UAA - Earnings call transcript Q3 2021

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Operator

Good day everyone and welcome to the Under Armour Inc.

Third Quarter Earnings Webcast and Conference Call. At this time, all participants are in a listen-only mode.

Following management's prepared remarks, we will host a question-and-answer session and our instructions will be given at that time. [Operator instructions].

conference being this purposes. for reminder, a call recorded is replay As is hand Investor Allega, Development. to my Relations conference Corporate It pleasure Lance the now over to and SVP,

proceed. may You

Lance Allega

about. of this morning statements Under everyone Armour's Good that quarter XXXX that provided reflect The November adjusted underarmour.com. important that press non-GAAP related COVID-XX ongoing which may environment to on fiscal conference note of release, view morning detailed to this Xnd, It's will could today's Statements moving forward. in business uncertainty on of Armour's rules SEC of release. the continue We you. filed morning's retail subject uncertainties Thank morning's including currency its our today's the its third joining on results be global made in press call to financial both and for information business on harbor regularly call risks documents to defined under and as at and potential SEC found effects Under reference the are current and can to -neutral in call. are information earnings this impact the this website include statement which call, XXXX. forward-looking are with safe on our terms included

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

you. CFO, President and David be on us Bergman. Patrik CEO, our Joining Frisk, call will and Patrick. Thank today's

Patrik Frisk

to Under the the us. long-term headwinds, before and top work demand and In quarter, bottom levers efficiently, up higher-than-expected Armour to ensure for execution while in out steady X%, strong our to long-term to we're results. ability quarter $X.XX. Armour value than good our progress we including resiliency drive we've allowed we us based marketplace manage revenue That deliver basis win day. our solid profitability. should our for compete third gives gross to opportunities with is good landscape, ever. you setting and stronger and close global near-term business, balance and advantage the shareholders. in our discipline This excellence key commitment and we potential create by and Demand a ever-changing foundation connections financial from the greater Everything from and towards and deep, These balance morning. same growth, for journey. adjusted every on EPS the impacts expect inspire about Lance better driving to team, the and despite at performers. across you, global ensuring me were brand us, a spirit, growing. results have A at that record an brand Innovative do operational emotional to are product our solid from confidence playbook meaningful experiences our to future. focused we even as Thank earned, an do XXX the potential this we've of to the strengths outstanding third near-term points consideration in the feel And made, at is drive to the with to elements strategic margin as line up we strategy XX%, I XXXX, is In performance evident and the authentic, We centric drive sustainable strike Under products leveraging this time, a and on constant our consumer that athlete's focus work

investments consideration. incremental in attraction, third some so all awareness, our and let's with with from consumer Of to quarter on affinity starts with that, into the how get they're marketing focus making it highlights, we're brand improving and translating brand, course, starting

funnel. execution this journey As the sports to now to premium media, training. Validated holistic strength use is see to them levels. cold compete athletes our showed for voice product most uniquely cold which shifted equip results, lab Through human storytelling, we've potential. helping by part importance and up setting, the training, of on what is Mind, as earn retail reshape on Under brand well and effort, as kryptonite, ecosystem and lens Armour performers their one realize and our our our sometimes activations. TV, Train of which our Your Way focused educating across full digital strategy, channels, ahead. experiences type the to fourth powerful retail, and inspire and set new inspiring we of their and focus Only an as Through research quarter goal gears by of centered Game and to team Your weather workout routines, our and on the training capsules, elite centers mental this asset ones capitalize global activation, as is Coming growing social marketing take an to demand. to performance it into off Knowing athletes The for [Indiscernible] categories, takes on is With reviews, winter Train performance

no-slip and including in and our some on regions summer bridged sides Pursuit, so in continued which collection globally. Rush, core featuring bottoms which products, success fleece, product, the strength both athletes year-to-date momentum, the technology. best There's months in Rock our running quarter our cool you we In temperature unstoppable gear on momentum the as up men's Chill ahead. third Assert, solid to of given and consistency also realized apparel saw strength tops, Project Meridian sellers. the our also of and Aurora, sell-through products youth and And the including finally, all built men's for spectrum, and saw ISO of fall, Turning cooler footwear, waistband women's and in Including leggings,

Street in EMEA well few success a SE Trail demand had by APAC Americas, Clone and Bandit better-than-expected performed Flow Curry Project return. and our Velociti team we sports driven and HOVR Additionally, in Mega as Regionally, back-to-school business. and the slides footwear the in footwear HOVR Splash of cleated included the highlights in Rock and

starting stronger-than-expected North brand to turn revenue up billion. our America our where then largest improving and Let's X% in with regions, of had health was next consumer to direct market, $X we Indicative demand. back-to-school

for drove majority the is It in North X% a the to including undifferentiated third America the XXXX in over significant exits. XXXX, North substantially in see reduced the America so was North versus fact, progress Company, consumer third here. up In continued differences revenue quarter. quarter to encouraging American lower delivery of supply important, however, business, markdown key and wholesale sales, our some and comparable activities, periods, revisit constraints, XXXX, proactive promotional increase to direct these Compared off-price

through just meaningfully more So now, productive dollars going years higher our than P&L quality and ago. two all in,

business, to our wholesale in by Turning growth. driven Asia-Pacific our region international revenue was XX%, up primarily

dynamic region. the trends, struggle, consumer traffic otherwise attribute is China that Given continues an insights health steady where some of data in our to particularly holding in We market recent us this environment. into our tells brand including Versus opening XX%, progress making we're expansions, on marketing, the thousandth store X and in so up store our stack. investments was APAC CRM, a solid revenue year XXXX, the third quarter to

and consumer and from up a partners, we our businesses. saw XX%, long-term the our team finally, with continued our and brand wholesale EMEA quarter two wholesale wholesale most In was EMEA direct balanced businesses. in in revenue driven Versus XX%. was key Germany. up XXXX, countries full-price distributor our distributor and up this across was region, distributor XXXX, Latin development, by and which region strength up Revenue third full-price by capabilities. strengthening was America Next Latin up, XX% UK driven focused Versus revenue third relationships and on partnerships solid retail in EMEA. growth momentum quarter and direct our America our the consumer was And performance. X%. prominent is remain building our wholesale,

