consumers. The campaign leverages humor, irreverence, and experiential marketing—ranging from digital takeovers to street-level activations like the NYC scavenger hunt—to differentiate Columbia from more staid competitors. Early consumer and wholesale feedback is positive, and management is committed to an “always-on” marketing approach, supported by a step-function increase in marketing investment (now above 6.5% of sales).
3. Product Innovation and Channel Reset
Columbia is betting on new, higher-end products—such as the Amaze Puff jacket (their most expensive item to date) and heritage-inspired launches like the Bugaboo 1 boot—to drive brand heat and pricing power. The company is also recalibrating its DTC approach, reducing over-promotion and focusing on digital storytelling and enhanced product discovery on the newly redesigned Columbia.com site. The closure of temporary clearance stores has pressured DTC comps but is expected to support healthier margins and brand positioning over time.
4. Operational Efficiency and SG&A Leverage
SG&A deleverage remains a material drag, with management attributing half of the Q3 increase to brand investment. Cost reduction initiatives and a profit improvement plan are underway, but operating margin recovery will depend on reigniting top-line growth, especially in the U.S., and realizing efficiencies as one-time costs roll off. Management targets SG&A and potentially operating margin leverage in 2026, contingent on successful execution of its growth and mitigation strategies.
5. International Expansion as a Growth Engine
International markets are outpacing the U.S. in both revenue growth and predictability, with Europe, China, and Latin America delivering consistent gains. Columbia is leveraging localized marketing, product innovation, and expanded wholesale and DTC channels to build share. Management expects international to continue offsetting U.S. softness, but acknowledges that U.S. demand and pricing elasticity remain key uncertainties as tariff-driven price increases take effect.
Key Considerations
Columbia’s Q3 reveals a company in active transformation, balancing external cost shocks with internal brand and operational resets. Investors should weigh:
- Tariff Shock Absorption: The company’s ability to offset a $160 million tariff headwind through pricing, sourcing, and vendor negotiations will be tested in 2026.
- Brand Platform Momentum: Early traction from the “Engineered for Whatever” campaign and new product launches must translate into sustained U.S. demand and channel sell-through.
- SG&A and Margin Recovery: Operating margin leverage depends on top-line acceleration and the realization of cost efficiencies as marketing and restructuring investments normalize.
- International Outperformance: Continued share gains in Europe, China, and Latin America are critical to offsetting U.S. volatility and supporting overall growth.
- Consumer and Retailer Elasticity: The impact of price increases on unit volumes, retailer order books, and consumer demand will become more visible in the coming quarters.
Risks
Columbia’s primary risks include U.S. demand softness, uncertain consumer response to high single-digit price increases, and the potential for further tariff escalation or supply chain disruption. Margin recovery is vulnerable to promotional intensity, weather variability, and the pace of U.S. DTC traffic normalization. Execution risk around brand repositioning and cost discipline remains elevated as the company navigates a complex macro and retail environment.
Forward Outlook
For Q4 2025, Columbia guided to:
- Net sales decline of 5% to 8% year-over-year
- Diluted EPS in the range of $1.04 to $1.34
For full-year 2025, management expects:
- Net sales of $3.3 to $3.4 billion (flat to down 1% YoY)
- Diluted EPS of $2.55 to $2.85 (including $0.46 impairment impact)
Looking to 2026, spring order books reflect flat to low single-digit wholesale growth, with international markets expected to remain positive and the U.S. declining modestly as price increases take effect. Management will provide a detailed 2026 outlook with Q4 results in February.
- Tariff mitigation and price increases are expected to offset incremental costs
- SG&A leverage and margin improvement are targeted as growth resumes and cost actions materialize
Takeaways
Columbia is at a strategic inflection, using brand and product innovation to counteract cost and demand headwinds and reposition for long-term growth.
- Tariff Mitigation Is a Core Competency: Management’s track record and proactive sourcing give confidence, but $160 million in annualized costs will test pricing power and unit elasticity in 2026.
- Brand Reset Is Gaining Traction, but needs to drive a turnaround in U.S. DTC and wholesale performance as international markets do the heavy lifting.
- Operating Leverage Is a 2026 Priority: Cost discipline, margin recovery, and SG&A control must converge with top-line growth to restore profitability to pre-pandemic levels.
Conclusion
Columbia Sportswear’s Q3 2025 illustrates a company in transition, with international momentum and brand innovation offset by U.S. headwinds and cost inflation. The coming year will reveal whether strategic initiatives and tariff mitigation can restore growth and margin expansion, or if consumer and channel resistance to higher prices will prolong the recovery.
Industry Read-Through
Columbia’s experience underscores the heightened vulnerability of apparel and footwear brands to tariff volatility and supply chain risk, especially for those with heavy U.S. exposure. Aggressive price increases and production shifts are becoming standard responses, but their success will depend on brand equity and consumer tolerance for higher costs. The rapid pivot to experiential and digital-first marketing, as well as the closure of clearance channels, signals a broader industry shift toward premiumization and margin protection. Retailers and brands across the sector should watch for signals on price elasticity and international diversification as key levers for resilience.