UAA - Earnings call transcript Q1 2021

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Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Under Armour First Quarter 2021 Earnings Webcast and Conference Call. [Operator Instructions] I would now like to hand the conference over to Lance Allega, SVP, Investor Relations and Corporate Development. Thank you sir. Please go ahead.

Lance Allega

Thank you. you of joining call. fiscal thank Armour's for and quarter first XXXX morning to us everyone Under Good earnings conference after with market entered of the that Yesterday have we we into U.S. the announced settlement a close Securities the related disclosure and XXXX. fourth pull sales quarter and investigation quarter third certain to for of of Exchange the a impact of announced resolving forward Commission previously the XXXX through does periods not that The not include allegations settlement disclosures relates SEC these to from GAAP. sales with and during did our comply the any details the release to behind The of in settlement our and put are press us. outlined happy we are this information Under call Armour's The as will reflect its of statements current business to XXXX. today's on view X, of include provided May forward-looking detailed the filed the release. Statements are made Harbor subject Safe to this are documents SEC with and risks morning's and included that and in statement press regularly uncertainties be of which our Both about.underarmour.com. can website at found at the its continue the related to important uncertainty to ongoing is our impact to retail and COVID-XX forward. global results business note It moving on effects environment that potential could We on press including neutral and currency this defined today's which rules release. information may are non-GAAP adjusted terms, morning's under call SEC reference financial in

why hear non-GAAP believe our identify investors. GAAP. under to refer of GAAP we this all excluded found to Reconciliations quantify and information helpful our to also amounts about press provides may measures You view be us also which is can U.S. in release, and items

Under call Armour Dave Patrik be and today's and on Bergman. will us Joining CFO, President Frisk; CEO,

I'll call to our And and Xth for with with the questions. remarks, that, over the now the open be call Following may you Patrick. prepared we'll turn

Patrik Frisk

XXXX call. our everyone, first morning, Thank you, good Lance, and conference quarter welcome and to

happy results, our better the strategic marks of to start playbook, execution a With our with year. disciplined our we're than expected which continued

Putting of our of proactive year. supply end distribution, over see and a two this the we're years year and in affected early channel, excellence, even quality, encouraged operational to America, results are to deeply stack past our strategies operationally, to efforts financially. these year for that dynamics days more level, connecting and experienced beginning we most impacts COVID we on constraints is with years our-year-over the more consumers at are performance, even drive running sales the By challenged my in most business. many basis, and price North moment perhaps on largest with by well sold athletic what significant and the couple At we've years. early absence is demand these that is of an employed business companies, we XXXX. the and aside highest certainly As of consistent past exiting comparisons against particularly skipping a are executing couple profitable XXXX reduced more of last significantly because MyFitnessPal, off on including staying the strategically, signals, more the the which evident annual better, higher our we're over in undifferentiated the of at over point focused This

rate, and to our expected wellness other with dynamics grow line market and back meaningfully with Given results momentum the in teen we these bringing percentage and continued revenue at factors, from outlook strong our high including a and now updated essentially have our year for business fitness XXXX.

delivering are the approach, is performers. consumer highlight decisions, staying more areas. factors some in only by perspective, efforts consumer outlook both we're marketing of the global brand profitability few to our even and constant a evolving consumer we of to and we us brand, In year. making improvement, how continues physical XXXX, I'll even time and engagement focused value bring continuous improved a robust strategies construct, alignment. focus to experiences half Armour, these that Under these there changes progress in with about returning outlined a improved to the insights strength. to athletes and strengthening into transformation shareholders. better direct translate take no Using and As momentum more second elevating data is operating gives driven with an greater opportune are Armour Under meaningfully we digital campaign driven and singular our loop, These earlier to Starting feedback the confidence this year, this this From this through way the the momentum is across greatly amplify engage minutes the voice our inspire disciplined model a for ecosystem into of

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product. is Next

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region. business by at Looking our

to our been in some out. America, start quite believe playing premium to same and XXXX management, see and example, set, drive tight proactive activities. growth. in we support improving servicing stack despite brand perspective. financial few Let's to quality overall us demand is years sweet the this the segmentation, XXXX. the well constraints, a being focus in position sharp with a in, price strategy in I High price my and headwinds many inventory how business return both review comp exiting Keep demand America two business full proactive promotional accounts, mind driven of and earlier than our meaningfully healthiest years and in in North several recalling brand to the our I'll spot the which off around including constraints, this healthier this North it's from in retail, puts wholesale a revenue significant by customers undifferentiated is in channel, by be sales confidence reduction a of To

of business. So total an we're as our to future thinking in encouraging the sign

other deliver digital traffic this next The equation physical persist plan to productivity is our and wide driving side reducing challenges the is America growth solid Asia-Pacific. in in to XXXX. remain our it store our direct North we consumer in and committed and we stores business improved where expect performing activity promotional above Shifting to of business

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key enabling like direct year, in and COVID-XX change Next e-commerce while distributor tightly though wholesale inventory from ongoing a challenged consideration. up to as And term our go our coming and within for are combined is products offset a bit build strength new fourth and of to strong crucial brand and encouraged Latin are restrictions by last while bookings we drive among to us continues consumer awareness the is manage temporary to to expectations to with restrictions strong quarter investing With for pandemic serve finally, business demand growth impacts partners in America no growth. region. healthy due our or reception near market related this to there's stores business market. and our EMEA even strategies are more unexpected there The remain our for the expectations and

in our call. discussed last As

certain transitioning begun parts strategic business distributor have in through our We a model.