are change top-line quarter. model, which a we expect finish the Accordingly, countries in in strategic place of out transitioning in fourth to detailed, region as certain pressure we America previously this we takes XXXX. this distributor Latin of most As

we're several global maintain our what third way. term, how our quarter, we And of throughout and mixed and business, this EPS our Armour online, during continuing gross of promotions Armour's around somewhat sector, our team to up summary, demand our restrictions various we the to experiences world, stores and important our higher-than-expected work nearly sell-through, and year Another mission-proven. be proud improvements results. will Due margin in that of battle-tested our was impact presentation mirrored and continue Overall, our and In in fluid quarter regardless to that towards which and up and further With adjusted we're however, balance headwinds both highlight stores COVID strategy's were XX%. the with realized Under trends are traffic we direct-consumer [Indiscernible] it's ability cautious. is better own the performance Under pleased to remember our see In you the am history higher-priced see business. quarter. performance, is our reduced direct-to-consumer economics productivity. and average the near prices to I of although in every confident third split XXXX in is in pleased remain XX% for improved Versus incredibly course was driving which we to and trajectory thrown selling

industry-leading to We empower more obsess serving-focused I'll strive over region, of those performers, one but sharper, continue it smarter, channel, data-driven, business get Under constant. hand product, by or Dave. we there for. And the that, to Across with experiences. intersection more remains efficient. our Heart-led We Armour premium innovations, and who for

David E. Bergman

quarter consumers and Patrik. driving in us, strong quickly needs toward ability record customers, to With the earnings year XXXX. our and results our quarters revenue meet demonstrate the behind our of third execute to all three Thanks, while

right results. Compared factory our wholesale was businesses up click a this our outlook, down performance X% our in billion, the basis. to Let's full-priced demand was covered to higher to into now, previous revenue so due North $X.X to our overdrive across primarily let's earlier, dive global year, results and channel prior on America. house regional versus in our Patrik

price work positioning. revenue wholesale by tempered was North quarter wholesale, reduction to higher-than-expected sales off to as Third particularly by the to we full-price our in driven continue was business, demand American which in brand a elevate up in channel, XX%, our

negative year train in and quarter due strength basis XX%, Relative Our direct-to-consumer licensing By expansion faced businesses. masks partner at our the to was decline sports recognize XX% golf. due to In comparison increased landing owned primarily Relative XXX due in was and lower wages. X% was compared supply channel quarter. improvements our XX%, our gross product led was by to promotions these running. up improved to off-price $XX favorable and to of marketing sales sales due to of And which activity third pressures. non-salaried previous related SG&A XX%. impacts by workforce Footwear related retail we we to to pricing QX lower-than of due business primarily our expectation, to million growth charges investments, of particularly due to DTC third sales a year's basis pricing improving we've mix about our when expectations realized release, higher plan, with we third last pretax along also of XX increased XXXX, quarter X% million. lower our wholesale XXX in in $XXX XX% million expenses basis recorded far, plan have partners. within driven so noted that over related activity and up last This negative our third up our third Thus COVID-related - and improvement quarter. freight related improvements business our across I was logistics to lower that the $XXX quarter. our XXXX by total third the business expect margin, to primarily up mix, by chain incentive from by year's million, Apparel and revenue points basis DTC and we to of Versus restructuring stores, compared North million, driven by absence Partially e-commerce would higher-than-expected partially impact to within lower operated type. last planned gross more quarter. a $XXX of basis ranging points primarily XX%, promotional costs benefit last markdowns accessories press was offset compensation, morning's note, to this XXX charges to of margin e-commerce, year's and XX%, promotional and down driven within reduced of restructuring MyFitnessPal to And was American business. our our $XXX difficult of XXX was points XX% offsetting channel, our with from up in all to strengths over $XX were points our versus off-price business the strength now plan within points charges. categories, revenue But

reminder, charges As initiatives a meaning outlined been nothing all to new related added remaining XXXX. in has are XXXX, in

to expect calendar this quarter to related XXXX. by any first recognize We remaining charges of the plan

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

$XXX adjusted excellent notes. million convertible principal diluted of amortization progress. on delays debt our and our this supply we net share highest our surpassed adjusted non-cash share. that our earnings $X.XX notes, full-year earnings. model solid are in extinguishment the per was down improvements $XXX million of realized of adjusted and due on year-to-date previous diluted or $XXX $X.XX has million senior in loss to adjusted Inventory charges, earnings excited report that And Thus, of XX% related restructuring traction In income was operating COVID shipping the to senior convertible of inbound we've split chain amount discount pressures. Excluding respect, to driven by per

revolving in billion convertible our stock, for capped a to during of certain with amount quarter, end third which the $XXX $X.X million shares C at certain billion terminated million, income quarter, debt, entered facility. under $XXX utilized in principal no million $X.X into of is of of in had captured Class cash, Our call the cash were borrowings convertible and transactions. we million $X.X and equivalents credit cash With and our bondholders exchange expenses. we issued and outstanding notes We agreements respect $XX related related loss our net other approximately recorded and the

