Columbia Sportswear Co (COLM) 2015 Q3 法說會逐字稿

Greetings and welcome to the Columbia Sportswear third-quarter 2015 financial results conference call.

(Operator Instructions)

As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Ron Parham, Senior Director of Investor Relations and Corporate Communications.

Thank you, Mr. Parham.

You may begin

Thanks, Bob, good afternoon.

And thanks, everyone, for joining us today to discuss Columbia Sportswear Company's third-quarter and year-to-date financial results and our upward-revised 2015 financial outlook that we announced earlier this afternoon.

Shortly after our earnings release crossed the wire, we furnished an 8-K containing a detailed CFO commentary with further analysis of the results, an explanation of the assumptions behind our 2015 outlook.

The CFO commentary is also available on our Investor Relations website.

With me today on the call are Chairman of the Board, Gert Boyle; Chief Executive Officer, Tim Boyle; President and Chief Operating Officer, Bryan Timm; Executive Vice President of Finance and Chief Financial Officer, Tom Cusick; and Executive Vice President Chief Administrative Officer and General Counsel, Peter Bragdon.

I'll ask Gert to cover the Safe Harbor language

Good afternoon.

This conference call will contain forward-looking statements regarding Columbia's business opportunities and anticipated results of operations.

Please bear in mind that forward-looking information is subject to many risks and uncertainties and actual results may differ materially from what is projected.

Many of these risks and uncertainties are described in Columbia's annual report on Form10-K for the year ending December 31, 2014, and subsequent filings with the SEC.

Forward-looking statements in this conference call are based on our current expectations and beliefs.

We do not undertake any duty to update any of the forward-looking statements after the date of this conference call to conform the forward-looking statements to actual results or to changes in our expectations.

Thank you, Gert.

And before I turn the call over to Tim, I'd also like to point out that during the call we will reference constant currency net sales growth, which is a non-GAAP financial measure.

We provide a reconciliation of constant currency net sales to net sales as reported under US GAAP, and an expiration of Management's rationale for including this non-GAAP measure in the supplemental financial tables that accompany our earnings release, a copy of which is available on our website at investor.columbia.com.

Now I'll turn the call over to Tim

Thanks, Ron.

Welcome, everyone, and thanks for joining us this afternoon.

We are extremely proud of how well our global teams are executing against our stated initiatives to drive growth, increase demand creation investments and improve profitability.

As a result, we delivered another phenomenal quarter as 2015 continued to unfold even better than we anticipated.

Outstanding growth in the Columbia, Sorel and prAna brands led the way in North America, while the Columbia brand continues to regain momentum in our Europe direct markets.

On a constant-currency basis, record third quarter and year-to-date net sales increased 18% and 19% respectively and are both up 14% as reported.

Our expanded gross margins are enabling us to increase our demand creation investments by 13% this year on projected net sales growth of 10.5%, while driving significant improved operating margins.

Third-quarter net income grew 39% to a record $91.1 million or $1.28 per share, aided by accretion from the prAna brand while year-to-date income has grown 36% to a record $110 million, or $1.56 per share.

Each of our brands put up double-digit constant-currency growth in the quarter, led by 14% growth from the Columbia brand; 59% growth from Sorel; and 22% growth from prAna.

In North America, those three brands were the primary drivers of constant-currency third-quarter growth of 28% and year-to-date growth of 29% on an organic basis.

Excluding incremental prAna sales, year-to-date constant-currency North America sales are up 22%.

The Columbia brand's 23% constant currency third-quarter growth in North America reflected increases in wholesale advance orders and 20% growth in direct-to-consumer sales.

(Inaudible) supply chain execution enabled more timely delivery of wholesale customers' increased advance orders compared to our delivery performance in 2014.

The Sorel brand's 59% constant-currency third-quarter growth also reflected increased advance orders and more timely delivery.

