Q1 2025 Under Armour Inc Earnings Call
David Bergman, David Bergman, David Bergman,
Speaker Change: Good morning and welcome to the Under Armour First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal Conference Specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded.
Arderland Alga: I would now like to turn the conference over to Lance Allega, SDP, Investor Relations, Treasury, and Corporate Development. Please go ahead.
Speaker Change: Good morning and welcome to Under Armour's first quarter fiscal 2025 earnings conference call. Today's event is being recorded for replay.
Speaker Change: Joining us on today's call are Under Armour President and CEO Kevin Plank and CFO Dave Bergman.
Speaker Change: Our remarks today will include certain forward-looking statements that reflect Under Armour's management's current view of our business as of August 8th, 2024.
Speaker Change: These statements may include projections for our business in the present and future quarters and fiscal years. Forward-looking statements are not guarantees of future business performance, and our actual results may differ materially from those expressed or implied in the views provided.
Speaker Change: Statements made are subject to risks and other uncertainties detailed in this morning's press release and documents filed regularly with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q . Today's discussion may also include non-GAAP references.
Speaker Change: Under Armour believes these measures give investors a helpful perspective on underlying business trends.
Kevin: When applicable, these measures are reconciled to the most comparable U.S. GAAP measures . Reconciliations, along with other pertinent information, can be found this morning's fresh release and at about.underarmour.com. With that, I'll turn the call over to Kevin.
Kevin: Thank you, Lance, and good morning, everyone, for joining us on today's call. With the first quarter of Fiscal 25 behind us, I'm pleased that we started the year ahead of expectations, and I'm encouraged by the early progress we're making in executing our Protect the South strategy.
Kevin: At the center of this strategy, we've recently declared to our team and partners that Under Armour is a sports house, a term that we're using to define the landscape in which we compete.
Kevin: The sports industry's version of the only handful of brands from Europe who've earned the right to refer to themselves as fashion houses.
Kevin: Across the sports brand landscape, we believe there are less than five brands that could be represented on this podium for sports globally.
Kevin: And that we are one of them, earned over our 29 year history the credibility to show up in virtually any athletic endeavor on the field, pitch, or court as an outfitter and be seen by athletes in the more than 100 countries where we do business today and are generally famous as an authentic brand, an authentic sports house brand.
Speaker Change: This rare air amongst the landscape of the sports industry is an aspect of UA that we feel is incredibly unique. In just one of the attributes of strength we see for ourselves, we contemplate the opportunity that Under Armour has in front of us.
Kevin: We believe this authenticity gives us an advantage as we reconstitute our brand strength and execute our strategy.
Kevin: To make that happen, this, of course, begins and ends with our culture.
Kevin: Elevating its importance in visibility, raising the bar of our culture across the enterprise. And like our brand positioning work, we're also reconstituting this.
Kevin: Our culture is unique in how it describes our brand, the athletes we have, and the ones we plan to attract.
Kevin: In this spirit, we've redefined who and what we stand for within our strategic plan. As discussed in our last call, the who we are being about athletes, sports, innovation, and passion.
Kevin: And we have a passion for, in its simplest definition, the underdog. The athlete who is not given all of God's gifts of talent. And despite what they're missing...
Operator: Good morning and welcome to the Under Armour First Quarter 2025 earnings conference call. All participants will be in lesson only mode. Should you use assistance, please say no conference specialists by question the star key followed by zero.
Kevin: It is not tall or fast enough or strong or swift or clever enough. For all those who have to stay late after practice to work on a skill or study harder than the rest, this is our underdog.
Operator: After today's presentation, there will be an opportunity to ask questions. To ask the question, you may press star then when you're a telephone keypad. To withdraw your question, please press star then two. Please note that this is being recorded.
Kevin: And because of this, U.A.'s athletes must use every resource and waking hour to make themselves better.
Lance Allega: I would now like to turn the conference over to Lance Allega, SDP, investor relations, treasury and corporate development. Please go ahead.
Speaker Change: Said differently, we don't innovate as a brand for athletes so that they can run up a score. We expect every product we build to provide an edge for our athletes, just to give them a fighting chance to compete.
Lance Allega: Good morning and welcome to Under Armour's first quarter fiscal 2025 earnings conference call. Today's event is being recorded for replay.
Speaker Change: This mentality is what drives our innovation agenda and manifests through grit, an oversized chip on the shoulder that is UA's beacon, an underdog spirit that can never be counted out.
