Under Armour(UA) - 2020 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter revenue was flat at $1.4 billion compared to the prior year, which was better than expected due to higher demand across wholesale and direct-to-consumer (DTC) channels [21][27] - Gross margin decreased by 40 basis points to 47.9%, impacted by COVID-19 related pricing and discounting [24] - Operating income for the third quarter was$ 59 million, with adjusted operating income at $133 million [26] Business Line Data and Key Metrics Changes - Direct-to-consumer business increased by 17%, driven by strong e-commerce performance [21] - Apparel revenue was down 6%, while footwear revenue was up 19%, and accessories revenue increased by 23% [22] - Women's business showed strength with key innovations like the Infinity bra and Meridian pants [11] Market Data and Key Metrics Changes - North America revenue was down 5%, while EMEA revenue increased by 31%, and Asia Pacific revenue was up 15% [23] - E-commerce saw over 50% growth globally during the quarter [17][18] Company Strategy and Development Direction - The company is transitioning from a product-driven to a purpose-led organization, focusing on empowering athletes [7][8] - Plans to reduce wholesale footprint by 2,000 to 3,000 doors primarily in North America, while still maintaining wholesale as a crucial part of the business [16][30] - Emphasis on a direct consumer-focused approach to enhance brand experience and profitability [9][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the ongoing uncertainty due to COVID-19 but expressed confidence in the company's ability to return to profitability [6][4] - The fourth quarter outlook has improved, with expectations of revenue decline in the low teens percentage rate, better than previous estimates [27][29] - Management anticipates challenges in 2021 due to the sale of MyFitnessPal and the exit from certain wholesale distribution [30][31] Other Important Information - The company announced the decision to sell the MyFitnessPal platform, which does not align with its core consumer needs [19][20] - Inventory grew by 17%, ending the quarter at$ 1.1 billion [26] Q&A Session Summary Question: What categories are expected to drive growth? - Management sees significant opportunities in core team sports and women's business, with strong product performance across various categories [36][42] Question: What is the expected revenue mix between wholesale and DTC? - The company is focusing on a DTC approach, but the mix may not change significantly in the short term due to partner-owned mono-branded stores [39][40] Question: What is the profitability of the e-commerce channel? - E-commerce has shown strong growth, and the company is investing in CRM and loyalty programs to enhance profitability [55][58] Question: What are the expectations for gross margin in the fourth quarter? - Management expects promotional activity levels to be higher than last year, which may pressure gross margins [29][82] Question: How will the exit from undifferentiated wholesale doors impact revenue? - The exit will be gradual and will involve various customer sizes, aiming to ensure the brand is represented appropriately [53][54]