The substantial increase in the volume of lightweight fall styles for delivery in the third quarter, along with healthy growth in winter styles, drove a near doubling of Sorel's US net sales and constant-currency growth of more than 80% in North America.

Our global supply chain teams did an outstanding job responding to the increased demand for Columbia and Sorel products.

Thanks to our more timely deliveries, consumers have been greeted by more complete fall floor sets at our wholesale partner stores and, as a result, we've seen stronger season-to-date sales of Columbia's versatile rainwear sportswear, lightweight insulated jackets, PFG and trail footwear as well as Sorel's fall and winter styles.

Whenever cooler weather has appeared, we've also seen an immediate bump in sell-throughs of fleece, insulated jackets and winter footwear.

The prAna brand continues to produce growth in excess of 20% during the quarter on strong US wholesale and direct-to-consumer growth.

We expect prAna to contribute approximately $0.11 of accretion to our full-year earnings per share.

We continue to be very pleased by the contribution prAna's making to our current growth and profitability and remain very excited about the long-term potential of prAna as it gains awareness and builds strong emotional connections with consumers around the world.

Although the Mountain Hardwear brand also achieved double-digit growth in the quarter against easy comparisons, it's important to understand that we're still very early in our efforts to refocus the Mountain Hardwear brand to better resonate with its core consumers.

Turning to our EMEA region, I want to highlight the continued resurgence of the Columbia brand in our Europe direct markets.

Our European Management team has been working hard to rebuild Columbia's presence into the accounts focusing on Germany, France and the UK while streamlining the business's cost structure.

Those efforts produced high-teen constant currency growth in the third quarter.

Year-to-date, they've achieved mid-20% constant-currency growth, led by trail footwear.

Our outlook anticipates sustaining that growth rate for the full year.

Although we still have work to do to reestablish profitability in our Europe direct operations, we are poised to leverage the current momentum to drive further growth and improve profitability in 2016.

In addition to our outstanding wholesale performance in North America and Europe, our US direct-to-consumer business grew 20% in the third quarter led by expansion of our outlet store fleet and robust e-commerce growth.

Our balance sheet remains very strong.

Inventory levels in North America and Europe are well in line with our plans at September 30.

In Korea, we've reduced year-over-year constant currency inventory levels by 26% and expect year-end comparisons to improve further.

As we've indicated previously, we're committed to strategically increasing demand creation investments behind our brands.

Our full-year 2015 outlook anticipates 10.5% sales growth to the 75 basis points of gross margin expansion.

We're using a portion of those expanded gross profit dollars to increase demand creation investments 13% in 2015 to 5.4% of net sales from 5.2% last year, while still projecting 30 basis points of SG&A leverage.

As it relates specifically to the Columbia brand, on October 9 we launched the largest integrated global campaign in the history of the Columbia brand.

The Tested Tough brand platform is a $50 million global campaign that marks the return of the original tough mother as one of the inspirations behind our innovative performance products.

Tested Tough differentiates and elevates the Columbia brand around the world.

It spans all form of traditional and digital media, along with a strong emphasis on improving our in-store presentation in wholesale channels.

Although the Tested Tough campaign is just getting started, we're very encouraged by some of the early reads on its visibility and engagement in social media channels.

For example, since the October 9 launch, the Columbia brand's YouTube channel featuring Tested Tough branded content has been the top feared channel in the outdoor industry.

We're very excited for the full global rollout of the Tested Tough campaign and are confident that it will connect with consumers and drive continued brand excitement.

Our third quarter and year-to-date results showcase the momentum that the Columbia, Sorel and prAna brands have in North America.

The Columbia brand is also gaining traction in Europe and driving continued constant dollar growth in Japan.

Our upward revised financial outlook for 2015 anticipates 14.5% constant currency net sales growth translating into 10.5% growth as reported to more than $2.3 billion for the year.

We expect full-year operating margins to increase approximately 90 to 100 basis points and net income to increase 20% to 23% to $2.32 to $2.37 per diluted share.