Lance Allega: Joining us on today's call are Under Armour President and CEO Kevin Plank and CSO Dave Bergman. Our remarks today will include certain forward-looking statements that reflect Under Armour's management's current view of our business as of August 8, 2024. These statements may include projections for our business in the present and future quarters and fiscal years. Forward-looking statements are not guarantees a future business performance and our actual results may differ materially from those expressed or implied interviews provided. Statements made are subject to risks and other uncertainties detailed in this morning's press release and documents filed regularly with the SEC, including our annual report on form 10K and our quarterly reports on form 10Q.
Kevin: Each day this UA team will operate with responsibility to do everything in our power to push the boundaries of innovation that makes athletes perform better. And above all else, we recognize the privilege and joy it is to work in sports.
Kevin: Our aspired culture will be the output of bringing this to life.
Kevin: In this effort, we must become more deliberate in everything we do, recognizing the difference between experimentation and intentionality, and have the right talent and agile decision-making abilities to ensure we can do this consistently at a high level.
Lance Allega: Today's discussion may also include non-GAAP references. Under Armour believes these measures give investors a helpful perspective on underlying business trends. When applicable, these measures are reconciled to the most comparable US gap measures. Reconciliation along with other pertin information to be found this morning's press release and at about.underarmour.com.
Speaker Change: As such, we have invested meaningfully and experienced leaders to supercharge our ability to execute differently than in years past.
Speaker Change: We're not just building a company, we're building a brand. And the reason is that a brand is so much more valuable than just a company.
Kevin Plank: With that, I'll turn the call over to Kevin. Thank you, Lance, and good morning everyone for joining us on today's call. With the first quarter of fiscal 25 behind us, I'm pleased that we started the year ahead of expectations and I'm encouraged by the early progress we're making in executing our protective South strategy. At the center of this strategy, we've recently declared to our team and partners that Under Armour is a sports house.
Speaker Change: We're building a UA brand with purpose.
Speaker Change: One iteration, one success, one day at a time.
Speaker Change: Looking back at the last four months since assuming the CEO chair, we still have much work to do, but I'm proud of what's been accomplished to date.
Speaker Change: including implementing a nine-month go-to-market process to complement our 18-month calendar with the self-form uncrushable hat being our first delivered product now available and in stock online.
Kevin Plank: A term that we use to define the landscape in which we compete. The sports industries version of the only handful of brands from Europe who've earned the right to refer to themselves as fashion houses. Across the sports brand landscape, we believe there are less than five brands that could be represented on this podium for sports globally. And that we are one of them. Earned over our 29 year history, the credibility to show up in virtually any athletic endeavor on the field, pitch or court as an outfitter and be seen by athletes in the more than 100 countries where we do business today.
Speaker Change: We also began to work to reduce our SKU style count by 25%.
Speaker Change: implementing a category management structure and right sizing our organization with a headcount reduction that, while painful, is now complete.
Speaker Change: However, we're still building too.
Eric Ly: This brings me to the announcement we made a couple days ago, the appointment of 30 year industry veteran Eric Liedtke as Under Armour's EVP of Brand Strategy.
Speaker Change: Following a 26-year career at Adidas, culminating in his roles as brand president and executive board member, we're thrilled to welcome him.
Kevin Plank: And are generally famous as an authentic brand, an authentic sports house brand. This rare error amongst the landscape of the sports industries and aspect of you way that we feel is incredibly unique. And just one of the attributes of strength we see for ourselves, we contemplate the opportunity that Under Armour has in front of us. We believe this authenticity gives us an advantage as we reconstitute our brand strength and execute our strategy.
Speaker Change: Complimenting one of the strongest product teams we've had in nearly a decade, Eric's proven track record of transformational brand growth and strategy will be an incredible asset to our product and regional leaders and our broader executive leadership team at this crucial time.
Speaker Change: As EVP of Brand Strategy, Eric will oversee our brand marketing, corporate strategy, consumer insights, sports marketing, creative, and loyalty functions.
Kevin Plank: To make that happen, this of course begins and ends with our culture. Elevating its importance and visibility, raising the bar of our culture across the enterprise and like our brand positioning work, we're also reconstituting this. Our culture is unique in how it describes our brand, the athletes we have and the ones we plan to attract. In this spirit, we've redefined who and what we stand for within our strategic plan. As discussed in our last call, the who we are being about athletes, sports, innovation and passion.
