Under Armour, Inc. Q3 FY2025 earnings call

• Product launches: Launched the Fox 1 shoe for De'Aaron Fox, Echo footwear in spring/summer '25, and new apparel from Unstoppable and Meridian collections. Innovation capabilities recognized, e.g., UA Infinity 2.0 High named best sports bra, UA Project Rock BSR 4 shoes as most versatile cross-training shoes.
• Operating model transition: Moving to a consumer-focused, category-managed model with singular accountability in team sports, train, golf, etc. Reducing SKUs across assortments, narrowing materials library, and streamlining processes.
• Marketing strategies: Focus on culturally relevant collaborations like with Notre Dame for the national championship, redeploying marketing budget for brand activations, and leveraging athlete rosters for storytelling.
• Service improvements: North America eCommerce saw fewer promotional days and deeper discounts, leading to average unit retail and order value growth. Refining owned retail promotional strategies and reducing SKU assortments in Brand Houses.

Revenue for the third quarter of fiscal 2025 was $1.4 billion, a 6% decline. By region: North America experienced an 8% decline; EMEA increased by 5% (3% currency-neutral); APAC fell by 5% (6% currency-neutral); Latin America declined by 16% (9% currency-neutral). By product type: Apparel revenue was down 5%, footwear down 9%, and accessories up 6%. Gross margin was up 240 basis points year-over-year to 47.5%, driven by supply chain benefits, lower discounting, favorable foreign currency, and product mix.

• Full-year revenue outlook revised to a decline of approximately 10% instead of low double-digit contraction. North America revenue decline outlook revised to 12%-13% vs prior 14%-16%. EMEA revenue outlook remains flat. APAC revenue now expected to decrease at low-teen rate vs prior high single-digit decline.
• Gross margin outlook improved to approximately 160 basis points increase from prior 125-150 basis points. Adjusted SG&A expected to decrease at low single-digit rate. Adjusted operating income outlook raised to $185 million-$195 million. Adjusted diluted earnings per share outlook $0.28-$0.30.
• Q4 headwinds due to spring/summer '25 order book, APAC softness, North America factory house comp, and foreign currency.

• Tariff proposals on imported goods from China, Mexico, and Canada not expected to significantly impact as Under Armour sources a small percentage from these regions. However, will stay vigilant and reassess if parameters change.

Q: How is Under Armour approaching balancing storytelling while doing less?

A: Kevin Plank said it's about being more intentional as a brand, leveraging new operating model and clean canvas, with examples like the Notre Dame collaboration showing agility. David Bergman added eCommerce discounting still has room for improvement.

Q: Are you seeing results from brand-strengthening strategies?

A: Kevin Plank noted phone ringing as a sign, with progress in gross margin but more to do. APAC has infrastructure in place, needing great product and story with right resources.

Q: How is North America reset working and expected growth in FY '26?

A: Kevin Plank said North America is in better position, with brand-new product engine starting in fall '25, expecting growth in FY '26 with category management and intentional storytelling.

Q: Details on inventory clearance and marketing spend timing?

A: David Bergman said third-party off-price inventory managed well, timing issues in Q4. Kevin Plank said marketing will be opportunistic, leveraging youthful talent and agile reactions.

Q: North America wholesale upside and shelf space?

A: David Bergman said North America overdrive related to DTC business, stepping off deeper promotions. Kevin Plank said focusing on better and best accounts, not decreasing distribution but seeking premium touch points.

Q: Retailer reception and gross margin potential?

A: Kevin Plank said product reception exciting, SlipSpeed Echo debuting at All-Star Weekend. David Bergman said no account close to 10% of revenue, gross margin on track to 50% with product costing and premium focus.