Keep in mind these outstanding projected results are despite macroeconomic challenges in Russia and Korea, two markets that have been significant contributors to growth and profitability over the previous decade, as well as slow growth in our China business and challenges in several other smaller developing markets.

In addition, these projected results include foreign currency exchange headwinds of approximately $0.14 per share.

Our improved US wholesale delivery performance in the third quarter will naturally result in lower US wholesale growth in the fourth quarter.

Also keep in mind that our US business is comping against 25% organic growth in last year's fourth quarter which included very strong performance in our North American direct-to-consumer business.

Our exceptional third-quarter year-to-date results, strong balance sheet, and upward-revised full-year outlook illustrate the earnings power of our brand portfolio and the robust operating platforms that are supporting their growth and enabling our improved growth profitability.

We're very proud of these results because they provide further evidence that we're realizing meaningful returns on the strategic actions and investments we have been focused on for the past several years, building an expanded, more versatile and differentiated brand portfolio that enables us to address the needs of a wider variety of consumers.

Driving renewed growth in North America and Europe direct wholesale markets through exceptional innovative products and strong relationships with brand-enhancing retail partners.

Increasing demand creation investments behind integrated global brand platforms that strengthen emotional connections with consumers.

Expanding our profitable direct-to-consumer business, enabling us to tell each of our brand stories more effectively and to respond strategically to business cycles.

Expanding our brands in international markets including China and other emerging markets, where we believe there is substantial untapped long-term potential.

Implementing an integrated IT infrastructure that provides greater visibility across our global supply chain and distribution channels.

And, of course, attracting and retaining talent and committed teammates around the world will make this all happen.

We believe these investments, our people, and our powerful balance sheet position us better than in any time in our history to expand our business and manage through a wide variety of retail environments, macroeconomic and political disruptions and weather scenarios, all of which are inherent variables to our global business.

You can find more details on our Q3 and year-to-date results in our 2015 outlook in Tom's CFO commentary available on our website.

That concludes the prepared remarks.

We are ready to take any questions.

Operator, can you help us with that?

Thank you.

(Operator Instructions)

Bob Drbul with Nomura Securities International.

Hello, good afternoon.

I guess I just have a couple of questions.

Can you talk about how the direct-to-consumer business comped or performed during some of the warmer weather in September?

Any insights into October?

And I guess can you talk about how your wholesale retail partners are handling the warmer weather in the outerwear categories and what you're seeing from them and you think about the inventories in the channel right now?

Certainly.

As you know, we don't report the way a typical retailer would in terms of the comp results on our own direct-to-consumer business.

But we're on our plan and I believe that our results for Q4 are going to reflect the plans that we've laid out and we expect to happen for the balance of the year.

It's been an important part of our business, especially in North America and we're pleased with the results.

As it relates to the wholesale channel, we've had -- we, as you know, have visibility to our retail customers sell-through and we have a lot more inventory in the channel.

But our results are equal, really, with last year in terms of the sell-through.

So we're pleased with where we are in our business.

The results we've seen from competitors would imply that we're taking market share, so I don't really know how much other brands' products would exist in our stores, but as it relates to our products, we're comfortable with our position.

And can you just comment a little bit on Sorel's growth and the performance and the expectation, what you're seeing out there, both for its performance and, I guess, the competition in that category?

Certainly.

Well, the brand is well known as a winter footwear brand.

But, frankly, the most gratifying thing has been the result of the sales of what we're describing internally and to investors as fall merchandise.

So the wedges and those products which don't require snow on the ground to sell have really been spectacular.

And the product essentially, for all intents and purposes, sold out last year so there was a lot of pent-up demand from consumers who couldn't buy the product last year.

So early sales have been good.

As you know, the footwear business can be explosive.

And what we've been diligent in managing preseason orders from customers so we don't have an issue.

And I think we've managed that properly.

So we're happy with how the business is progressing there.

And then I just have a question for Tom.

When we look -- so currency is a $0.14 hit this year.