Speaker Change: In addition, Eric will be tasked with building out our marketing organization, including its Go Forward leadership that will report to him.
Eric Ly: On our last call, we outlined what needed to be done immediately.
Speaker Change: distill the key points of our strategy into a presentation that's now been delivered to all 16,000 UA teammates and take it on the road to our key retail partners, factories, franchisees globally across North America, EMEA, and APAC.
Speaker Change: From quick hallway talks to two to three hour meetings and presentations, we had transparent two-way conversations to gain perspective about how to take better care of our brand.
Kevin Plank: We have a passion for it, and it's simplest definition, the underdog. The athlete who is not given all of God's gifts of talent, and despite what they're missing, is not tall or fast enough or strong or swift or clever enough. For all those who have to stay late after practice to work on a skill or study harder than the rest, this is our underdog. And because of this, UA's athletes must use every resource and waking hour to make themselves better.
Eric Ly: These interactions have provided well-rounded insights into our strengths and areas of opportunity.
Eric Ly: such as being faster and bringing products to market, more intentional and committed storytelling for our launches, serving as a better business partner, and driving deeper connections with athletes to ignite brand love.
Kevin Plank: Said differently, we don't innovate as a brand for our athletes so that they can run up the score. We expect every product we build to provide an edge for our athletes, just to give them a fighting chance to compete. This mentality is what drives our innovation agenda and manifests through grit and oversized chip in the shoulder that is UA's beacon, an underdog spirit that can never be counted out. Each day, this UA team will operate with responsibility to do everything in our power to push the boundaries of innovation that makes athletes perform better.
Eric Ly: Constant theme across these exchanges. Parallel to the spirit of many of our investor conversations is the optimism in Under Armour's ability to deliver a premium positioning and unleash our full potential.
Eric Ly: In the product construct of good, better, and best, we believe that UA can do business in all three, including as it relates to price, a unique characteristic of being an authentic sports podium brand.
Eric Ly: This is probably the most significant business advantage of being a sports house and why we believe we can drive more premium positioning while not abandoning good level altogether.
Kevin Plank: And above all else, we recognize the privilege and joy it is to work in sports. Our aspired culture will be the output of bringing this to life. In this effort, we must become more deliberate in everything we do, recognizing the difference between experimentation and intentionality and have the right talent and agile decision-making abilities to ensure we can do this consistently at a high level. As such, we've invested meaningfully in experienced leaders to supercharger ability to execute differently than in years past.
Eric Ly: This range is one of the reasons I know we can attract A-plus talent to join us in this next chapter.
Eric Ly: And this potential is evident when we combine innovative products, outstanding design, and thoughtful storytelling, we delight athletes with performance solutions they never knew they needed and now cannot imagine living without.
Eric Ly: This, in conjunction with our strengthened product team and feedback based on early sharing of our evolving product line architecture, is encouraging.
Eric Ly: We aim to scale this more broadly across every product we make with renewed energy, story, clarity and alignment across the company.
Kevin Plank: We're not just building a company, we're building a brand. And the reason is that a brand is so much more valuable than just a company. We're building a UA brand with purpose, one iteration, one success, one day at a time. Looking back in the last four months and assuming the CEO chair, we still have much work to do. But I'm proud of what's been accomplished to date, including implementing a nine-month go-to-market process to complement our 18-month calendar with the self-form and crushable hat being our first delivered product and now available in stock online.
Eric Ly: With that, I'll highlight each element of our Protect This House strategy, starting with building better products and storytelling.
Eric Ly: Central to the evolution of our product organization has been the re-architecture of leadership and structure over the past year.
Jassine Saidi: with Jassine Saidi leading a talented and experienced team of apparel, footwear, innovation, and design experts.
Speaker Change: By order of operations, product was the most immediate fix and, frankly, longest lead time UA needed to address. I'm very confident in the work this team is executing, including a more centralized vision across product, merchandise, and marketing that will enable us to correct our past inconsistencies.
Kevin Plank: We also began to work to reduce our skew style count by 25 percent, implementing a category management structure and a light sizing or organization with a head count reduction that, while painful, is now complete. However, we're still building too.
Jassine Saidi: Always editing and innovating to drive our brand forward.
Kevin Plank: This brings me to the announcement we made a couple days ago. The appointment of 30-year industry veteran Eric Lidke as unarmors EVP of brand strategy. Following a 26-year career at Adidas, culminating in his world as brand president and executive board member, we're thrilled to welcome him. Complimenting one of the strongest product teams we've had in nearly a decade, Eric's proven track record of transformational brand growth and strategy will be an incredible asset to our product and regional leaders and our broader executive leadership team at this crucial time.