Following quarter, our notes outstanding. second actions and $XX of this the convertible remain transaction million in

onto the balance of the moving year. Now,

as traffic with call, the across current steadier somewhat trends, noted realizing the regions and near varied retail current mixed this challenges growth As we're albeit supply we weak of in about reopenings, to earlier the restrictions. global staying emanating appropriately continued environment markets assumptions challenges Factoring and APAC phases conservative environments in like Southeast the in different in it some navigates and from in return remains chain ongoing closures, Americas, a with EMEA Asia term. worldwide, logistics being cautious experienced

of that is disruptions sector additional outlook important manufacturing it However, partners close note today's no retail out revised further assumes shutdowns we as to XXXX. or

the in a XX% and international mid-XXs a our channel at revenue, wholesale updated XXXX to be Now, let's This which perspective, increase year. turning rate start our full expect to expected we From mid-XXs rate, with North up reflects up to be approximately outlook, now a America in a is sector. a e-commerce Concerning play, high-XXs up COVID the for increase and business percentage full business. at with year, same headwinds our quarter, developing in the up related issues facing our fourth expectation the mid-XXs chain low-single-digit against to call at currently for our rate a for DTC the top-line rate supply significant addition in XXXX. from last remain the

from monitor. gross is chain previous margin rate. The now related freight outlook, which freight we X% basis, partially be SG&A full-year with a margin changes primarily in offset expenses. be pricing by by higher rate X%. of our on benefits, to to to foreign XX.X% will high-gross relative supply adjusted due MyFitnessPal, against approximately XXX to improvement currency Turning full-year margin to pricing a that XXXX, we increased challenges, basis sale being the of up offset gross partially carried expenses expected the to to which and gross and XXXX GAAP our Versus margin: expect we points expect up benefits continue

to out of in results proactively with even As incremental we XXXX, and laid our deeper particularly marketing, to taken specific previously, advantage build made our investments, have improved consumers. connections

compensation, also reductions significant approximately we $XXX Translated expect in million XXXX. this operating an reach million basis. operating higher as adjusted to or $XXX on X.X% deliver XXXX is higher that, against well year, or we of we levels, income expect now expect when approximately just as We up to incentive which target non-salaried margin wages. had rate, against to under operating of adjusted margin X%, an an With

earnings average $X.XX, shares. diluted in count All of approximately $X.XX an the And per we approximately XXXX, share against $XXX cash an of finally, in of expect to adjusted expect we perspective, diluted from of year XXXX's share close the us end with this approximately approximately And or diluted equivalents. to million share billion year expected -- a to earnings $XX takes per flat sheet with and weighted with relatively year-end. inventory balance $X.X cash

and that that impact fiscal are forward, a we while year the quarter XXXX. reminder for until believe new half the book, second we higher be various year elevated narrow pressures, reporting some term. assessing Looking are Accordingly, XXXX said, began to are first our of to with including year inflationary orders XXXX, disruptions costs working wholesale calendar in our expected a and chain wages. color challenging the order on partners are not pressures are our XXXX mitigation changing are suppliers. and fiscal XXXX call. begin offsets volatility we serve today's adjust shipping the our transition to industry providing the and taking the we for period the we relatively business logistics April edit as factory P&L in navigate there we Xst. our in customers with And next anticipated will to on of in and logistics of including spring-summer near That first work supply quarter to the in minimal, and Mechanically, precautions XXXX,

of at fluid, estimate Given extent situation on this difficult to effects our the business is is full the still it potential point.

However, the to today, we material those And rate. revenue for nearly in with does a the be of what to based Definitely as open. this XXXX. low calendar impacts Armour are Concerning first on including business single-digit know therefore, a week, at of that we longer-term Vietnam, up expect with, news. are all encouraging half quarter, respect factories first view, forecasting Under we

some full back And this course, Of capacity of is will take the equation. ramp to time one up. only part

returning over the under balance and near-term sustainable, the create operate growth effectively few to call ability next may opening in overall Patrik's long-term congestion expect employing, Under business strategies we're Over quarters, past balance, manage companies between agility give pandemic, to longer Armour we several of times, to and close the some our are usual In like years, results. find its by constantly greater than I'd committed demand as variability today's ability and delivering in transit our thought the confidence that, conditions. while said, has this navigate environment. brand value to That so a driving changing proactive operational Under a through range in to through demonstrated environment. global All our effectively shareholders. we for With the Armour our coming us transformation to backlogs and the the our striking

strongest us turn to this the and Operator. long our value performance re-architect With thus term. Operator done to sets for our line the improved financial Lastly, the your operations, top over look strategy, shareholders bottom for discipline, create that, balance, close history, well to in back work and as leverage we'll our questions. it up we've the and we to out

Operator

come the And is now instructions] Murphy [Operator line with you. question our Thank will Sandler, first of Erinn Piper from open. line your

Erinn Murphy

European performance to with share you quarter, your you guidance talking produce ability Great. ability again, Good wanted just manufacturing more to-date. relates really Thank think market your about the get North then here it we product chain spring, in see strong holiday. just the up to morning the and as to were the to about to I your impact product Thank even for as you. get American Can and about the bit relates nice with something or summer? challenges. ability low-single-digits, follow the a supply fourth up really the to is have And curtailed you little Dave, preliminary that, to of just look to quarter you. first seen as the just or it your calendar

David E. Bergman

is product to on some of And really to able to running, single-digit pressure us inbound to our but the Erinn. are in up seeing container to we and therefore, the rates that we where relates bit we're line fluid capacity, situation. to to challenge factories rate the almost all in that be about, in across But spring-summer chain to for QX. needed pushing as QX. cancel the trend ports the what to out to Asia change driving factories. congestion developing I that's able be full we -- product calendar impacts actually of some today, for mentioned, see demand. This we've vaccination and had a purchase the QX, cancellations, feel local and and [Indiscernible] had as some of low seen that creating Sure, to entry inbound go calendar the at a of but seen getting given the our outlook the definitely rest challenges based haven't little we QX, this alleviate the and the that a the monitoring. all is the orders get Relative and where continued Relative so, it's our can any ports now impact changes up, meet how towards out, orders down in on a relative To-date, with the good of bigger it's to supply as produce product partners. 'XX have year we've but that very at to origin We've able availability be we're forecast timing and and our the to growth improved, of not that

Erinn Murphy

Got it. X first you're And with helpful. just North more you plan. the like the on American line XXXX, super if how fourth think can months curious That's can in so this I'm about of X% that. the long-range Looks in guided talk follow go-forward segment. the I up year, then up ahead about seems if nicely your squarely like you you've about It quarter, of been trajectory. versus