opportunity affinity negatively this help long expect the profitability across to awareness brand our and revenue drive region. we will impact we to believe greater in and this better over it a While change term, XXXX provide increase

direct elevating Now approach. experiences the consumer lives. shopping create and moving that lines personalized into seamlessly unique third focused Consumer brands their continues blur priority physical to integrate demanding to digital our preferences between that

level average to For perspective, opportunity margins In included first we're the along experiences us conversion. recent Under approximately to we'll all however, touchpoints. and long thinking led keep to create of first more store even optimism quarter, Globally, will an total improved with promotional our term, representing Armour, reduced out about capabilities across higher solid building trends business enable a omni-channel the consumer we high traffic up how business XX% values, term activity our From believe quarter for gross mix. results regions better and trends, by powerful growth consumer all execute appropriate the expected than signs own in across XX% due from in direct with connected encouraging e-commerce in are continue an the near our was to conservatism our strategy order of shopping retail.

processes And performance, continued ultimately, confident year's this athletes. expectations how against digital the our pandemic is investments e-commerce the deeper while we're about year's strength even shift and capabilities are left better understanding are support XXXX, sites, to the be our and teams, long and building it's that Given of to connections e-commerce to seen the on leads together focus, with expectation teen maintaining sustainable in consumer journey of rate we results to to outside double due our to digit hyper strategies the online over to sticky focused full additional growth is shareholder making term last these to unlock adjusted in all high our in drive year, Bringing up With pleased operating a and long at long with us towards a progress our up over nice the our I deliver spent. around line well step for revenue profitability money an value am with being This our the term. XXXX. discipline margin rate last the expectation term. greater

to So progress we making. with I'm up, the wrap pleased are

Under to built for Armour over profitable allowing architect I'll a the execute about to with to it's start the we've right the processes, with structure drive growth and growth. solid that, across capable play model And further patience brand and year of sustainable ability to strategy transformational improved With the is compete track. to enable it global on to hand tools, continuing and Dave. premium driving capabilities Our operating our and

David Bergman

noted strong to With start that outstanding quarter Revenue due efficiently COVID-XX up Today's perspective, dive are the COVID-XX across QX, the Patrik. our our chain DTC to due our year was better channel to of the results. impacts pandemic. revenue was expected From order was connected as XX and to to to two XX%. brand up XX% the compared Under can demand This this higher strong approximately backdrop wholesale thirds Keep changes wholesale evidence continued to timing operating customer businesses. last let's of call. with supply in the in XX billion shifts mind, prior Thanks, flow serve demand Armour was due right in to results than our QX, year. and on growth model X.X for first against a transformed our uncertainty related an to a

stronger addition, of QX our over In delivery our higher due customers. and demand most wholesale North was American sell to from through

growth XX% led by business direct e-commerce our retail in stores. in Our growth increased a XX% consumer XX% owned to and operated and

e-commerce were in retail than higher to average conversion Our DTC values better order and results primarily due rates. expected higher

being By apparel X% run revenue and licensing was accessories driven driven categories. by sports driven our was XX% was product America. primarily Footwear North our and up run our Our categories. XX% XX% business And growth growth was by was the QX a up up regional business train team and by part first in by of type, was COVID-XX which up driven most North in in by driven quarter masks. with business wholesale by sports shifts. segment revenue driven up XX% impacted order our America to QX perspective, From

to due wholesale that QX in QX EMEA owned quarter. Asia-Pacific to American face partner including leading shifts. house wholesale as end to growth order the revenue our about important up doors impacted was factory Revenue X/X with by North the including and benefited note It's our in XXX% order which business, growth Additionally, impacted in driven EMEA business well our growth. from to strength COVID we led In QX continues and DTC up mono significant business e-commerce. shifts, strength closed of for all as our channels, of COVID-XX to with partly e-commerce branded distributor by XX% with QX balanced in saw across was the at impacts COVID-XX the way

where stores reminder in closed A-Pac most XXXX. a of QX, As through

results our here down So America, in we lower growth a are Latin significant comping regions. partially than was offset e-commerce. driven COVID-XX In primarily more by impact by in wholesale X%, revenue other

promotions significantly within was a our driven to points with basis of margin approximately XX% pricing basis expected lower our First with to DTC channel wholesale improvements XXX than lower XXX quarter due business. and improvement within better point gross activity by markdowns promotional along

promotions, and the In primarily points including channel were mix requirement favorable pricing. due saw legal addition of of inventory lower finally, basis which tighter XXX driven points in inventories a and million mix margin resulting with Overall year. XXX was higher reduced XXX previous by reserves experienced And improvements. expect resulted we off demand gross supply this to stronger quarter to to along expected recorded impact sales price XX product our improvements prior related improved chain of lower inventory we versus and reserves of year. X% costing the negative quarter more costs Relative and for lower DTC. we of to expenses basis levels outlook lower our mix benefits versus down we a due than realized in throughout SG&A and XXXX for marketing expected a restructuring about MyFitnessPal, now million gross million plan to X favorable absence Offsetting less first than to of we've restructuring Including QX, charges. points XXX had due related realized we charges than pre-tax and execution. amount first these a anticipated in the of slower we margin basis factor to impact a