Speaker Change: With new leadership also came new priorities.
Kevin Plank: As EVP of brand strategy, Eric will oversee our brand marketing, corporate strategy, consumer insights, sports marketing, creative and loyalty functions. In addition, Eric will be tasked with building out our marketing organization, including its go-forward leadership that will report to him. On our last call, we outlined what need to be done immediately. To still the key points of our strategy into a presentation that's now been delivered to all 16,000 UA teammates and take it on the road to our key retail partners, factories, franchises globally across North America, America and APEC.
Eric Ly: And we're progressing well with our category portfolio realignment.
Jassine Saidi: This brings greater simplicity to the business and adds focus to our core sports categories, yielding much clearer roles and responsibilities for our product teams to identify and execute go-to-market plans that are ideally optimized for the highest quantitative and qualitative returns.
Jassine Saidi: As mentioned on our last call, our Fall Winter 25 season is when this team's efforts will begin to show up more robustly with new design language and improved balance between performance and style.
Eric Ly: A pivotal season that we will build into subsequent ones.
Eric Ly: Yet, that doesn't mean we're just sitting back, waiting for next year. We're working to elevate our core men's apparel business with a refined assortment, infusing it with industry-leading performance technologies and a more deliberate design direction.
Eric Ly: At the same time, we're sequencing investments in our footwear and women's businesses to reinvigorate consideration among two of our largest long-term growth opportunities.
Eric Ly: We're also shifting towards a head-to-toe approach across our largest categories by employing key franchises, trend-right styles, and innovations to underscore an always-on authenticity.
Kevin Plank: From Quick Hallway Talks to 2-3-hour meetings and presentations, we had transparent two-way conversations to gain perspective about how to take better care of our brand. These interactions have provided well-rounded insights into our strengths and areas of opportunity, such as being faster and bringing products to market, more intentional and committed storytelling for our launches, serving as a better business partner and driving deeper connections with athletes to ignite brand love. We have constant theme across these exchanges.
Eric Ly: Looking at the season ahead, Fall-Winter 24, we're going to see an uptick in our sportswear offering with more to and from wearing occasions for the 16- to 24-year-old varsity team sport athlete who we target.
Eric Ly: This includes the launch of high-performance streetwear in Unstoppable, versatile style and athletic performance in Meridian.
Eric Ly: Elevated Warm-Ups and Sport-Inspired Looks in our Icon Fleece Collection.
Eric Ly: infinite and phantom running launches and finally in basketball the Curry 12 along with a first signature shoe for D'Aaron Fox of the Sacramento Kings
Kevin Plank: Parallel to the spirit of many of our investor conversations is the optimism and under armors ability to deliver a premium positioning and a leash our full potential. In the product construct of good, better and best, we believe that UA can do business in all three, including as it relates to price, a unique characteristic of being an authentic sports podium brand. This is probably the most significant business advantage of being a sports house.
Eric Ly: Our next most significant effort is driving an improved demand creation ecosystem through compelling storytelling and aligned merchandising.
Eric Ly: We've begun to optimize our marketing organization, including efforts to clean up our messaging, particularly in North America.
Eric Ly: A great example is our use of performance marketing. Last year, when we sent an email to consumers, two-thirds of these messages were about discounts or promotions, and one-third were focused on full-price selling and storytelling.
Kevin Plank: And while we believe we can drive a more premium positioning, while not abandoning good level altogether. This range is one of the reasons I know we can attract a plus talent to join us in this next chapter. And this potential is evident. When we combine innovative products, outstanding design and thoughtful storytelling, we delight athletes for performance solutions they never knew they needed and now cannot imagine living without. This in conjunction with our strength and product team and feedback based on early sharing of our evolving product line architecture is encouraging. We aim to scale this more broadly across every product we make with renewed energy, story, clarity and alignment across the company.
Eric Ly: This year, that ratio is now inverted.
Eric Ly: which, although early, is showing signs of positive traction and perception.
Eric Ly: So, it's encouraging to imagine how a year's impact might improve our brand affinity.
Eric Ly: In addition to not simply leading on the retail floor or online with price, we will ensure that we are telling a story about the product advantages, with messaging focused on premium franchises and inspirational connections around key retail and sports moments.