I know you're not giving 2016 guidance, but can you just give us an early read in terms of what we should expect on foreign exchange as we look forward into the next fiscal year?

Yes, Bob, I would say if we were to lock in today at today's rates relative to next year, obviously currency would be a headwind.

And mostly on the gross margin line.

But with that being said, I would say in 2014 and 2015 each currency's been about a 50 basis point headwind.

We still have been able to expand gross margins, so that's kind of how we see it today.

Great.

Thank you very much.

Good luck.

Thanks Bob.

Jonathan Komp with Robert W. Baird.

Just two questions for me, maybe.

Tim, first I just want to be clear and if you could clarify, I noticed the full-year revenue projection for the US looks slightly lower than it was last time, low- to mid-20% growth versus a mid-20% number last time.

Understanding both of those numbers are very strong, could you maybe just given any more commentary or just make it clear why that change was made?

Yes, this is Tom.

I think that's really a 1 percentage point delta one way or the other and we felt compelled to provide a range there.

So really no meaningful change in the US outlook for the full year.

You really should look at the results from a first half, back half point of view.

The deliveries can move around from quarter to quarter, but we're really talking about business in the second half which has been significant and growth has been good.

Great, that's helpful.

And maybe a bigger picture question, really on the demand creation side, and this is more working over the next several years.

I know you've gradually been increasing the spend as a percentage of revenue and in some of the recent work with the Tested Tough campaign looks pretty encouraging.

So I'm wondering if you could just provide a little bit more of a longer-term road map on how you see the demand creation side playing out over the next few years?

Yes, certainly.

Well, as we've said before, we have many competitors that are spending double-digit marketing funds to create demand and we haven't been spending at that level.

In fact, we've been spending below our levels of today.

We know we need to increase that spend and we also know that we need to improve our operating margins, which are just now getting to close to average.

So the goal over time will be, frankly, to grow our top line, grow our gross margin to provide funds for additional marketing spend, which I don't know that we will ever get to double digit, but we need to spend more, and we need to be more efficient with that spend.

And at the same time creating better operating margins.

So we've been able to do that incrementally over the last several years and that's the plan is to continue that.

Great; very helpful.

And maybe one last one from me.

Tom, just any high level thoughts you have on some of the input cost directions for next year would be helpful if you're willing to share anything at this point?

Yes.

Obviously we're not guiding for 2016, but from a commodity constant standpoint, I'll let Brian jump in here, if he would like.

But we see that the environment for 2016 as being favorable.

Labor rates are expected to continue to increase, but commodity costs coming down.

Currency being a headwind; changes in channel mix.

I think when you put all those together, I think 2016 could look similar to what we've put up from a gross margin standpoint the last couple of years.

Great.

Thank you very much.

Camilo Lyon with Canaccord Genuity.

Hi, this is (inaudible) for Camilo.

Thank you for taking my question.

My first question is on the inventory.

So your guidance is implying a 3% -- a low single-digit growth in sales in the third -- in the last quarter.

But your inventory is up about 10%.

Can you give us a little more detail on the composition of the inventory?

Are you expecting to shift more wholesale orders these last part of it?

Any color there would be helpful.

Yes, I would say the vast majority of our inventory growth is comprised of that inventory that sits in North America and, to a lesser degree, Europe, where we put up the highest growth rates year to date, and we expect to, two to four years.

So we feel like inventory is in really good shape.

In fact, Korea, which has been our most challenged region, that inventory comped down 26% year over year.

And that's in constant currency terms.

Got it.

Thank you.

And my second question is on -- so you had some advanced wholesale orders this quarter.

At what point if the weather doesn't turn and if the sell-through, that they are, is still [is un] expected, at what point do you start to see any cancellation or slow down in any reorder business during the season?

Okay.

So we run the business on a future basis.

So these advance orders were given to us sometime between November and March of last year -- November of last year and March of this year.

And we've shipped the bulk of them.