As ranging that remaining new important we XXX XXXX to charges to all that detailed million It's last anything are not in to September this are adding we note initiatives XXXX. from in related plan XXX million. charges meaning contemplates determined total

We to second second expect program towards to XXXX. approximately million in incur half XX charges as we quarter completing XX the of the this in million of work

income was Moving quarter operating on, XXX million. our first

we tax, of per realized million earnings adjusted million. the Excluding $X.XX during operating XX of diluted or net XXX restructuring was After charges impairment quarter. income and income share

finally, $X.XX million, quarter charges, convertible a the diluted of end clear earnings a was million, discount our X% the per our net notes to have was made share. efficient of to adjusted the of non-cash down indicator improvements restructuring XX first at amortization the debt we XXX drive operating Excluding and on And more inventory adjusted and income or senior model.

on outlook. our updated moving to XXXX Now

recently up the on than recent improvements at under revenue, is low the increase reflects year. today's as start robust within high greater channel percentage our cautious initial shutdowns our we consumer macros That is at outlook. more continuing our wholesale our the last full game to general due predicated the overall no while most continue with regions, progresses. and relative retail teen a to improvements let's with and expectations. America we business From pandemic. driving in trends for increase demand This While top most XXs see we outlook the to with year percentage within as seen a of in the we our bookings well positive expect the demand landscape significant QX have perspective, high a in in business than which America same rate moderate be Therefore, North better more teen said, we've come percentage North our be to our remain rate marketplace And as the business. to anticipated, international respect the across COVID-XX

focused As discussed, XXXX. the outpacing also demand undifferentiated growth of see in with in particularly comps through to against exiting store constraining that including business, stronger our North far we tightly retail remainder supply some are expect up results is on year America. DTC we to managing In given difficult and the e-commerce, business inventory meet that our retail of drive

from employ we of margin basis, points channel pricing due which For outlook by approximately within margin a adjusted offset in cost our gross gross improving improved we've rate relative for remains carried we gross MyFitnessPal, partially rapidly we on mix with logistical future areas our against XX expense benefits believe stay ensure The previous marketing our call, scale we help and and chain discipline by the to the XX.X% our re-based a efficiency congestion full is in rate. invest to the an offset processes port DTC a stated our we structure The basis improvement XXXX perspective international partially be situation. sale freight high pricing to SG&A in to gross changes and evolving of margin critical margin as last and businesses. and up with expect appropriately which benefits increased related supply year return optionality From GAAP and costs growth. based like to to

to particularly expect our the respect, out, in our with In some is we second advantage of improved growth. driving seeing. a to continue half that investments, of year at be of we're this As incremental to rate outlook laid one momentum half of approximately that we Patrik in revenue underlying SG&A marketing intend the this take up

year. XXXX. Translated the profitability XXX of XXX and to operating about remaining million an approximately or to approximately In marketing reductions we initial overall expect which increase approximately operating million of X.X% controlling significant When planned in XXX addition combined, to higher three prior our about costs, SG&A balance adjusted outlook marketing represent incentive disciplined SG&A margin adjusted increase planned an basis. After investments these incremental year-over-year SG&A or million meaning other XXX a X% about million up now the expect significant to is to That and against this on is reach operating outlook levels. target consistent is the to top the we year saw that provided of margin and investments, an these the productivity, of at deliver growth, X% is the year priority. higher earlier ensuring X% rate, relative to part our with compared right said compensation between to income absolute to when this dollars quarters dollars, incentive without we factors, them, in underlying compensation these our in slightly in about

of the diluted X.XX appropriately second share us we to should All North constraints, sum the changes back including MyFitnessPal, we've A see American to To quarterly adjusted impacts for some the revenue outlook our in $X.XX and to of highest and business consideration shuttered we to half, the improvements up share. into our growth particularly regional the reflect which we to restructuring up, headwinds more as believe half across operating to expect this diluted XX% undifferentiated loss $X.XX per masks. expected year lower approximately and America. supply color or model, outlook, quarter retail takes last approximately sales our the earnings $X.XX America our we on excluding second on exit continued taken it retail the comments significantly updated the of little of of world of demand per of this the made to a about last seen we reiterate Latin flow, starts absence our year, year and full in call our be sports with of be Latin in

QX to gross primarily a points XXX to Next, due channel mix, and considerably following last second we year, the basis e-commerce was last with portion the overall to to margin price closed. down expect impacts, negative expect the be predominantly sales we about quarter to versus percentage lower business XXX compared of higher off a when within wholesale when year price of channel off being

to the deliver is operations transformation to believe turn diluted a currency. MyFitnessPal increased year by Under income absence talented, share. the changes per it Bringing $X.XX we bottom factors adjusted the team, on questions. for from foreign to positioned well of and are adjusted expense Additionally, to some prior freight relative transportation approximately lower million improved this be tail earnings operator chain quarter in $X.XX beyond. your out passionate Armour close supply that, be or These from by for to due line, pricing and partially negative our we second the negatively with along to expectations the we and improvement finally, XX led focused multiyear to activities challenges. logistics an discounting promotional about through our strategy work of expected we'll ongoing from plan as a the million And XXXX operating To in back and winds will With to incredibly with impact quarter. offset perspective expect to XX we anticipate

Operator

Erinn the Instructions] first with [Operator question of Murphy line from Your is Piper.