Eric Ly: In North America, upcoming back-to-school activations highlight key franchises across team sports, apparel, footwear, and sportswear styles.
Kevin Plank: With that, I highlight each element of our protective house strategy, starting with building better products and storytelling. Central to the evolution of our product organization has been the re-architecture of leadership and structure over the past year. With justine society leading a talented experience team of apparel, footwear, innovation and design experts. By order of operations, product was the most immediate fix and frankly longest lead time UA needed to address. I'm very confident the work this team is executing, including a more centralized vision across product merchandise and marketing that will enable us to correct our past inconsistencies, always editing and innovating to drive our brand forward.
Speaker Change: The Elite 24 Basketball Showcase this coming weekend in New York City, and our All-America Volleyball and American Football events in Orlando in January , give us an excellent platform to connect even more deeply with young team sport athletes.
Speaker Change: In Asia-Pacific, Stephen Curry will be taking his first tour across China since 2019, this September . And we're generating brand heat through social media and activations, leading to millions of new followers and thousands of new member enrollments in just the first few days.
Eric Ly: With four major cities on tap, we look forward to September's tour and the energy it will bring to the Chinese market.
Kevin Plank: With new leadership also came new priorities and we're progressing well with our category portfolio re-alignment. This brings greater simplicity to the business and adds focus to our core sports categories, yielding much clearer roles and responsibilities for our product teams to identify and execute go-to-market plans that are ideally optimized for the highest quantitative and qualitative returns. As mentioned on our last call, our fall winter 25 season is when this team's efforts will begin to show up more robustly with new design language and improve balance between performance and style.
Speaker Change: In Europe , across EMEA, football has been a sharp point in driving brand affinity with youth and unlocking our sportswear consideration.
Eric Ly: Activations during critical sports moments, including the English Premier League, Champions League Final, and the Euro Championships.
Eric Ly: focused on our iconic heat gear compression apparel in the clone Magnetico boot featuring a young stable of UA athletes including Tony Rudiger of Real Madrid, Eddy and Ketia of Arsenal. We are very much in this conversation in European football.
Eric Ly: We're also increasing our investment in paid social media influencers.
Kevin Plank: A pivotal season that we will build into subsequent ones. Yet that doesn't mean we're just sitting back waiting for next year. We're working to elevate our core men's apparel business with refined assortment, infusing it with industry leading performance technologies in a more deliberate design direction. At the same time, we're sequencing investments in our footwear and women's businesses to reinvigorate consideration among two of our largest long-term growth offers, opportunities. We're also shifting towards a head-to-to approach across our largest categories by employing key franchises, trend-right styles, and innovations to underscore and always on authenticity.
Eric Ly: Over the next few years, we intend to double the number of influencers in our Creator Program to lean into fresh new content to drive reach and engagement.
Eric Ly: In line with this, we signed University of Miami Women's College basketball players Haley and Hannah Cavender to a multi-year partnership. This serves as a metaphor for tying together sport authenticity and influencer relevance. With nearly 7 million followers across Instagram and TikTok, it's great to welcome them to the brand.
Eric Ly: Another first quarter highlight was demonstrating staying on our front foot with collegiate assets, including extending our partnership with the University of Maryland to be the exclusive outfitter of athletics programs, including 19 varsity sports and universities club in intramural sports.
Kevin Plank: Looking at the season ahead, Fall Winter 24, we're going to see an uptick in our sports we're offering with more to-and-from-wearing occasions for the 16 to 24-year-old varsity team-sport athlete who we target. This includes the launch of high-performance streetwear and unstoppable, versatile style and athletic performance and meridian, elevated warm-ups and sport-inspired looks in our icon fleece collection, infinite and phantom running launches, and finally, in basketball, the Curry 12, along with the first signature shoe for de-air and fox of the Sacramento Kings.
Speaker Change: With now 7 Power 4 teams for UA, 85 Division 1 squads, and 350 Division 2 and Division 3 schools, our NCAA presence is a testament to Under Armour being a brand that athletes trust. A true sports house.
Speaker Change: We also announced our new partnership with USA Football as the official and exclusive uniform apparel and footwear provider, including the U.S. men's and women's national teams.
Kevin Plank: Our next most significant effort is driving improved demand creation ecosystem through compelling storytelling and aligned merchandising. We've begun to optimize our marketing organization, including efforts to clean up our messaging, particularly in North America. Great example is our use of performance marketing. Last year, when we sent an email to consumers, two-thirds of these messages were about discounts or promotions, and one-third were focused on full-price selling and storytelling. This year, that ratio is nowverted, which although early is showing signs of positive traction and perception, so it's encouraging to imagine how a year's impact might improve our brand affinity.