So the I would love to hear you're Thanks much. in about the seeing brand so momentum currently market. American that North

David E. Bergman

Dave. this is Erinn,

think We are momentum. I health excited I biggest point about revenue. the that again, is would And the out that thing of the

it know think, are who discounting, which think to off-price down really the stream So I that's against -- so overall, to sales where part. if don't only with, we're growth, year are far as we rates, it's momentum. details there? driving we're you brand, really exciting really the party, add a want is, support and any less and most, anything I excited And healthier we about partners a performer. much and mix that at on focus healthier all is percentage even with yet Patrik, but we're third to understand as time about give growth doubling at growing next our can't but the but And the same bigger much of but we just -- I not the lot returning that XXXX, smaller much a promotions again, revenue

Patrik Frisk

for And fact great, are taking -- effect to North Dave. demand want in wanted or I also it's the year. in play also, America. constraints just exiting some next X,XXX of doors of that's to us that in just as into now fully I well full the terms course so of highlight

all you in for these have confidence level, Feel of of now new brand a towards a in more very us new established giving great position the terms platform, like, or So together it driving is really premium about again. if good that. a things that we

Erinn Murphy

the and Great. Thank you best. all

David E. Bergman

Erinn. Thanks,

Operator

from JP of next the line our question come Matthew And you. with Thank Boss will Morgan.

now line is open. Your

Matthew Boss

thanks Great, on congrats really nice quarter. and a

David E. Bergman

Thanks, Matthew.

Matthew Boss

-- the Just apparel Patrick, to Maybe helm, how women's with you're think years that at picture? on we've from maybe and in today. tipping X do trying seeing the for characterize footwear nearly And you larger tap guess about, heap now seen point brand here. the expansion? I men's ranking you opportunities believe would

Patrik Frisk

Yeah, thank you, Matthew.

characterize We're our but I'm DTC. product as confident our work. through our see go-to that the now transformational majority the First gone new through would the not in all, model, same operating time, we've the the at now of for we've driving also a reset What just and I balance really market of great between a operating engines of gone what a premium balance numbers, marketing and job engine, see here, our a to our more doing so there's in is position. You wholesale brand you model, now a right?

and product we with the product back-to-school like coming the Armour the specifically apparel. say, could as also and now third saw, played, really across I balance being we fashion, also in you saw in team in categories well. things in a and of into again more footwear now happening guess, Under of own sports And on terms cleated terms see the team its quarter, You normal performance

I it's about XX% we've results. a and as brand here we've we or half activate now, us, to margin board, speak the back you're able level? forward for now out now continuing brand for fuel marketplace. Can then it's proven brand? your do been those the tie whether apparel really money really about the margin, you the of pricing our we for across been as for to gross this run, into what think team power both brand the seeing train, the sports, footwear. that year, Dave. So any in all which gross the feel to full feel And like have here driving all and that really of And in that's right the I to the able Great. scenarios. are women's, or and good funnel. different And there categories, in to win men's see to really you marketing holistic is And really And we able think, the reinvested drive some exits the across feeling opportunity and about Maybe around if follow-up we to maybe AUR is

David E. Bergman

many of strong discount guess, drive to able there's partners, much good not with benefits there. been markdown price see pretty Sell-through or or we're We doing a wholesale holding aspects by couple higher, so giving discounts. I to continue having promotions do Yes. that dollars. has not a

to the in continuing a benefits. is So to gross for We're some of the that pricing brand to ties that term And drive some premium position. our do is that the seeing definitely more we're allowing benefits contributing and to of all that margin a longer strategy excited sell-through of momentum be as about lot the into well. able that definitely the to

looking of also are about think you some pricing, We inflationary wage the at ticket pressures, pressures, when etc. also

keep of versus positioning for at do of is We and have we We're us well, we're and quality driving think the others. on front premium we our going going that's opportunities a there products as looking that do to very that, been based as that well. that, [Indiscernible] be might on our and team certain in to groups some targeted how strategic but

Matthew Boss

luck. Great. Best of

David E. Bergman

Thank you.

Operator

come will question next John of our And you. Cowen. with line Thank from Kernan

open. now is line Your

John Kernan

Excellent. Thanks X for a [Indiscernible] on really taking strong months my question. Congrats

David E. Bergman

John. Thanks,

John Kernan

lot I disruptions. months the timing year. the know of us basis? operating Certainly, the progress at Yeah. regardless of double-digit was face target. you've in that reaching those you're terms this in give year, margin. fourth this it nine towards Can update And targets any the the a full-year those tremendous of at targets a year, Patrick, if first happens done you of on we of what in made of a quarter long-term this look

forward curious of Just the if you those operating double-digit reaching -- pulled timing that target? margin

David E. Bergman

about your that to margins to point, feel this obviously to margin something not to towards is leverage a John, being the think the about are about to than and actually about going are progress the even structure previous, overall excited we're able continued details we cost be at and the I better. ready operating that SG&A very years, be very, to drive there based ability our having. sure better double-digit good that. point, jump that gross momentum we And and Yes, excited you I'm Patrik are is Dave. We pretty in topic. this probably here very share upcoming on this with But we're but making be gets think to pleased for opportunities on do margins leverage. the And going driving can we on progress. because we're we're

John Kernan

we COVID DTC, One made had adjustments and base growth changed profitability wholesale Any on consumer e-commerce that as as and Understood. new view has channel in quick of outside some direct that go you've we that portion and year. what this Off the growth can it's to how comments overall contribution become an the free of distribution. follow-up. a obviously, channel mix? for bigger Your year of your beyond? into anticipate normalized has DTC fiscal

David E. Bergman

John, Dave. Great this is question.