Erinn Murphy

Patrik would hoping about there. to more and three brighter you Good thanks. bit team main talking seems you like landscape. have the American morning, thought a It the spend here is seeing? books, what's Can I'm seems share back about curious what reason in the today. you're you've room for just the And strength you wiggle really the seeing. implied than very a was then more Great, North could guide still on outlook some half, like like the ago, order time months which sounds up second wholesale the quarter that the It you're I little lot left there. given congrats

insights on So as at from the retailers half. are second just much. any so data the well for what looking the Thanks

Patrik Frisk

Good Well, North with morning, Erinn. America. Thank start you. let's

various North to them, For has continue part that better, across innovation, in and of on that that us, just business into whole Under go the been the work, on that the quality being in believe go also gender, now the also working to We're America at that XXXX the benefiting the leveraging business, the in from a And thinking North beyond understand us leveraging about has execution have biggest model a is across We're very time. fitness the a disproportionate and season consumer now that to industry early marketing return in our strength through And and more across to started market that we categories, and our year now been market do believe. that fact North for mentioned spend this that's go and the Armour. my feel for brand. the and this it's America we're for efficiently better doing this a our seeing that what's and here of And position us at that we the journey rest as seeing we healthier is script and sure. to in than that impact, long we're investment each we we're and across today world the we market. we that we in wellness we've going deploy XX in you're as marketing what's that into it with right point. I makes And American of our

be step course, the and Execution we're lot is, definitely in getting we responding. think we how executing, at our this the team. I to to everything of marketing, a is So There better America. place, the about point color spring there. are better of you from all in proud of want time, terms know a and bit North Dave, add right the if right a right don't innovation, stuff, the coordinated little better product, of consumers

Dave Bergman

And then sport we back for North America in of we year. the well. Yes. on, factor back of would well, Erinn I a that on then But undifferentiated work half. half think the half maybe also back also, that America just on plans back to a of has what growth. about the is we demand back far North is as half we've half mentioned think as premium constraints impact exit last retail, and remind focus really mask versus bit a right when for But I put place, as down an premium as side businesses more is being think impact the thing little

then with times still So COVID-XX. factors are on are different highly uncertain we And going of in that a there. couple operating

as we're So to our be trying prudent with well. planning

Erinn Murphy

it Got women's And department in fair just enough. can up follow you're now. seeing ask if right I what on a the

of on kind did XX% Just quarter? men of in Thank you. perform versus payroll the that how women's growth

Patrik Frisk

would innovating to styles. for lot XXXX, really space, tops, to a I in Flow and well to our I example, out better think our bra the in women Infinite continuing been product, great of it and Yes. now and this now with make which for Women's If Infinity communication, marketing, to as bottoms, for we're consumer leggings, leggings, us category as products are Velocity meaningful footwear waistband, apparel Wind and really, women footwear and to what's call I genders has in example, came for many the Sonic the launches Meridian the for is across comes Machina slip that we're around for that our resonating different attribute had really both and had both we started show into better with a me better our as innovation when improvement right we've encouraging business like women's run for the our HOVR no well into as all resonating. a cross many as that as relates other year, and resonating

more the market. that communication. through approach its go its footwear styles, the to holistic it's the tops, comprehensive, we're business, also it's categories, about But more to its it's it's it's taking So toe across and head across bottoms, that to

are showing show it's way that and Armour up We in up Under expects consumer the a resonating. in to

very about that going mean what for So excited us might forward.

Erinn Murphy

will hop back. I Right.

Operator

Your question is the from Duffy line with James next Stifel. of

James Duffy

I morning, you. on inventory start Thank to position. Good the everyone. wanted

on that. Should supply? a to you Given you have to how I'm I'm you follow an asking where your question. on And demand curious be enough I you pleased have position? feel really as come outstrip demand capacity then But look the have the inventory feel you this the to your Can up capitalize chase? update you that's about from, on guys materializing? at give Do demand accelerating us

Patrik Frisk

I'll he hand morning. bit can maybe Dave James. you more it give a is I'll Sure, start off. to. Good over This color And to Patrik

and proposition But ourselves this buckets reality the the the back in we're we're we're what what we're sit of like demand beyond because because across and full year every right availability is retail spreading two now, making calls of the won't thinking tighten can The model clean of replenishment as product between into X,XXX necessarily about opportunity place. also point do so going and about the we to XX. chase, distribution careful at as tightening have so came half X,XXX in add take means that will dialing But up are constraint right at that's this effect right we doing is with we also that both notion We're bad every on last and not and terms that as six thin it While point. of running that to very-very strongly making capitalize off terms what channel last part our to do want we're and selective with ones we very year. that talked in to in constraining this demand a tremendous very it That's and the better, across. ourselves. inventory believe somewhere would which be of in now right of think to in that's much we that we're in continue be for tightening seeing things supply we James We're be accelerating sure we're right it and seeing we've chain. something simply in actually everything relates We amount inventory, months being around exiting we sure this going to risky happening what of auto that to exiting and think that inventory this now staying investments. that have we not course is doors the of how about that undifferentiated a in now to

So with XXXX. half we're know of careful for you the Dave I of thing. sort on being any some add back if don't chase want thought very to that