Eric Ly: This is also an excellent opportunity to have a front and center grassroots pathway to defining flag football across more than a million member athletes by integrating it into our existing UA Next platform.
Eric Ly: We're very excited about this, especially as it leads to flag football's debut at the 2028 Summer Olympics in Los Angeles, where UA will be the official outfitter for Team USA competing on the gridiron.
Eric Ly: And speaking of the Olympics, with more than 70 athletes from 26 countries across 28 sports representing UA, we've had a fantastic roster on the world's largest, most famous athletic stage.
Eric Ly: A few call-outs, of course, are Stephen Curry and Kelsey Plum on the U.S. men's and women's basketball teams.
Kevin Plank: In addition to not simply leading on the retail floor or online with price, we will ensure that we are telling a story about the product advantages, with messaging focused on premium franchises and inspirational connections around key retail and sports moments. In North America, upcoming back-to-school highlight key franchises across team sports, apparel, footwear and sportswear styles. The Elite 24 basketball showcase at this coming weekend in New York City, in our all-america volleyball and American football events in Orlando in January, give us an excellent platform to connect even more deeply with young team sport athletes.
Speaker Change: New York City Marathon winner Sharon Locati representing Kenya at her first games And Thurman Lopez, a key Spanish player, who's led his team to the final of the Olympic football tournament by scoring four goals and two assists in just five games
Speaker Change: Next up is our second strategic priority, running smart plays and our work to optimize our business to clean up unnecessary complexity.
Speaker Change: Meaning growth by constraint.
Speaker Change: Our approach here is simple. Test all existing rules to determine how to take advantage of all business dimensions more efficiently. Accordingly, no area is left unturned, and all systems, structures, and processes must have a clear and well-defined purpose and output and definition of success.
Kevin Plank: In Asia Pacific, Steffan Curry will be taking his first tour across China since 2019, this September. And we're generating brand heat through social media and activations, leading to millions of new followers and thousands of new member enrollments in just the first few days. With four major cities on tap, we look forward to September's tour and the energy will bring to the Chinese market. In Europe across the Mayah, football has been a sharp point in driving brand affinity with youth and unlocking our sportswear consideration.
Speaker Change: So a difficult decision, our restructuring program has given us a head start in streamlining the organization.
Speaker Change: During the quarter, we right-sized our workforce and are executing various transformational initiatives and advancing considerations around facilities, software, and other areas.
Speaker Change: As a result of some of this work, we've begun laying out projects to automate tasks in decision-making processes using both traditional and AI solutions to unlock data-driven insights and operational improvements. So, very promising for long-term efficiency gains.
Kevin Plank: Activations during critical sports moments, including the English Premier League, Champions League Final, and the Euro Championships, focused on our iconic key-care compression apparel and the clone magnetico boot featuring a young stable of U.A, athletes including Tony Rutiger of Real Madrid, Eddie and Ketia of Arsenal. We're very much in this conversation in European football. We're also increasing our investment and paid social media influencers. Over the next few years, we intended double the number of influencers in our creator program to lean into fresh new content to drive reach and engagement.
Speaker Change: An output of complexity led to the creation of, frankly, too many products that, without proper segmentation and marketplace differentiation, have challenged brand affinity.
Speaker Change: In this respect, I've tasked our team with achieving a 25% SKU reduction over the next 18 months.
Speaker Change: And we're making solid progress toward this objective.
Speaker Change: This is not, however, a blanket strategy across our good that are best construct.
Speaker Change: Nor does it apply to all categories equally. We're being surgical in this effort, distorting toward areas of opportunity with the highest returns, both financially and strategically, from a brand-building perspective, and purposely over-indexing towards better and best-level products as we elevate our brand positioning.
Kevin Plank: In line with this, we sign Universe Miami Women's College basketball players, Haley and Hannah Cavendr to a multi-year partnership. This serves as a metaphor for trying to get a sport authenticity and influencer relevance. With nearly 7 million followers across Instagram and TikTok, it's great to welcome them to the brand. Another first quarter highlight was demonstrating staying on our front-foot with collegiate assets, including extending our partnership with the University of Maryland to be the exclusive outfitter of athletics program, including 19 varsity sports and university's club and intramural sports.
