Columbia Sportswear Company shares were under water in after-hours trading Thursday after the company reported third-quarter results and offered lowered top-line guidance for the year but better bottom-line numbers.

COLM reported net sales increased 3 percent (+3 percent constant-currency) to $985.7 million from $955.0 million in the comparable period in 2022. Net sales growth was said to be balanced across the DTC and wholesale businesses. Within wholesale, growth was reportedly driven by earlier shipments of Fall 2023 orders compared to the same period last year, which more than offset lower distributor sales.

Wholesale sales were up 3 percent in the third quarter and direct-to-consumer (DTC) was up 4 percent. DTC was 32.6 percent of sales in the third quarter.

Gross margin expanded 70 basis points to 48.7 percent of net sales in Q3 from 48.0 percent of net sales for the comparable period in 2022. Gross margin expansion was said to primarily reflect lower inbound freight costs and favorable channel mix, which more than offset the impact of inventory reduction efforts across COLM’s wholesale and DTC businesses.

SG&A expenses increased 10 percent to $351.6 million, or 35.7 percent of net sales, in Q3, compared to $319.0 million, or 33.4 percent of net sales, for Q3 2022. SG&A expense growth was reported as primarily reflecting higher expenses across DTC, demand creation, and supply chain.

Operating income decreased 7 percent to $134.6 million, or 13.7 percent of net sales, in the third quarter, compared to $145.3 million, or 15.2 percent of net sales, in the comp 2022 quarter.

Interest income for Q3, net of $1.9 million, compared to net interest income of $0.8 million for the comparable period in 2022, reflects higher yields on increased levels of cash, cash equivalents, and investments.

Income tax expense of $32.6 million resulted in an effective income tax rate of 24.0 percent, compared to income tax expense of $34.0 million, or an effective income tax rate of 23.3 percent, for the comparable period in 2022.

Net income decreased 7 percent to $103.5 million, or $1.70 per diluted share, in the third quarter, compared to net income of $111.8 million, or $1.80 per diluted share, for the third quarter in 2022.

For more details about Columbia’s Q3 results, including the CEO’s commentary about the Columbia. Sorel, Mountain Hardwear and Prana brands and details about the warning on its future business, go here:

Columbia Sportswear Sees Rocky Road Ahead for Wholesale Business