David Bergman

you well. think I pretty covered Patrik, it

James Duffy

remarks. shape business in XXXX, mix you prior thinking your would there the of revenue a revenue the to as a prepared over And line? we to you to inventories, more relative consumer with much spoke I'm base direct foundation Patrik, healthier were of days? healthier think base that about as base, Is revenue curious power your years accretion to opportunities if a about to couple to percent this how you relative then, look ASP prior than pricing in for But that of XXXX units the frame period versus the any leverage tighter ASP seen you've in And product do then year up? that see that years, way

Patrik Frisk

own is across a to which with of the and a little better of One consumer. factors. on. In the One of availability when product by different what's of ability well is the it's Yes, product driven other inventory. words, launching you're combination go terms the is that launch going actual in better A this of lot is you course, resonating in also a prices terms our in our relates matching premium resulting us it It's terms our channel in getting be markdowns, both average up. for selling innovation driving the inventory markdown more in promotional bang being levels. to because of less ends buck activity less wholesale as of you're to is able in in channel our your

last So and about with are those maybe? much don't the And Dave, doing the your of if on that products European seeing all us much. those our we're last I digital the to the balance. also standard the platform, you approach specifically we this, North the diluting we're the channels that merchandise better product inventory of American enable you e-commerce for to of what which buckets, upgrading with about and through relates now new on lower simultaneously midway able right are the that I And know about how work aspect communicate digital we've side, highlight example, faster, that so as taken also more the weeks different over and ability we did It's better, same which what some to turnout just is back American be better. as in which balance to the net our and would they're want site on hand a stories year off little of in half your innovation to year. about in how not to this and done and happening they're it's gross now the talk the that on we're the better a consequence, our much the site to our selling marketplace, and will North capitalize as you're things same XX to months gross you revenue we've will think of fact terms have it being means

David Bergman

maybe I AUR higher mean, that of kind average James just we're along and healthier order it the XXXX does seeing to vs. bring I up, sum with that Yes. mix think value AOV.

that we drive business and So progress, we are that continuing about are healthier excited to seeing forward.

James Duffy

the good guys. Thank Keep Excellent. work. you up

Operator

Your question Konik of is Randal with from next line the Jefferies.

Randal Konik

guys. Quick question. Good morning,

Just you've on improvement months footwear more six some two don't versus changes the quantification you a can ago? a perspective seen and kind know, I in on or give more sell So just changes color in let's us improvement seen differences or apparel specific the any us through of that year on sale on business. years there little maybe there. give versus Thanks. sell little And be say through you've today through the and to a on on just is the

David Bergman

Dave. what in that started we this continuing We Randy, is were really excited through, of need is back I that forward need we're say would through the returns. don't quantify seeing year leading sell really and typically but bigger changes through the fact less improvements the markdowns, that also towards for for half And about less last less need promotions, that's QX. sell for

is to little X% back also an price dilution the that So party forward. again margin favorable we X% bit we a mix forward. perspective, spot range as as the less kind gross and it from inventory making easier helping helping we of fairly management of taking And a off kind manage and of from aspects to maybe sweet in that that of been perspective, go think that's third that kind well have revenue as also continues that's returns,

levels partners, that. at three we So we really quarters very-very see at and the continue for to weeks monitor are which has continually been wholesale our of two now healthy to stock that

and to excited continue as and to partnerships together with them with discussions key have maximize We working to continue we accounts forward. we're our sell move great to through

Randal Konik

and some kind assumptions process double follow how on you're a margin of just specifically maybe operating around the your on the Can a and into then way distribution? just and path the margins. us your digit long framework business towards business term about factors helpful, how up journey structure thinking Great, thought DTC around you about across kind online, thinking channel that you're of the more give

Patrik Frisk

mean, question. different digit journey And we come things ways. in there. there's different different definitely margin. are a on to towards on I operating double a that going going It Yes. couple is couple great Randy,

best A-Pac the Keep consumers. open on lot a of that of You're up go That are chain though our in we when forward brand going really to we higher a with costing touch DTC revenue in continue doors last DTC might supply our bit forward. lot margin improvements little the a a mix up and but of couple right, DTC the continue of will the see are as driving go doors those bit to gross been wholesale, generally and those expression to that partner has you mix mind with of points the increasing and lean continue through mix little go that driving so temper years. few the you over comes the our that will with to and we that

kind a journey that within positive story then is margin front, is SG&A. gross developments of continued two also part there part So on of the but

a when As else. a with bring that little rent with does everything and in up besides mix start know, DTC operating you it you to on costs SG&A bit revenue more and in

SG&A restructuring, structure the that we're kind spot. But as leverage little work extensive the lot to as we've good to a that revenue the and with of cost It's be go feel we a kind doing and bit. into we're rebasing really to to of So operating beyond. like in does model able grow. all structure cost we pressure and better done with be we XX And going what rebasing a the that's

to operating So out bit And the that's really double and bit of to see you'll continue to a margin. of way margin. simplest kind digit improving of lay journey little revenue, a the SG&A improvement little gross

that. about excited running forward on we're So

Randal Konik

Thanks, helpful. Super guys.