Speaker Change: We're also working to become smarter and more efficient by modernizing our supply chain with two primary objectives.
Speaker Change: Improving our end-to-end planning and cross-channel capabilities, led by Chief Supply Chain Officer Sean Curran, our end-to-end planning work spans multiple disciplines, aiming to enhance our ability to plan better and protect our consumers' needs, to optimize our assortments and manage inventory across regions, channels, and retail doors.
Speaker Change: We've also started a multi-year distribution logistics modernization initiative to enable cross-channel capabilities to optimize cost, maximize speed, ensure inventory availability, and increase service levels across our DTC and wholesale businesses.
Kevin Plank: We also announced our new partnership with USA Football, the official exclusive uniform apparel and footwear provider, including the US men's and women's national teams. This is also an excellent opportunity to have a front and center grassroots pathway to the finding flag football across more than a million member athletes by integrating it into our existing UA next platform. We're very excited about this, especially as it leads to flag football's debut at the 2028 Summer Olympics in Los Angeles, where UA will be the official outfitter for Team USA competing on the gridiron.
Speaker Change: That takes us to our third priority, Elevating Consumer Experiences, where we're focused on driving excellence across our direct consumer and wholesale businesses.
Speaker Change: In DTC, the first quarter marked the beginning of our journey to elevate our North American e-commerce business toward a more significant and premium consideration. As expected, our e-commerce revenue was down, driven by roughly a third fewer promotional days than last year. However, positively, it was a positive year.
Speaker Change: The percentage of full-price sales in our digital channel rose significantly, along with a reduced mix of outlet and clearance sales. So although still in the early days of this strategy, we're optimistic about initial performance metrics, which include higher average order values.
Kevin Plank: And speaking of the Olympics, with more than 70 athletes from 26 countries across 28 sports representing UA, we've had a fantastic roster on the world's largest, most famous athletic stage. A few callouts, of course, are Stephen Curry and Kelsey Plum on the US men's and women's basketball teams. New York City Marathon winner Sharon Locati representing Kenya at our first games. And Furman Lopez, a key Spanish player, who's led his team to the final of the Olympic football tournament by scoring four goals and two assists in just five games.
Speaker Change: Regarding physical retail, we're focused on delivering service excellence and identifying areas to improve, upselling, repeat business, and profitability.
Speaker Change: To support this, we're testing a new full-price brand house concept and are pleased with the initial results. Seeing an improvement in productivity and revenue per visitor.
Speaker Change: With cleaner sight lines and more curated product assortment, including nearly 50% fewer skews, and an evolved in-store presentation, athletes can more easily see and feel the power of the Under Armour brand.
Kevin Plank: Next up is our second strategic priority, running smart plays and are worked to optimize our business to clean up unnecessary complexity. Meaning growth by constraint, our approach here is simple, test all existing rules to determine how to take advantage of all business dimensions more efficiently. Accordingly, no areas left unturned and all system structures and processes must have a clearer and well-defined purpose and output and definition of success. So a difficult decision or restructuring program has given us a head start in streamlining the organization.
Speaker Change: All of this will come together even more beautifully later this year as we open our new flagship store at our new headquarters here in Baltimore before the end of December .
Speaker Change: In our factory house outlets, we're digging in to optimize this business better, especially in North America, which is critical to balancing future revenue and margin opportunities.
Speaker Change: During the quarter, we initiated trials with mixed results as we dialed various promotional levels up and down to assess volume and ASP impacts, and excellent test and learn as we solidify our go-forward strategies.
Kevin Plank: During the quarter we right sized our workforce and are executing various transformational initiatives and advancing considerations around facilities, software and other areas. As a result of some of this work, we've begun laying out projects to automate tasks and decision making processes using both traditional and AI solutions to unlock data driven insights and operational improvements. So very promising for long-term efficiency gains. An output of complexity led to the creation of frankly too many products that without proper segmentation and marketplace differentiation have challenged brand affinity.
Speaker Change: We're also working to change our assortment and segmentation, including less made-for-outlet products, SKU reductions, elevated visual presentations, and full-price selling.
Speaker Change: All geared at harnessing this platform more effectively to generate capital for other parts of our business.
Speaker Change: Our loyalty program is also giving us an added boost in realizing improved long-term growth, profitability, and higher brand engagement.
Speaker Change: With less than a year under our belts in North America, UA Rewards has grown quickly, and its performance has been a positive contributor.