And again, we receive cancellations and reorders every day.

So the guidance we've given today it really contemplates what we believe will happen as it relates to both of those new orders and cancellations.

Okay.

Thank you.

Lindsay Drucker Mann with Goldman Sachs

There's been some concerns raised by a couple of peers and other industry participants just about the state of the industry, inventory situation, maybe some deceleration business, heading into October, obviously, your numbers are very strong.

I was just hoping you could share some of your perspective on what you're seeing from a -- as far as the bigger picture is concerned.

Well, I'm actually quite optimistic about the business, frankly, and I don't really see the deceleration.

We end up in this sort of quasi-panic situation in October frequently when it's not minus 3 degrees as people expect.

I really can't comment about our competitors.

I can tell you our position we believe is strong and expanding.

And you have to remember the results that we are showing today are -- our business has been under pressure over the last several years and we've been working diligently to improve through a number of different factors, including better product, more marketing, et cetera.

So I think our results are, frankly, the results of an improved business and may not be that reflective of the industry.

And so again, as it relates to the industry, I'm, frankly, quite encouraged.

Thanks.

And I know that you're not giving 2016 guidance, but in prior third-quarter updates you've had some visibility and actually in some instances given a lot more detail.

Is there any light you could shed for us just on your feel for how some your retail partners are thinking about 2016, maybe what some of the shop talk feels like or certain product innovations otherwise, just to give us a sense.

Thanks.

Certainly.

Well, the big product innovation for us for spring really globally was this OutDry extreme where really we -- we have a real disruptive rainwear product where we've moved the waterproof breathable membrane, which is really the functional part of the raincoat, to the exterior of the garment as opposed to the interior.

And there's lots and lots of positive reasons for doing that.

But at the end of the day, it's very distinctive and it has high performance.

So our business, I think, in North America and Europe direct is going to continue the momentum we've seen, as well as our footwear business, which has been really increasing fairly significantly.

Our spring 2015 sell-through that we managed was good.

And we have a division of the Company -- I'm saying division, I'm really talking about the PFG sub-brand which, frankly, is not present by a lot of customers -- a lot of competitors that we have are selling outerwear only, which is a spectacular product and growing rapidly.

So we haven't mentioned really spring 2016 much, but there was lots of other good stuff to talk about in the quarter, but that's my take on next year.

Okay, great.

And then just lastly on Europe, you guys have worked hard to turn that division around.

And I was just curious, as it relates to the continent, what inning you feel like you're in, in terms of the turnaround, when we can start to see that division accelerate maybe in terms of profit contribution?

Well, we really haven't started to guide on 2016 or beyond, but our expectations are that we will have continued improvement there.

We really have the right team in place led by Frank Fogliato.

He's got a solid grasp on the business and more opportunities come to us all the time.

So that's going to continue to improve and I hope to be able to give you more guidance on when that will be black ink over there soon, but for me, it's really moving in the right direction.

Great.

Thanks so much, everyone.

John Kernan with Cowen.

Hi, guys, congrats on a fantastic quarter.

Thanks for taking my question.

Going back to that European scene, when do you think some of the supply chain initiatives that you've put in place and seen so much success on in the United States can start to translate over into improved international profitability?

Well, I think we're seeing the results, frankly, in the increased profitability in Europe with some of our supply chain initiatives, even though we haven't put the final touches on it, and the final touches being described as installation of the SAP system into that market.

But much of the learnings and the advances that we have in the supply chain and focus here has resulted in improved business in Europe.

We're not all the way there yet.

But, frankly, we're much of the way there, just based on our current investments.

Okay, thanks.

You have got a pretty consistent history of beating the guidance you put out the past several years.

Where do you think you're most conservative on the outlook for the fourth quarter?

This is Tom.

That one's a tough one to ask -- or to answer.

When we look at what we're comping against, 25% organic growth in the US, 15% organic growth globally, we kind of had the perfect storm weatherwise in the fourth quarter of last year.