Operator

line question next Paul of Deutsche from Bank. the Your Trussell is with

Paul Trussell

the results margin and and momentum. Yes. conversation. on morning, the Good I continue wanted strong congrats very to on

second on particular, the a little the think the detail guidance in this updated of I with slight for year SG&A year, you can half additional growth. for bit give If forecasts prior

a So sounds major step there's it like up. certainly

you're pursuing? the include that the So want brand maybe is prior it guide campaign the you to plan And not better making. that of revenue despite little just majority incremental that now also that assumption building understand marketing on did sounds investments like

David Bergman

is Paul, Yes, Dave. this

coming Excluding to marketing we do restructuring year lower our last expected in plan into SG&A into our initiatives what the related driven with call rest and is had that comp, well. that mentioned slightly, investments we on grow capital by making along legal which continued offset and we what the strategies to international investments incentive expect from and this incremental to the by we're in XXXX the is savings we and as preservation our expenses similar retail of

the compensation versus XX structure are of in and we improving as especially then the long of as continue So But more about a cost And incentive seeing are going half want are again, in increases term forecast our we feel seeing momentum that brand you increase with last in invest marketing from good higher a year. and prior commitments. the the the you we results. that to mentioned outlook and we expectation forward, the drive not into these back

rely and reset is we as move it So continue on base. continue cost to can adjust something into to we that XXXX that

Paul Trussell

more then detail And you in you're give other little on a just my And could seeing how you. in just guess maybe turning I America, the Thank to Europe, specifically? think maybe what also LatAm business? about then to North Understood. of up, geographies outside China, follow just bit

Patrik Frisk

really And we've a little gradually And of in retail to apart be the Yes. closing Patrik. expect rebound we well down a up Hi this I'll you Paul. opened it UK it few up This maybe bouncy relates and quickly, business most after seen as is to quarter. start it's down. there ago. open as from weeks basically might the the up opening reopening Well, Europe, locked that very know there Europe

the of we'll half year. back how plays So that the on see

we're doing space, outlet of that promotional especially profitability a now careful COVID than doors we're digital of China making sure but in terms progress the in about a there more excited prioritizing opening say We're e-com the that seen really and was before making in the of course. hit. of our of we're China But market the manner would terms up traffic in that is our this business terms year. rebound In it additional we've I

strong has So a But full perspective, year we're new to be over will quality the last price China trying year, going and that outlets continue this of be accelerating and just again there. and from normal, when to quantity we're in And been stronger to understand to from traffic speak, so out than online. traffic continues for we're stores in in but course, and build there. looking watching to

David Bergman

And improve Brian some both on the shifts potential distributor on LatAm of it's while brand. to model really the to continued and focus continue and profitability continuing predictability building profitability

LatAm. So in our of continued that's kind drive

Paul Trussell

of Thank you. Best luck.

Operator

from of is next Nagel the Your question Brian with line Oppenheimer.

Brian Nagel

Hi, good morning. Congrats on the results.

Patrik Frisk

Hi Brian.

Brian Nagel

particularly, with question saw to they sales a we just in in trends first improvement QX. the My regard have sales significant here

of kind to helping sales And recognize at business way helping sales? in sales? stimulus, there's a is of be that second that drive is break lot these way government, you us to categories extent merge drive the moving there to I'll your parts question two other they I any stimulus, say But launches. then a what So are here but points look mentioned that products, is, understand my way right new Is together. Patrik, help out whether you to a there the product or the run

Patrik Frisk

in exactly is in that and the stimulus it's certainly now by time, across that happening we I say because think with would is really is. and footwear. holistic say also or it is the growth think the about I But how down of is and In still But the driven not. that some at apparel understand the traffic both to of much that hard U.S., it's retail. would the same really I seeing really across It Brian, would word gender categories. doing brand way brand global. It's use and right to the the is what I is we're the reason I'm see

higher that we're there our lot and both is we've e-commerce also business going seeing yes, been into well at business as retail So less a we're product very in certainly promotional. on. being convert our as priced as good converting better But consumer some stimulus

globe better innovation, executing this think at we're go doing So going to across gender, really job across across and point. our on a our I holistically the what's across across market, our categories, that's

David Bergman

I doing tendencies, etc. Brian, that well. and COVID note general strong think, I think in very it's the workout And wellness pretty to to behaviors, and just also sector is continues be mid fitness strong important consumer It

So benefit obviously, as that's well. a

Brian Nagel

for Great no, follow better if I thanks in that. those again, just much sales And QX. can, then up But all to clearly one points. here

fallout should look bigger you think, competitive you signs the post-COVID a at we crisis? that heading share be the out Do are towards market could you hopefully share As opportunities, to as market seeing lead you're meaning of pull there better landscape, world.

Patrik Frisk

fully Brian, a health our to the now, yet continue it athletic dramatic sector. to fallout don't seen I Dave's growth think believe I think right we're to point, performance, in because in be sector going earlier any we is is you've sector wellness buoyant. that And

as to stay competitive that make because expectation understanding we're consumer way. as come centric, better, why going performing be to make go to And for here. to And and it's we're I we'll and to get long better. from continue against to think in better us going focused consumer market time engineered better we're down marketing great journey, our So way, on is It's to is get our our okay. every that focus the to engineered with that being consumer case, them consumer, very great expectation delivering we'll understanding product, which the their

Brian Nagel

you. Thank color. the all Appreciate

Operator

with question Cowen. the next from is Your John Kernan of line

John Kernan

Good my taking question. for morning. Thanks

Patrik Frisk

Hi John.

