Under Armour, Inc. Q2 FY2025 earnings call

Management Statement and Operational Highlights:

• Product Elevation: Strong feedback on new products with brand-new innovations, refreshed design, and holistic outfitting. Focus on men's apparel, footwear, and fall/winter '25 collections. Success in premium distribution with HeatGear, Unstoppable Fleece, and Vanish training collection. Trojan Horse products like StealthForm Uncrushable Hat show premiumization.
• Team Sports Positioning: Solid performance in cleated products for baseball, football, and basketball. Curry 12 launch had solid response, and De'Aaron Fox's signature shoe upcoming. Successful China tour with Stephen Curry, driving brand exposure and sales.
• Service and Consumer Experience: Reduced promotions in DTC and eCommerce, leading to higher full-price sales, average order value, and unit retail. Factory House outlet stores shifting to targeted strategy for higher profitability. New flagship store opening in Baltimore to inform brand experience rollout.
• Loyalty Program: UA Rewards program celebrated first anniversary, with 13 million members, driving repeat business and higher revenue per consumer.
• Wholesale Business: Managing reset period, focusing on relationships with strategic retailers, delivering elevated products with storytelling.
• Team Alignment: Strengthened leadership team with Yassine Saidi, Eric Liedtke, and others, aligned on brand reconstitution and culture, with new headquarters opening soon.

Segment Performance:

• Revenue by Region: North America down 13%, EMEA down 1% (currency-neutral), APAC down 11% (currency-neutral), Latin America down 13% (currency-neutral).
• Revenue by Channel: Wholesale down 12%, Direct-to-Consumer (DTC) down 8% (eCommerce down 21%, retail stores flat), Licensing down 13%.
• Product Type: Apparel down 12% (declines across most categories, but good performance in outdoor), Footwear down 11% (declines in most categories, relative strength in golf and team sports cleated products), Accessories up 2%.
• Gross Margin: Increased by 200 basis points to 49.8% in Q2, driven by supply chain benefits (120bps), favorable channel mix (50bps), pricing benefits (40bps), offset by foreign currency and regional mix headwinds (10bps).

Guidance:

• Full year revenue expected to decline at low double-digit rate.
• Gross margin outlook improved to 125-150 basis points increase for full year.
• Adjusted operating income outlook raised by $25 million to $165-185 million.
• Adjusted diluted EPS expected $0.24-$0.27, up ~$0.05 at midpoint from prior outlook.
• Q3 revenue expected down ~10%, Q3 gross margin up 150-175 basis points, Q3 adjusted operating income $20-30 million, Q3 adjusted diluted EPS $0.02-$0.04.

Risks:

• Foreign currency impacts and regional mix headwinds affecting gross margin.
• Retailer conservatism and intense competition leading to inventory and order challenges.
• Potential tariff increases impacting sourcing and cost of goods sold.

Q: Congrats on ongoing progress. Anything further on what Eric's bringing to the team?

A: Kevin Plank noted Eric Liedtke's experience, helping with brand strategy, operating model refinement, and marketing coordination to build a major campaign in 2025.

Q: Bob Drbul asked about North America and marketing dollars in back half.

A: Kevin Plank said North America has upside with brand reconstitution, and marketing dollars in back half will be used for top-of-funnel brand building in regions like Europe, APAC, and U.S. around key events.

Q: Paul Lejuez asked about underdog persona and inventory/promotions.

A: Kevin Plank said underdog persona taps into athletes overcoming challenges, from elite to collegiate levels. Dave Bergman noted industry inventory better but retailer conservatism remains, with inventory levels managed well and aging in good shape.

Q: Brian Nagel asked about tariffs and wholesale partners.

A: Dave Bergman said tariffs are monitored but no immediate major impact. Kevin Plank discussed reengaging wholesale partners, earning shelf space with better product and storytelling, and retailers rooting for Under Armour.