So the comps are quite difficult.

We plan the business for a normal winter, so if winter is like it was a year ago, the results will be better.

So I guess we plan it as down the middle as we can and I think that's what you see in the guidance today.

Okay.

That's all I have.

Thank you.

Susan Anderson with FBR.

Good evening.

Congrats on the good quarter.

I was wondering if you could talk about -- it seems like you did a really good job on offering more transitional product in the stores for early fall, which it seems like sold very well.

Maybe if you could talk about any difference this year versus last year.

And then also if you could talk about the difference in performance between the heavier outerwear and the lighter outerwear?

Certainly.

Well, I think, in total, you have to remember that the Company's product range is quite broad, so it goes all the way from lightweight shirts which are designed for use in tropical climates and, arguably, in Houston, Texas, it is tropical all year round.

So we've had great success in the southern part of the United States and in Central and South America.

And then we have had good success with our lighter-weight garments, insulated garments, but we've also had good success with our heavily- insulated garments.

And I think a big portion of that success was the fact that we placed the merchandise in stores earlier.

Early in the year we can gain a couple -- up to three percentage points of sell-through even in a month as early as August or July, based on having the merchandise in the store.

And, frankly, for our retailers, just the most profitable sales period when there is no discounting and actually we can observe trends there that help us to design future seasons' products.

So I think the fact that we delivered in a timely basis this year as opposed to prior periods has been helpful for our sell-through

Got it.

And are you guys -- do you feel like you have the same penetration of the heavier outerwear this year or did you try and spread it across both heavy and light, just given the potential for warmer weather?

Yes, I think it was about the same this year.

I don't have the figures right in front of me to be specific about it, but I think it -- in terms of the composition of the offering it was about the same.

Got it.

Okay.

And then just one more question on Mountain Hardwear.

It seems like it's finally trying to gain some momentum.

Maybe if you could give a little bit more color on what you guys are doing different there to drive that performance improvement?

Well, yes, Mountain Hardwear has been under the category of a challenged brand for us.

We had a good quarter this year in this quarter but I wouldn't read too much into that.

We still have a lot of heavy lifting to do there.

We're searching for a new leader there.

And Scott Kerslake, who is the President of prAna, has been helping us to manage the business on an interim basis.

It's a great brand.

It's got a tremendous following.

It's very well thought of in the Alpine-ness community and those heavy users.

And we just haven't been providing products that make the promise of the brand come alive.

So the focus for us over the next several months, really, is going to be on continuing to improve the product.

And with current leadership we think we have the right approach.

It's a great brand.

Well thought of.

It will get better.

Got it.

Thanks so much.

Good luck next quarter.

Rafe Jadrosich with Bank of America Merrill Lynch

Hello, good afternoon.

Thanks for taking my questions.

Can you give a little more color on why the retailers are taking shipments earlier?

Is there something being driven from your end or do the retailers want the product flow to them earlier?

And then is that also more transitional product and that's why they're taking it earlier?

No.

I think, again, we want to make sure investors view the back half of the business cycle as opposed to any particular quarter.

We continuously improve our logistics and delivery performance so that we are delivering when retailers want it.

In the past, we perhaps delivered three or four days later than what they wanted to start.

So we are really talking about just a few days difference.

As well as those retailers that I said who want to get the most profitable advance order -- excuse me, the most profitable sales period, which sometimes can be quite early in the year, in the summer.

So we really didn't do anything differently this year other than to focus on delivering the products when retailers wanted them on a exactly timely basis.

So you should look at the business from a first-half, second-half basis, especially as it relates to the outerwear business.

Okay, got it.

And then (inaudible) are performing really well, but I think Columbia footwear is also growing?

Can you talk about some of the key drivers there?

Certainly.

Well, we have a couple of -- as it relates to the Columbia footwear business, we have a couple of very strong winter items, especially the Minx, m-i-n-x, product which has been really leading the charge on our winter products.