John Kernan

upside year. in margin in fairly the increase like year? outlook gross half there's areas Dave the it for inflation QX and you affected How inflation of back a gross to took back and obviously margin. go like other the looks the in has freight flat half I of much year. your the lot for commodity the the some of in decline of wanted up back QX Obviously, guidance to of the

David Bergman

to-date, been done a challenging. but navigating logistics pressure supply believe that it's globally, mean, on is things been Yes, one a there's And I on it job mean, that. lot John. definitely our we've remarkable I delays, a lately port that just availability, and obviously, like a has factor chain of discussing lot I container

thing that that our for reserve and forecast. price is ability, The that those a I been do that actually this actually improvements is also and but covering promotions, some is to the say versus it expectations then forecast good new, so built our weighing health did seeing that freight adjust we that pricing wouldn't And inventory pressure relative the out we're we've lower in sure out it of logistical our the updated and we news have massive big off make into enough it call we of to assumptions are markdowns inventory our factor relative that it. challenges. to improvements the including wanted to tougher

net, little we're on for seeing the our gross bit higher giving prior than full that So margin call. you're that's the outlook a of why year

we're monitoring So it.

it navigating fairly and Our well, point. is we're supply on this chain it at

John Kernan

your It year? pre-COVID then how you're the on looks think the do That's revenue the the back digits days like of up how low helpful. about Thanks. And half versus maybe so. we or side, overall XXXX single planning

bigger the curious from half international? So just North of your what back the thinking macro upside macro QX then taking environment I'm embedded curious was conservative of came assumptions I'm amount that view a came fair you year you're a the both overall America just and how in into are perspective outlook. there of and the fairly in about a year in the picture

Patrik Frisk

Yes.

I really to to gets lot four in. momentum the the think positives coming orders back a it to relative business again of improved of

But So those not of fact continue half to health a well the a related we developments. to back that are lot of to are headwinds as got there favorable as just of think business. about fair the amount which

that our to fitness MyFitnessPal of of XX% sale the So XX% segments. was connected

constraint pretty business retail, sport business LatAm that's of work until half the mask then back doesn't exiting impact, more big been we've year. back year. back impact about well. model differentiate The into on The have talking as of play and So half which this changes a a half for of demand come the really

think, again, is the continuing those business XXXX of are call pretty we're some about of headwinds. mix decent the I accounts forward. just biggest kind and drive of definitely Relative excited health that overall to out to size So

John Kernan

That's helpful. you. Thank

Patrik Frisk

John. Thanks,

Operator

the question line is Matthew Boss of next Morgan. JP from Your with

Matthew Boss

Great, congrats thanks, and nice on again quarter. the

Patrik Frisk

Matt. Thanks

Matthew Boss

drive you as cited marketing brand greater to opportunity a Patrik, So accelerated potential awareness.

women's fruit a and footwear? think took lowest about we if the marketing, back, today, about we is where where brand overall do as think So or hanging step awareness see we as apparel men's you versus maybe

Patrik Frisk

was through way To tools Armour actually new that we you began learn of we digital in like think about with that lot the this year, only to of and in we everything works better. only terms had them we our were that able and for March consumer with learned through switch the go our our terms in in to think modeling marketing what use went then the with time to is to that the our journey, inside how resonating a about in digital. space But capability the make market to especially have, when really year Under of really together last the early to if advantage to of

be around the we be we in do would to the because the of here we understand kind what the top should easier and we it into improve buttons to now us year than push the Dave for decision invest building year it's this expecting we able as is half numbers So saw I brand to to back of back really much what returns coming more so us and and year. make the of brand into funnel thought now, for understand

to connect a the an it's both to asset base space the activate So level engagement and able in having to consumer the against with works of from really and consideration and us for be perspective. what right brand right understanding just that as raise awareness the

really excited also set do the stage us very for should for to able and So this that XX. we're it

Matthew Boss

high athletic you then up the the SG&A way on an see then only is best that rate is have that as digit. And crisis? still as dollar annual do think think best Under annual to So mid we Patrik you how pieces I exits way SG&A is for to Armour? the growth single industry multiyear about is the post do pandemic, past this we given with the lastly, we And Great. what about slightly? think you to think reasonable again a way talked Under that in about that think Armour today with maybe pieces And growth it? the think David revenue that end best Is rate? the have, that, to now that growth about

Patrik Frisk

and And off see in the future Matt. we it I terms being holds in when as we're of bit it on We're what's kick of think consumer. a possibly game the We're we're still busy and making strong as for us as game the to I'll relates working us can into course, the the marketplace, it in here foundation long what for going XX. sure cautious, that now right little long XX be is post-pandemic going our in here building eternal. and

on no the our So right returning We're growth we're going and make decisions a _ to to to stronger brand. growth. make to foundation continue mistake make

mindset. growth a We have

holistic a spend line I now mindset line, everywhere. it's growth think bottom top the difference across

excited day going So to you some date bit? all the for of we'll a you. our lay be at come all future for very able and we're us, to add you investor future be of want little to out to Dave, have to

David Bergman

longer Yes to discussing in rates, we're we revenue Matt, I completely understand in about that growth where yet. a term spot the interest want talk but not just

we'll due go really-really rate excited revenue done, as down we've bit we're SG&A we've and and what to work forward growth discuss that into more we're revenue to and XX foundation and able relative driving leverage about to to that growth all the and forward that beyond and couple more a we drive be Relative laid going the work percentage next through forward to a this estimated at the well. date will that yes, years. to little as as ready go to future SG&A that more continue continue we probably relates we discuss XXXX when over to We about we're as

