Under Armour(UAA) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The second quarter revenue was flat year-over-year at $1.6 billion, with a 1% decline when excluding foreign currency impacts [123] - Gross margin improved by 260 basis points to 48%, primarily due to supply chain benefits from lower freight costs [96] - Cash and cash equivalents stood at$ 656 million, with no borrowings under the $1.1 billion revolving credit facility [74] Business Line Data and Key Metrics Changes - Apparel revenue increased by 3%, driven by growth in the train and golf segments, while footwear revenue decreased by 7% due to softness in team sports and running categories [72] - Direct-to-consumer revenue rose by 3% to$ 596 million, supported by a 4% increase in owned and operated store revenue and a 2% increase in e-commerce [95] - Licensing revenue fell by 14% to $29 million, impacted by declines in North American and Japanese licensee partners [95] Market Data and Key Metrics Changes - North American revenue declined by 2% to$ 991 million, with wholesale down 1% to $940 million, reflecting challenges in the full-price business [94][95] - EMEA revenue grew by 9% to$ 287 million, or 4% on a currency-neutral basis, driven by strong DTC performance and new store openings [71] - APAC revenue increased by 3% to $232 million, or 7% on a currency-neutral basis, with China being a significant contributor to growth [124] Company Strategy and Development Direction - The company is focused on its Protect This House 3 (PTH 3) strategy, emphasizing brand heat, elevated design, and operational efficiencies to drive long-term growth [69][81] - There is a strong emphasis on footwear as a significant growth opportunity, with plans to evolve the footwear strategy and invest more in this area [86] - The company aims to improve its premium wholesale distribution strategy, expecting mall penetration to increase by over 40% by the end of fiscal '24 [67] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing pressures in the North American wholesale environment, leading to a revised full-year revenue outlook [79][127] - The macroeconomic environment remains uncertain, with inflation and mixed consumer confidence impacting order books [127] - The company is optimistic about international markets, particularly APAC and EMEA, which continue to show solid momentum [121] Other Important Information - The UA Rewards loyalty program exceeded expectations, surpassing 1 million members shortly after launch, indicating strong engagement [91] - The company is actively managing inventory levels, expecting a decline in inventory by mid to high-teens percentage rate by year-end [97][116] - New product launches, including the Curry 11 and Slip Speed footwear, are generating excitement and positive consumer response [87][108] Q&A Session Summary Question: Can you provide insights on the U.S. wholesale environment looking into 2024? - Management noted that while there are gains in mall-based channels, overall wholesale remains conservative, and it will take time to develop robust revenue from new partnerships [11][112] Question: How is the company addressing footwear performance and domestic store expansion? - The company is excited about innovations in footwear and is focused on enhancing the in-store experience to attract customers [107][109] Question: What is the outlook for the international business amid economic challenges? - Management remains bullish on international markets, particularly APAC and EMEA, and is implementing localized product design and marketing strategies [113]