But more importantly, we've had really high quality global sales of the Company's trail footwear products.

So that's been one of the most gratifying improvements in the footwear business for Columbia, because it's a non-weather sensitive business.

As it relates to Sorel, again, well-known as a winter footwear brand, protective, and we've been transitioning to a real fashion business founded in the protection space.

But really the fall business has been quite exceptional there, especially these wedges, which have sold very, very well for us.

So we're pleased with the business.

Obviously, as Tom said, we will have better performance than expected if we have an exceptionally cold winter, but we believe that we've given our best look at a complex business and what the outcomes will be for the fourth quarter.

And then just last question for me, in terms of South Korea and Russia, two businesses that have been under a little bit of pressure, can you just talk about when those businesses might inflect and turn positive for you?

Certainly.

Well, as it relates to Korea, the industry there really expanded at an enormously rapid rate over the last 10 years and is now contracting.

There are players leaving the industry.

There are competitors departing the market.

We're committed to being there.

We have a new leadership there which is very focused on a high degree of profitability.

And, by the way, that business is profitable for us, but when it will get back to the days of growing at a rapid pace and being highly profitable, I'm not sure yet.

But it is a profitable business and our expectations are for continued improvements.

We've made, as Tom mentioned, significant improvement on the inventory turns.

We've reduced our reliance on old inventories and that business is improving.

As it relates to the Russian business, it's really going to be a function, frankly, of what happens with the price of oil and that's to be determined.

Great.

Thank you.

(Operator Instructions)

Laurent Vasilescu with Macquarie.

Thank you very much and congrats.

Last October you called out you expected 2015 to be the second consecutive year of double-digit, net-sales growth.

Has your visibility changed this October regarding the following year versus last October?

This is Tom.

I guess how I would answer that is we gave our preliminary outlook for 2015 at this time a year ago because of really the kind of significant disconnect in our outlook -- our internal outlook relative to the street.

Given we don't have that disconnect at this time, we've not provided a preliminary outlook for 2016, if I'm answering your question correctly.

Yes, that's very helpful.

So then we can expect what guidance -- what the street has for next year then?

We will be providing our 2016 outlook in our February earnings announcement.

Okay, fair enough.

And I think on an annual basis it's been mentioned that DTC's 36% of your overall business?

Can you provide some clarity around how much DTC contributes for the third and fourth quarters?

Well, I don't have that detail in front of me but I guess -- I think it would be fair to say that DTC is a higher percentage in the fourth quarter for certain than the full year.

I don't have the third quarter in front of me but certainly the fourth quarter, that would be the case.

Okay, great.

And then in terms of input costs, you're seeing leather go down, synthetics go down.

Could you articulate how much of a benefit your gross margin benefit from this quarter?

And should we see that magnitude increase over the next couple of quarters?

This is Bryan.

There is a lot of puts and takes in our gross margin in terms of what we expect.

I would tell you that as it relates to spring 2016 and, for that matter, all 2016, as Tom mentioned, we do see a little bit of pressure on the labor and overhead just due to inflation in Asia.

But that's more than offset by the commodity decreases that we are seeing, which is really a factor of oil down, synthetics, of course, being a derivative of the oil.

And so that's where we see some good traction as it relates to both spring and fall for next year.

Great.

And then my last question, I think you mentioned two quarters ago you guys are number 58 duty payer in the United States.

Now that we are one step closer to the Transpacific partnership, how should we think about the benefit in terms of basis points for gross margin if the TPC is enacted?

Well, yes, if TPC is enacted, which there's a question mark there, it will take several years before these savings will be visible, frankly.

So these savings will be headered into over time and gradually reduced, so there will be obviously an important ultimate savings for the Company.

But more importantly, it signals to the rest of the world that we're interested in trade and that's where we expect to be rewarded is just having a more level playing field globally for trade.

Okay, great.

Congrats again.

Corinna Freedman with BB&T.