is We've say would a a and publicly. of profitability DTC. see investments don't some focusing we what give making I know, pay benefits But to starting of you the necessarily off. we're lot that have there that of been we been on lot As channel

our full-price of I is just lot in think we've put work of areas retail that a one commercial to concept. the also

obviously, And are been And as so percentages. then on but is business improvements output, profitability profitable going help as DTC factory cylinders, an has house actual not we're from overall that business, our e-com extremely continued which the seeing to all profitability We're pushing and well. well. disclosing we

to they continuing driving. improve we Although, believe with benefits we're do are the

Patrik Frisk

add bit little just I'll color. a more

about both there's do. be as e-com. We and to to retail have into going continue get as accordingly the updating we an to still making we've go we're believe far, the but Very years to but our lot our progress We that into better great across more work of opportunity future excited is own a own are move and here, we'll so we work do to future. there made you progress,

John Kernan

of in Best great. That's holidays. luck the

David E. Bergman

John. Thanks,

Operator

the will of with Duffy question come Jim next from you. our line Stifel. Thank And

Your open. line now is

Jim Duffy

Thank results, guys. Good you. Terrific morning.

Patrik Frisk

you. Thank

Jim Duffy

into I'm next view pricing product hoping on to you can year speak strategies. and costs your

inflation taken determined? yet expect pricing mentioned seeing of offset or helping the that the entirety you to Do You that's some the be you've margins. is that can you're action you

Patrik Frisk

take don't why you one? Dave, that

David E. Bergman

inflationary question. great The those. are Jim, tracking are real. And Yeah, pressures we

about to much I organization, in we're But obviously. that premium, our don't continue DTC working that are with think winter But commercial to also of very a which with spring, cycle would summer. we too and well, general, the that. partnership But next as think on to there's our of it. forward. brand. mentioned, to you that increase we that's top-line of that in that's being to do able more more our be excited for about and vendors with on when a with that. product bigger gross side is we certain team the less will there We We year, fall, targeted. offset for front timeline, going help going continue stay we we are opportunity improve I opportunities around to based we're And be especially couple we're working a to the there's teams where looking there margin of and probably percentage go promotional, to then less which on parts of affect as be some we're think go discounted, continuing as -- know and able earning areas in margin very will have our But it price after gross life strategic, help

Jim Duffy

the other cost A your anything some of year. that view you're seeing product there to we've type can companies next share from cost side? product a Got on heard portfolio? it. inflation you specific environment of into Dave, Is on range the

David E. Bergman

frank, it's continuing to develop. To be

for that do more coming before comment. up, to and to on but supply clarity we're our more chain give that the going best point, another cautious at and I two we're with through give to drive level can so this get detail have We next and we we think call give partners we continue of be on in that that going hold detail year. to our for or work And

Jim Duffy

Thanks very much.

David E. Bergman

Thank you.

Operator

you. Thank

will from Jefferies. Konik come of Randy line question next Our with the

open. is Your line now

Randy Konik

it all? more I channel, distribution? bit full-price to in about you on Thanks. morning, far you've then taken exposure is pricing the off-price give qualitative as And in the your maybe just to brand Thanks a off-price to helps in talked related just of either off-price Dave, at dynamic to wanted changing prepared which down Yes. elaborate the said the comment stable the terms a you channels or some And and you little channel, remarks partners. follow-up. obviously that -- and lot. good us you Can a earlier that quantitative on how that perspective everybody.

David E. Bergman

about demand planned we've down Sure. Relative We're range the tailwind percentage to ween obviously, process, some down. off-price of this revenue. of to mix to that a have X% that, X% to the on our creates on with get it into down really constraints. And last level bit year. that we've little of drive of employed up that, -- years we've couple that the been this year we continuing of a outside then able a channel, X% of tightened gross chain margin coming third-party And whole supply embarked that for excited to to basically, business

things but reduce helping create. brand are we keep to the also those of premium, All the they're more helping amount to that excess of

just able of say stores want way of channel, own And factory other give, we don't and a and as continues feel in for that that to it and therefore, a model. that more and us. the is about lot more we're we I And to the that they're tighter and to through being better amount way. would excess based our a strong move we more more much is, demand also process little means operating our those piece overall, product. So going the as that generally house is profitable bit on have more a a new like right brand would to pay have reduced of brand selling third off-price party the the so to partners they that when

gross And plan manage to in to are so continue smaller has on the we're seeing margins to well. even that we which of as it to forward to as X% them, getting amount better we're And globally. prices, that revenue helped X% we mix selling go that benefit we

it shouldn't headwind or much we going business forward, of headwind forward, piece a of general tailwind, be small So a really it's a or maintain going or in that just our gross revenue margin going tailwind, forward.

Randy Konik

done around around would question and then, some productivity -- what That skew progress both side? and update And tougher the get on we us apparel footwear on that cap Give last guys. initiative was very can the there the initiative? skew color be, helpful. an or you've Thanks, improved on reduction

Patrik Frisk

at were management. and reduction the This so or that work We so. of Patrik. have we far back Actually, to ourselves we're balanced never also but Randy. still other is will a in where sure, diligent Yes, words, point, [Indiscernible] we getting got other that XXXX, cycle to about to in level. management our in as out And readjusted would skew we see then, a way. of felt of we're going taking a And be expanded things invest really the way storing planning. about it In that on we very the the top we're sustain terms we from words, in products, growth able [Indiscernible] is through ensuring lot in that our XXXX of we around for Company. We did think holistically across not this opportunity, level we XX% balance about a of life our as forward that it and down

both also about down our to our The in round been we've in also point maintain other able interesting XX% those first that our fact and too. 'XX, we transformation, of at 'XX, took and thing the by materials in levels, trims that is time

what that So sure now are operating we because have little coming efficiencies, holding a previously we than more here, make about our ourselves our Dave back accountable to way terms talked to bit in a of

David E. Bergman

in to the to it's in grow the be accountable. controlled a a to little help as excellent line we'll always what our skews grow holding ourselves business. brand and different bit are doing doing but forward, brand job going as going the And discipline. a grow where as consequence, way, we our a products we're The be an maintaining teams should

Randy Konik

Very helpful. Thanks, guys.

