Release Date: May 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Under Armour Inc (UAA, Financial) is focused on reconstituting its brand strength by emphasizing brand-building fundamentals such as product quality, compelling storytelling, and enhanced consumer experiences.
- The company has a clear strategy to streamline operations, which includes reducing SKU counts by approximately 25% to focus on higher quality and better-segmented products.
- Under Armour Inc (UAA) is making significant strides in innovation, as evidenced by multiple new product launches, including the StealthForm Uncrushable hat and various footwear releases.
- Despite a projected revenue decline, Under Armour Inc (UAA) anticipates gross margin improvement of 75 to 100 basis points, driven by reduced promotional activities and proactive product and costing initiatives.
- The company is actively working on improving its direct-to-consumer (DTC) channel by reducing discount levels and enhancing the online consumer experience, aiming to elevate the brand's premium positioning.
Negative Points
- Under Armour Inc (UAA) expects a revenue decline in fiscal '25, with a particularly sharp decrease in North America, projected at a low double-digit rate due to factors like lower wholesale orders and strategic decisions to restore brand health.
- The company faces challenges in its North American market, including a lack of consistent execution and increased competition, which have impacted brand perception and demand.
- Under Armour Inc (UAA) is undergoing significant leadership changes, which, while potentially revitalizing, also introduce a period of transition and uncertainty.
- The international business is expected to see a low single-digit revenue decline, influenced by conservative macro consumer trends and lessons learned from North America.
- Under Armour Inc (UAA) is incurring restructuring costs estimated between $70 million to $90 million, which could impact short-term financial performance but are intended to support long-term efficiency.
Q & A Highlights
Q: Kevin, recognizing the tone shift, how do you think about this go around of the brand elevation versus revenue contraction versus the last time you successfully elevated the brand and the gross margins?
A: Kevin A. Plank - Under Armour, Inc. - Founder, President, CEO & Director: Kevin emphasized that the approach this time is different, drawing on past experiences and wisdom. He highlighted the focus on North America, acknowledging that improvements won't happen overnight and mentioned an 18-month outlook for changes. He stressed the importance of transparency and proactive measures in cutting down operations that do not align with the brand's core values, aiming to rebuild the brand's base fundamentally.
Q: Can you talk about the progress on your view of the progress that you've made in eCommerce and the eCommerce channel? How long will it take you to get your website to where you want it to be?
A: Kevin A. Plank - Under Armour, Inc. - Founder, President, CEO & Director: Kevin acknowledged that the eCommerce channel is a work in progress that will continuously evolve. He highlighted the need for better alignment of product offerings and storytelling on the website. The focus will be on reducing promotions to clarify the brand's message online, aiming for a cleaner and more direct communication with consumers.
Q: With regard to product innovation and the new products coming, when should we start to see these products? Is there more of a revamping overall with the product innovation at Under Armour?
A: Kevin A. Plank - Under Armour, Inc. - Founder, President, CEO & Director: Kevin clarified that innovation has been ongoing and the company is not starting from a standstill. He mentioned that significant product launches are planned for fall '25 but emphasized that innovation is continuous. The focus will be on refining the product assortment and enhancing storytelling around these innovations.
Q: How do you view leadership today versus how you thought about it before, and how is it going to help drive Under Armour forward?
A: Kevin A. Plank - Under Armour, Inc. - Founder, President, CEO & Director: Kevin discussed his evolved view on leadership, focusing on building a strong team and empowering them to execute the brand's vision. He highlighted recent strategic hires and the importance of melding new talent with existing team members to drive innovation and brand growth.
Q: Are there other potential changes in the management team in the future? How will you work to retain this fairly new team?
A: Kevin A. Plank - Under Armour, Inc. - Founder, President, CEO & Director: Kevin indicated stability in the current management team but noted the ongoing search for a new Chief Marketing Officer. He emphasized the team's motivation by the potential to enhance the brand's value and the excitement around the direction Under Armour is heading.
Q: On the international outlook, how much of the macro is driving the low single-digit percent decline in international? Or is there something specific to Under Armour?
A: Kevin A. Plank - Under Armour, Inc. - Founder, President, CEO & Director: Kevin attributed the cautious international outlook to both macroeconomic factors and deliberate brand management strategies derived from past experiences. He emphasized a focus on maintaining brand integrity and avoiding aggressive expansion that could dilute the brand's premium positioning.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