Hi, good evening.

Let me add my congratulations.

I have a question on Sorel.

As you add outerwear this year and essentially have an untapped international market, could you share with us the long-term vision for this brand?

How big you think it could be and how meaningful it could be to the bottom line.

Well, we have a lot of discussions internally on this specific subject, as you might imagine.

And, really, the focus has been on improving and continuing to make our footwear business the leader.

But there is a lot of opportunity in apparel and accessories and possibly even handbags.

We constantly look at our biggest competitor in this space, which would be Ugg, at north of $1 billion.

So when you think about where we could be with this business if we operate it properly, that's certainly something to shoot for.

I don't believe that the outerwear component at that brand is as strong as it could be with Sorel, based on our Company's understanding of how to build outerwear.

So we're still experimenting a bit but, frankly, I think there's lots of opportunity to extend the brand into categories which are very relevant to us.

Great.

Thank you.

Jay Sole with Morgan Stanley.

I just want to follow up on the DTC talk about maybe your updates on maybe store opening plans for 2016.

And maybe more importantly, how your website and everything you are doing from on an e-commerce standpoint helps drive the wholesale business.

Well, I'll talk about the e-com business and how important it is for our total business.

And then maybe Tom can give you some specifics on the brick-and-mortar store openings.

We are one of the last players in our space to actually have a commerce business as it related to our website.

And what we found that our traffic to the site increased dramatically.

But, frankly, our conversion rates are in the range of industry average, which means something like 97% of all people that visit get a very robust marketing message and deliver an important view of the Company and its products, and go somewhere else and buy their products.

So I think it's been very accretive to our marketing efforts as a wholesale business.

So just by way of reference, we have a direct e-commerce businesses in US, Canada, Japan, Korea, and almost every country in Europe.

So we'll continue to invest in that area of the business because it's very accretive to the total brand-building experience for the brand.

And on the new store openings, our plans for 2016 aren't locked yet, so I thought what I could do is just provide a brief update on 2015.

So we will open 17 stores this year; 10 of those will be in the fourth quarter.

They include 12 Columbia outlets, two Sorel stores, one PFG store, and two prAna brand stores.

And then in Europe, we will open four stores, all in the back half.

And those are outlets in Western Europe.

And then China, Korea, Japan are all -- it is a bit different model there, a combination of owned and franchised branded outlet and shop-in-shop, again, franchised and owned.

In that model we'll have opened nine stores exiting the year in China.

We'll be net up 14 stores in Japan.

And in Korea we will be down about 17 from 280 to 253 stores in Korea

Got it; that's great.

And then maybe just to follow back up again on the e-commerce question, can you (inaudible) perspective in mobile just to enhance the overall e-commerce presentation your Company makes to the consumer?

Well, we have a very significant investment in that and especially led by our directors of Toughness, which is a new investment for the Company in this back half of 2015.

I think a more robust description of what our investment there could be had by our marketing department.

I'm not as conversant as I should be, probably, with this, but I know that we've invested heavily there and the results have been quite good as it relates to the connection to our e-commerce business through social media.

Got it; thank you so much.

Christian Buss with Credit Suisse.

I was wondering if you could talk a little bit about how much the better execution on deliveries contributed to the revenue growth in the quarter, if you can quantify that?

Yes, Christian, this is Tom.

So if you look at the percentage of our order book that we delivered in Q3 this year versus last, it's about a $40 million-plus increase year over year based on the order book this year.

Okay, that's very helpful.

And that does help you on the gross margin line as well, because you're not paying late payment penalties or anything like that, correct?

Correct.

That's very helpful.

Thank you so much and best of luck.

There are no further questions at this time.

I would like to turn the floor back to Tim Boyle for closing comments

Thank you very much for listening in.

We're excited about the progress the Company has made towards our ultimate goal of exceptional performance in all fronts and we look forward to talking to you at our next quarterly call.

This concludes today's teleconference.

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Thank you for your participation.