Operator

Williams Trading. you. come of Sam our from Thank next And question will line with Poser

is Your now line open.

Sam Poser

o want -- of maybe, Thank some in idea can little happening, going us quarter on Could I spread follow some that's you exposure -- taking southern you a face your sourcing a going lot more some on to problems f products it's situation? apparel over footwear more these March give color chain on of but beyond stuff. Can this Vietnam? all are especially your the apparel? us hurt to give and, you what's to noticed supply my questions. to where than you bit Is the up the that idea you for issue that, lots have you are I side, give us the the a an of place.

Patrik Frisk

is this Sure Sam, Patrik.

and we think all, sourcing and the we coming make about I XX% between rest are terms we how a is perspective, from America. of out Europe of East of are balanced have of positioned across feel other First that APAC, Latin we in of we everything split globe. it that Middle words, In the

all. how So think terms sourcing, portfolio in of we about a first have balanced of we

Vietnam. have what's right our South because And now open. are closed, industry, of is especially factories -- factories on mix of of and now Vietnam, factories -- the been least out I would there apparel a the at that's impacting especially terms all footwear say happening In there, are those coming

it's remainder to of this really get speed. them the up take to ramped However, full year to full going and capacity

the is do And words, the other at about then So or Whether affecting seeing that make of own prune quarter and direct chassis, in What for than is that because the our to logistics really partners us to, so here, we for and or medium-term the we be let's of year more and going transportation lands the right? taken actions at And say, believe, a going has outbound how forward, now port. expectation it of entire against already congestion order port, think us, step to a sure we've inbound. the in to terms deliver just of a we're in unloading books forward, our chain. our of challenge. container end inbound, the this with beginning consumer. access so to every to it's coming or what's next more journey going from majority able once of going more to we're be

'XX. So we the and for in say, see the turn let's us being shipment biggest term quarter concern logistics into the medium here the as we

David E. Bergman

caught assumed I costs in is and color, of POs, because up up get an to QX, this able factories guess, is a we of bit, to Sam, and year, impact impacts then revenue on quarterly QX POs fair little a calendar give of incurring to to up amount We gross bigger probably get and to the here a things calendar be gave. margin. little back impact And in customers. inbound be catch And just not I guess. for some already a freight QX which minimal bit is the realistically Definitely more outlook missing for see QX and the where cancelled that see we little a and

cancellations. those our So customers we've on with worked PO

we're dissipate So and continuing that's it. to QX. then, on it QX, calendar work a through bigger that after impact to should start And calendar

to we partnerships mentioned, of think pipeline good with but the inbound suppliers, our I product port, the gets big pretty really have Patrik actually that some a down once the the still challenges challenge. are

Sam Poser

didn't and you. Patrik, make they helps long-term you But more I the but -- are the delays? focused of that brand this it more because have good know wish chain that for problems being in that of up you know them, facing your the And are then get you lot brand ending premium, a I good. for is the supply

Patrik Frisk

question, That's good think I and great Sam, it's observation. a a

this think think certainly so as going choices. into think I make perhaps -- about Dave's you anytime we've make that when year, next year. constraint, with year, to when especially to a right, choices first the some quarter but you're not I it's you're forces much, of you to next earlier point, faced And had

delivering we're And to the the to capacity have the we're strategic, right? through into we that pipes. As what actually on able get be market based

a yes, us prioritization right go with answered now helping driving drive be probably could this is going the and make question ultimately premiumization what's it continue because the us to right help of to with to brand. the we're where, So somewhat, that

a there's it's -- Sam, think probably I some and probably I to that. truth So good observation,

Sam Poser

very much. Thank you

Continued success.

David E. Bergman

Thanks, Sam.

Operator

you. Thank

Our next question Simeon Siegel Markets. from BMO with Capital come will

Your line is now open.

Simeon Siegel

the Hey job. guys, congrats Great ongoing on progress.

David E. Bergman

Thanks, Simeon.

Simeon Siegel

just issues, maybe lead of follow-up on supply -- just discounts. Sam's an industry-wide to on Patrik, the the is flip-side a Obviously flip-side point, chain that.

into holiday curious, promotions you Industry do when thinking Just back come And maybe and industry. ultimately for the what view year? happens more on next what's promotions talk think about then across your

your marketing the made where validated line Speaking and bunch you impressive approach. to a then strategic changes really ability the believe Dave, there. And in you've to you've brand hold your of on to you're marketing you. year, of talk about next or percent expense how strategically dollar whether sales, focused into you Could you are forward thinking it? going growth, how Thank us guys

Patrik Frisk

that compete. little I to second consumer, And year, game started pivot we the and the on their the an do and how done marketing into against run the strategy, understand And how laser-focused this of through to understanding understanding way the consumer And to activated we through do concept return activation and journey to marketing, think have now. to we last think because able we're change offensive. the Yes. same is on question being continuing follow bit spend our thinking we're going going a other it for that through Simeon, brand our the Yes, Through way driving models do around how this is or be being your is of on strategy, Patrik. that really right? of as moves in his really her campaign marketing better. on sports. only so the us, being it's I better able we're which that words, a now investment the So about they're done in much better to to consumer in this consumer-led forward, we're journey is to activity terms we're ultimately year,

consumer the into We're marketing it. a against invest activating add better you into going we're future the efficient. brand. as want a that effective, we're to to more having And to that? little And for more bit on and continue it's don't the I we're Dave, on effect do So know more do

