Under Armour, Inc. Q1 FY2025 earnings call

• Protect This House strategy: Defined Under Armour as a 'sports house', aiming to be one of the few premium sports brands globally. Focus on reconstituting brand strength through culture, product, and storytelling.
• Product initiatives: Rearchitected product leadership, realigned category portfolio, with fall/winter '25 season plans including new design language and focus on core men's apparel, footwear, and women's business. Implemented 25% SKU reduction over 18 months.
• Demand creation: Optimized marketing organization, changed messaging to focus on premium franchises and storytelling. Back-to-school activations, Asia Pacific and Europe athlete tours, influencer partnerships, and NCAA/USA Football partnerships.
• Operational efficiency: Rightsized workforce, initiated restructuring, automated tasks, modernized supply chain with objectives to improve end-to-end planning and cross-channel capabilities.
• Consumer experiences: DTC efforts to premium positioning, Factory House trials, growth of loyalty program UA Rewards, and progress in wholesale partnerships.

Revenue for the first quarter of fiscal '25 was $1.2 billion, a 10% decline. North America saw a 14% decline due to softer full-price wholesale demand and lower sales to the off-price channel. EMEA was flat on a reported and currency-neutral basis. APAC revenue dropped 10% (7% on a currency-neutral basis) driven by softer wholesale and DTC businesses. Latin America had an 16% increase (12% on a currency-neutral basis). Channel-wise, wholesale revenue fell 8%, DTC revenue declined 12% (e-commerce down 25%), and owned and operated retail store sales dropped 3%. Apparel revenue was down 8%, footwear down 15%, and accessories down 5%. Gross margin improved 110 basis points to 47.5% due to 170 basis points of pricing benefits from lower discounting/promotions and 40 basis points of supply chain benefits, offset by 60 basis points from unfavorable mix shifts and 50 basis points from unfavorable foreign currency impacts.

• Full year revenue expected to decline at a low double-digit percentage rate. North America now forecasted to be down 14-16% (previously expected lower), offset by APAC market pressures. EMEA expected flat, APAC down high single-digit.
• Gross margin expected 75-100 basis point improvement for the full year, but Q1 overdrive not fully passing through due to ocean freight headwinds, foreign currency impacts, and unfavorable channel mix.
• Adjusted SG&A expected low to mid-single-digit percentage decline, with ~$40M savings from restructuring. Adjusted operating income anticipated $140-160M (up $10M from prior outlook), adjusted diluted EPS $0.19-0.22.
• Q2 revenue expected down ~12%, gross margin up 20-30 basis points, adjusted SG&A decline high single-digit, adjusted operating income $110-120M, adjusted diluted EPS $0.18-0.20.

• Macro environment impacts affecting consumer demand and traffic. Promotional challenges and inventory management issues. Supply chain disruptions, including ocean freight cost headwinds. Foreign currency fluctuations. Intense competitive landscape affecting market share.

Q: Jay Sole asked about confidence in delivering sales growth guidance for the second half.

A: Kevin Plank stated confidence in the team, adding A+ talent like Eric Liedtke, and progress in executing the strategy.

Q: Robert Drbul inquired about marketing evolution and Eric's role.

A: Kevin Plank discussed product, story, region balance, need for aggressive North America marketing, and Eric's ability to balance these areas.

Q: Simeon Siegel asked about SKU reduction and price vs units.

A: Kevin Plank talked about deliberate SKU reduction, focusing on performance products, and Dave Bergman discussed ASP growth and balancing SKU development.

Q: Geoff Lowery asked about EMEA and APAC performance.

A: Kevin Plank discussed measured approach in EMEA and complexity in APAC, emphasizing quality and long-term strategy.

Q: Jim Duffy asked about partnership with Eric Liedtke.

A: Kevin Plank explained Eric's role in marketing and strategy, and balancing decision rights.

Q: Paul Lejuez asked about second half guidance and Factory House.

A: David Bergman discussed front half vs back half profitability factors and mixed results in Factory House trials.

Q: Laurent Vasilescu asked about guidance and e-commerce lessons.

A: David Bergman and Kevin Plank discussed full year guidance, e-commerce promotional decisions, and lessons learned from full-price sales.

Q: Samuel Poser asked about back half marketing spend and North America turnaround.

A: David Bergman discussed back-loading marketing spend and Kevin Plank emphasized constant progress and focus on product, story, region.