Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Under Armour Inc (UAA, Financial) started the fiscal year ahead of expectations, showing early progress in executing its 'Protect This House' strategy.
- The company has made significant leadership hires, including Eric Liedtke as EVP of Brand Strategy, to enhance brand growth and strategy.
- Under Armour Inc (UAA) is focusing on reducing SKU/style count by 25% to streamline operations and improve product focus.
- The company is seeing positive traction from shifting its marketing strategy to focus more on full-price selling rather than discounts.
- Gross margin improved by 110 basis points to 47.5%, driven by reduced discounting and supply chain benefits.
Negative Points
- Revenue declined by 10% to $1.2 billion, with a significant 14% drop in North America due to softer wholesale demand and lower off-price channel sales.
- The Direct-to-Consumer (DTC) business saw a 12% decline, primarily due to a 25% drop in e-commerce sales from reduced promotional activity.
- APAC revenue decreased by 10%, impacted by a softening macro environment and competitive pressures.
- SG&A expenses increased by 42% to $837 million, although adjusted SG&A was down 6% due to cost management actions.
- The company expects continued revenue declines in the second quarter, with a projected 12% decrease compared to the prior year.
Q & A Highlights
Q: Kevin, what gives you confidence in Under Armour's ability to deliver on the sales growth guidance for the second half of the year?
A: Kevin Plank, CEO, expressed confidence in the company's strategy and team, emphasizing the importance of assembling a strong team and executing their strategy effectively. He highlighted the addition of Eric Liedtke as a positive step and noted the company's focus on macroeconomic factors while maintaining a sense of optimism about future progress.
Q: Can you elaborate on the evolution of Under Armour's marketing strategy and what Eric Liedtke brings to the table?
A: Kevin Plank discussed the importance of product, story, and region alignment. He emphasized the need for aggressive marketing in North America and highlighted Eric Liedtke's role in enhancing storytelling and brand marketing. Plank noted the company's focus on authenticity and connecting with the 16- to 24-year-old varsity athlete demographic.
Q: How does the 25% SKU reduction play into Under Armour's strategy, and what are the expectations for units versus price?
A: Kevin Plank explained that the SKU reduction is a strategic move to focus on core products and improve efficiency. The company aims to enhance product quality and storytelling while maintaining a balance between units and price. David Bergman, CFO, added that the focus is on ASP growth and reducing lower-margin products to drive gross margin expansion.
Q: Can you provide more insight into Under Armour's performance in EMEA and APAC, and how much is market versus company-driven?
A: Kevin Plank highlighted EMEA as a strong region with momentum, particularly in the UK and France. He emphasized the focus on authenticity in football and partnerships with key retailers. In APAC, Plank acknowledged macroeconomic pressures and the need for more attention from the home office, with plans to leverage Stephen Curry's tour in China to boost brand presence.
Q: With the addition of Eric Liedtke, where do you expect to spend more of your time, Kevin?
A: Kevin Plank stated that Eric Liedtke's role will focus on marketing and strategy, allowing Plank to concentrate on other areas. He emphasized the importance of balancing product, region, and story, and expressed confidence in the team's ability to drive the brand forward with a focus on authenticity and innovation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