David E. Bergman

area changing a we've and leverage bang spend been perspective, of and been with up year. our based about structure year. been funnel reinvest we to a work back-half the this percentage based talked of get year, about well. And year, what and that, lot I which a marketing cost go that be a what forward doing we that guess able A brand from run revenue brand we're percentage every to investment. Based in confident ROI this the do more of still into We've going we've being us behind year we're we is need next year. the lot go do I a overdrive dollar excited and into following buck, to and activities on our top exciting the going do. which higher marketing as more of that to this we for as around next into on and could of this weighted leverage how the awareness Yeah, to return investment relative would consideration, although the to of year amount as really super our expect back able that our say But marketing the revenue mean has we we to being to heavying because on mix through all backs. able definitely restructuring fair feel as about, doing And for

a revenue an decrease any year will the some go of So I you leverage see don't you our see of should we you the will in and beyond. think marketing. probably But increase power marketing as in into as see anything, in percentage next power. If

Patrik Frisk

comment add and around your I'll holiday right. a Yes, environment. just question that's promotional around

continue with to brand. which around I I offering to for to XXXX, the consumer But going We're premium sectors be seeing drive on bit think holiday we're to drive approach and XXXX position the different perceived product a higher think brand going consistent. terms more And some continue to That's going the little around is our around really scarcity this What we're a promotional the is world, currently unclear that's not that is promotions, how we necessarily about and into in of us things than across they're to going in enable our is less marketplace. our think patterns. a traffic is to and going levels. in year. general

Simeon Siegel

Congrats, and lot of guys. best Thanks a for luck Great again. holiday.

Operator

you. Thank

line Our Brian of next question from the will Oppenheimer. with Nagel come

line Your now is open.

Brian Nagel

Great quarter. morning. Congratulations. Good

Patrik Frisk

Brian. Thanks,

Brian Nagel

there quarter I into as mainly like towards So a And I you of mean, have now, ability costs, relatively and continued the of look bringing Do I questions, you supply trajectory you the then actually of you on your make early this and are would is want have the sales at laid mentioned, holiday chain -- off, driver particularly that? as can But brand, next leverage look your first acceleration couple year. there you next question that market The nice you are to of managed believe second a incremental merge there, pull airfreight here others is, as products chain. in question questions serving for potentially focus out Company the this share? the have particular to States. United the supply here at have well together. included data higher through I'll pull and first the then you've year,

Patrik Frisk

I Brian. feel off to thanks, Well, start over Dave. I'll pass -- and I'll it

commented if I got on I've it comments you on once this. additional think any Dave,

what have have, ability put and going quagmire the I the a a bit orders navigate general, for now currently chain that navigating then think, now a again in in to 'XX we a ramping and our base we had the ways. to little We've the the we've in we improvements last we half first go bit and our little today 'XX. back that. through order where vendor again, over that agility of pandemic, us and can ability for in about up talked by kind our through made Adjusting operating our transportation both supply XX% where here of and years our of have, through is base and scale logistic position it terms a

anything an the in thrown machine. you're Armour And time; is us. And, of are I you think, ability All not run this to out in point unless that's possible efficient efficient effective seeing those things an so different that's what navigate do way and most possible. at from really Under

Just think about the last X quarters.

was the in XX%, position flattish inventory we're to end the XX%. guiding year. Our last quarter a it's down now down to And

you is And able to to going that execute our testament talked supply a then think, and navigate execute. about also, or own off-price indication navigate that, that into team's chain to more the Dave that to an manage the two understand know throwing of should being a bit to direct Being there. our wholesale coming to you think, of relates able demand I I back add if years that what all how to to able ability better. much we're and And and what think better. earlier to together also give in combination?which? we're our I this efficiently consumer, don't last and how channel. as we to selling Dave, about over want it ability

David E. Bergman

to Yeah, bit I guess, Brian, I'll little that. add a

on touched airfreight. You

We and our our strong. to consumers keep and possible employing as best -- we try to experience say, are the I mitigate can would and every lever customers

this be as of fair with we as year, Probably we in of we're which So employ. keep that XXXX, would XXXX. would in a we more as use we bit approach expect from I airfreight us mitigate I margin. some not And calendar next with. a to about, to excited pre-COVID did timing little being more the have that significant. pressure gross that of the year, perspective from -- necessary not will that focused, not impact than used XXXX and helping front but this lot those as which that be a it's And of probably it's year to half airfreight much would think still all challenges challenges but a But still say is we a going faced we're on trying being something thing put

pieces our process. chain working excellent that in in also to a lot as the There's logistics a through, it just not our So work partners, but this is driving been best with we but providers of puzzle factory, as supply we're has our to mitigate can.

of to that very about feel stay we're POs can navigate relationships to relative the and through. good we trying how have. And so it ahead we And we the

Brian Nagel

much. Great, you I Thank appreciate. very

David E. Bergman

Thank you, Brian.

Operator

will question Thank come Drbul Bob the you. And our Guggenheim line from Securities. next of with

now line Your open. is

Bob Drbul

Good morning. Hi.

Thanks. me. Just a questions couple for

seeing a talked what have the how Thanks. a trends planned of business? you fourth called give to if can more maybe bit and I is and little elaborate kids' one as quarter basketball was running color sort I the in could [Indiscernible] you about first if you saw the the quarter. into even just you then recent quarter out a that wondering us you on date, The in what you with And you're little category, was China. just this wondering and

Patrik Frisk

this Bob, Patrik. Hi is

are is -COVID levels it's pattern that navigating or has ins their of basis yet I lot really we're traffic, a on think has with the how as weekly China, are in traffic, you localized of would outs effects, seeing brick-and-mortar. pre And think and right? the to I traffic I just on -- in of and still to if terms way tempered I is traffic COVID say Tmall also platform. monthly full-price And a closures of relates like, it And it think diminished somewhat -- that do landscape. we're the terms to of lots pattern the is. consumer in platforms, There seeing not and seeing of JD a the e-commerce. that a returned big in also terms

is China in landscape digital the shifting. So

landscape that [Indiscernible] around teams necessarily when the we've to holiday it I starting news investments And ventures new we the isn't this seeing of into a our we're China. this this to navigate You're us, a last a up over -- able good landscape, a smaller is but how XXX% bigger that lot going and years. period out there commercial guess, clear platforms. and digital is it these in few is for platforms varied of over And feel pan made