Matthew Boss

Best Great. luck. of

Patrik Frisk

Matt. you Thank

Operator

Poser is Trading. question next from Williams Your Sam the line with

Sam Poser

sort for we've couple was that my A to companies, mean, seen of on direct your a other increase response you you to spend. faster into lots Thank started see I consumer marketing, more this questions. increases. when marketing morning. taking investing from Good of sales their they the

your how your direct consumer to is So the increased marketing? revised of question reflective much of is plan sales

Patrik Frisk

morning, and the question. now And Good versus Patrik. funnel is Sam. in top back marketing funnel most a that would where This That's down performance returns clarify, driving you predominantly great quick of the just marketing, so to spend going is that we're speak. see to the of half

to that and we've balancing really we're permitted other by we're drive commitments do balanced And sure of been tie some hindered and also we've towards time. we've for now. to past wanting funnel we're because had to to able a things that So making a marketing. brand something the driving what and quite to go that more do somewhat funnel long term up in really lot And us hasn't that's been contracts

down the in bit for mean hence and marketing investing to lot spend doesn't really funnel really funnel. for to now the and set It of that is little XX commentary the a we're future of how we're So a going top around beyond. not stage my

planned already guided revenue have the now to. that We support that we to have

talking add brand want Dave, I this if And you additional really we're marketing that to something. don't about. is about So know

David Bergman

Yes, Sam.

of piece driven our our largest in much And that not a is Patrik's think increase further. of revenue side. call. seeing we to is wholesale directly last that increased our The the tied to or the versus to marketing. step just that is is point are from take I incremental revenue There outlook majority the the the of

see relative term more and of much in from investments. for so longer XX is brand it So benefits and these to opportunity XX more the investment we'll the

Sam Poser

to and business in Let both just me was consumer business. up. good follow I direct mean your on very your digital your stores

picture incremental isn't digital, digital of expensive bigger things. and as sort that So marketing doing as

that consumer are facing part increase half? consumer, direct marketing and the back increasing in understand though the Is increase? your So it's the digital I you Even picture. of

So?

Patrik Frisk

capabilities, is Sam. things and earlier of learn to what that the in is been able we other to the we it back to due half digital, accelerate it's was that the That span put we my in have that is digital through a is. going actually it's play A able tools, isn't It that even lot were lot new And commentary on. XXXX against Yes top the pandemic. that actually funnel, absolutely of top funnel. what's of going into of though year now of

Sam Poser

you Okay, very great. much. Thank

Patrik Frisk

Sam. Thanks,

Operator

with is question the from final Jay Your UBS. of Sole line

Jay Sole

price what better, planned of thank How Great, was that and to expect requirements this been would in compared quarter you take the the it's of but just in about you had. you not and upside. mean, that question you is did gains normally, requirements pricing that be the much. so quarter to saw in take normally did a this got maybe sort to did I you normal Dave normal you it better, quarter my the that reserve you there reserve see but inventory terms was

impacted gross us give two margin? an just really factors idea You of how those

David Bergman

at about versus for this QX we with then of healthier it think obviously tighter a the be incremental up I the in thought that basis inventory. originally points, definitely but inventory even Yes management, to not drive as is well. just we've and our mix last We healthy year it of back for would forecasts factor and wasn't of look the supply Again, well moved I half into well, best level the also far as as are chain through year coming very-very but then updated the the We inventory running factor. than inventory set we with ourselves the XXX year-over-year, talked it is mean, have that that the the through year-over-year. driving way actual expectations, exactly

when more at than so our And price reserves and through have full things and sell it impact required lower are your an you add together does to anticipated. those ability

that outlook. is But prior difference out call that broken our enough it point we to versus out. basis exact haven't it wanted of We the meaningful

Jay Sole

over more Understood. guidance What's maybe that The balance of the sense balance cash a it's a balance I at flow one now not into much But cash course suggests ask decent sheet there be is the the generate give And this just how mean, right a of might year? taking lot guidance, And change. you'll I new free amount sheet if end of the the sheet on the the how us QX. more, year. right. might balance change than for would can the Obviously there's of of plan the normal account? just in the in

Patrik Frisk

through continued numbers see mean, that the you and focused forecast. again, are in updated very work I Yes. CapEx the going you capital coming And been that we that working on improvements, see well. right prioritization now, all and has very

we like considering at lines, well. forward. time, or we in are feel something those to continued where drive we nimble be and being along are call a at pretty liquid, consider So something be really balance of intend And we to as But will remaining we and happy And that very drive debt as quarters now last with the this point be are continuing able and through on maybe do buyback we're to we we yes, we this this year. we good cash year. would cash very-very free mentioned high the flow about drive Right nimble it.

the we where that, with more to We're feel that future. good in work continuing of but So, on are. we

Jay Sole

All right. Thank Got it. so you much.

Patrik Frisk

Jay. you, Thank

Operator

the concludes no Under conference Armour quarter are earnings for you This webcast Thank There call. participation. your and further first questions.

may disconnect. now You

Under Armour (UA) 4 May 212021 Q1 Earnings call transcript