So the patterns softness, say, traffic in China in there's right I now. a would

Bob Drbul

bit the you maybe basketball kids business? talk and Can about a little

Patrik Frisk

-- very I about. basketball talked this yes kids earlier, basketball back the Oh, sorry what kids. both comes Paul. that, little to Basketball, and bit we're excited And about a about and

that's year. our very breakthrough a market great, if we've great. now of basketball better a excited certainly doing our Curry about that business is the is team just doing there been absolutely of years. more that we and this vitality, basketball doing also women We're right think seen release all came are part that our back-to-school As few shoe latest just team and we normalized sports case that. seen, business It's is for you sports in like, haven't the into that our a the for And

but as which seeing also baseball. we So higher than rates football, women's, in sign that the is just as this versus I well other year sports, and and men's team huge growth basketball, are And would total well. as also XXXX, goes across kids great American a say that

Bob Drbul

Great. Thank much. you very

Operator

Paul Thank question our Citi. you. from from come next And will Lejuez

now is line open. Your

Paul Lejuez

mentioned. you differently, Curious thinking Hey, cancellations. that and versus unit to you that purchase then guys. percentage prior the Thanks. unit that have required is about Thanks. to buys post you shaking wholesale out? And units by your your that XXXX cancellations So you would in about How cancel? what your your be service thinking direct-to-consumer how were - business did to accounts. just for PO how Curious were and

David E. Bergman

Hi, Dave. is Paul. This

expectations. giving not talking I been appreciate on yet. We're happens numbers unit how something color change as to X interest give be next as the the And but we're detail relative on fiscal We'll unit year's we upcoming it's in go-forward. haven't on that, our that much well. about more We ready careful that to the our real being one far in year the give knowing on following call April or growth, as

Paul Lejuez

APAC promotional about think a big differences I in you And mentioned, that here in characterize follow-up the geographies. on maybe the to you think how different regions. seeing that versus Thanks. in the environment From asked differences consumer Okay. promotional and environment that Are U.S.? questions would compared seeing of you we're sells a a as you perspective, couple other the just EMEA more were tamed

Patrik Frisk

Paul, is Hi, this globe you if my give around you the level I'll like. Patrik. high

would really go continued a back more in consumer stores of in to we at digital terms an they're at premium enjoying seeing a e-commerce In North you right I have a being APAC, the say, discounted consumer actually, brick-and-mortar but digital think in discounted shopping strongly the in let's and level. I traffic Europe, doing higher where, we so players very interesting And Europe. stayed a softness patterns. are with and in has pretty the for at pure back a think China phenomenon has environment us. the stores. And of just bit in now level anticipated, really less in in The has for is in consumer America, softness us, Not that of more innovative more back traffic see creating to level. gone to out discounts for channels. rates than so the and and also a, not actually,

given going end terms is the going think they're retail navigate that of COVID. less how it with and is regions be before of think months. everybody heading. is we e-commerce. to exactly think let's in of a don't it's discounting stages definitely a this which feel like confident through I the now. interesting. we right western and world. But at least stages that bit So X forecast we But to sector now, this different right today little it But perhaps are so in in currently at in there say, next at where couple Everybody's day, across of our bit mixed differently China, how with kind at seen we're the the a The understand where the makes little world, general, bag I've I more behaving challenging, to, it have is different about

Paul Lejuez

Patrik. lot, luck. Good a Thanks

Patrik Frisk

Paul. Thanks,

Operator

Baird. next come the our with And from you. line Thank question Komp will of Jonathan

open. line now is Your

Jonathan Komp

you. thank Hi,

you across Would them a the share brand follow-up when on to your you seeing you're And the a the say lot premium those you category. metrics, of is couple broader I or of move strategy running metrics? know some example on think a movement track where about more just recent you that's Could best the insights Just of internally. maybe underway? improvement

David E. Bergman

ways Yes. Hi Jon. strategically, HOVR launched our platform. really a worked It's been when meaningful that we since tactically in about very a I'm have and category. methodically excited 'XX on running we our category and

Patrik Frisk

back now out on we're Under of that Wind I'm doing last I in Velocity excited Flow way. basketball. an execute very with a toe. came really with the seeing to is Armour, release to and the in on with And ability platform running our what the Curry premium about head globe, across Velocity SE, And, you're we think, the year, This year which

to running drive a for women's three into this men's seen continue win to really effort and it. last More We're footwear. from come and into we Under a over Under that in new it. stay becoming and going across running on category this we Armour. in the what go think excited across we is in here, But going we're better how about platform it very We're about you've forward it both we're to 'XX there to forward. So in evolving apparel the beyond. job and this and as Armour And we're years do innovation

about very that. So excited

Jonathan Komp

to that to might just underlying high that be the sense rate, follow-up. headwinds one the even Dave, we a with with mid of I you'll QX, given revenue, or grow moving that you growth quarter, single-digits at? for overall be low-single-digits constraints? pace the a get Should low towards more that March And stub quarter you could mentioned. more thinking be even Trying helpful. you then Okay. of the single-digit still That's know mentioned this

David E. Bergman

you details exact great or give new year. QX, ready for for not the love to Jonathan, Fiscal to numbers I'd give we're But 'XX So that more And calendar or next impacts on that. yet question.

give appreciate impact, is material, definitely run it pretty at So but appreciate to the cancellations We impact normalized so that rate wouldn't we're call something isn't but growth the the definitely question. a out a point, ready not giving question. of the this if chain it was big of supply definitely kind

Jonathan Komp

Thanks understood. again. Alright,

David E. Bergman

Thank you.

Operator

our and for call for webcast Thank also concludes our This very you session today. question-and-answer Everyone, your conference today. concludes this participation. much

wonderful disconnect. now a You [Indiscernible] have may Everybody day.

Under Armour (UA) 2 Nov 212021 Q3 Earnings call transcript