Kevin Plank: In this respect, I've tasked our team with achieving a 25% skewer reduction over the next 18 months and we're making solid progress toward the subjective. This is not however a blanket strategy across our good that our best construct. In order to apply to all categories equally, we're being surgical in this effort, distorting toward areas of opportunity with the highest returns, both financially and strategically from a brand-building perspective and purposely over-indexing towards better and best level products as we elevate our brand position.
Speaker Change: The program has nearly 5 million members and is growing month by month.
Speaker Change: It's exciting, too, that about half of recent enrollments are new to the brand. This is an excellent sign of expanding our reach with unique visitors.
Speaker Change: Further, nearly 60% of our North American DTC revenue comes from UA Reward members.
Speaker Change: And we're showing roughly 50% higher revenue per consumer, along with a three-fold increase in the 90-day repurchase rate compared to non-members, so very encouraging for the long term.
Speaker Change: Now shifting to wholesale.
Kevin Plank: We're also working to become smarter, more efficient by modernizing our supply chain with two primary objectives, improving our end-to-end planning and cross-channel capabilities led by Chief Supply Chain Officer Sean Kern, our end-to-end planning work spans multiple disciplines, aiming to enhance our ability to plan better and protect our consumer's needs to optimize our assortments and manage inventory across regions, channels, and retail doors. We've also started a multi-year distribution logistics modernization initiative to enable cross-channel capabilities to optimize cost, maximize speed, ensure inventory availability and increased service levels across our DTC and wholesale businesses.
Speaker Change: Following meetings with key global retail partners, I'm happy to report that they are encouraged by our progress and optimistic about the potential of our strategy.
Speaker Change: As mentioned, it will take time for the Wholesale Channel to inflect. We must allow for improved storytelling to take shape.
Speaker Change: In the interim, we're changing the script on what it means to be a UA partner and are committed to strengthening our crucial...
Speaker Change: account relationships in each distribution tier. In addition to working out improved segmentation with our current mix of products, we're partnering on better integrated planning and joint marketing opportunities.
Speaker Change: In closing.
Speaker Change: Though early in our journey to reconstitute Under Armour's brand strength, we're making tangible progress in building a more premium product offering. We're running smarter plays by tightening up our SG&A, reducing SKUs and materials, and beginning to elevate consumer shopping experiences.
Kevin Plank: That takes us to our third priority, elevating consumer experiences, where we're focused on driving excellence across our direct consumer and wholesale businesses. In DTC, the first quarter marked the beginning of our journey to elevate our North American e-commerce business toward a more significant and premium consideration. As expected, our e-commerce revenue was down, driven by roughly a third fewer promotional days than last year. However, positively, the percentage of full-price sales in our digital channel rose significantly, along with the reduced mix of outlet and clearance sales.
Speaker Change: Amid the early progress we're making and air coming on board to fill a critical missing piece of our puzzle through the marketing lens.
Speaker Change: We'll continue to empower and evolve our culture to reduce complexity and be more deliberate in everything we do.
Speaker Change: I have every confidence that our improving level of execution will result in a better presentation of the Under Armour brand.
Kevin Plank: Although still the early days of this strategy were optimistic about initial performance metrics, which include higher average order values. Regarding physical retail, we're focused on delivering service excellence and identifying areas to improve, upselling, repeat business, and profitability. To support this, we're testing a new full-price brand-house concept and are pleased with the initial results, seeing an improvement in productivity and revenue per visitor. With cleaner sight lines and more curated product absorbent, including nearly 50% fewer skews, and an evolved in-store presentation, athletes can more easily see and feel the power of the underarmour brand.
Speaker Change: through building this sports house.
Speaker Change: There's much to do, but we're undeniably back on offense.
Speaker Change: With that, I'll hand it over to Dave for more details on the results and outlook. Dave? Thanks, Kevin. Starting right in with the results of our first quarter of fiscal 2025, which came in better than our outlook.
Dave: Revenue was down 10% to $1.2 billion, with a 14% decline in North America due to softer full-price wholesale demand and lower sales to the off-price channel.
Dave: Our DTC business was also down during the quarter, driven mainly by a decline in our e-commerce business resulting from proactive strategies to reduce promotional activity and a decline in our retail store sales.
Kevin Plank: All of this will come together even more beautifully later this year, as we open our new flagship store at our new headquarters here in Baltimore, before the end of December. In our factory house outlets, we're digging in to optimize this business better, especially in North America, which is critical to balancing future revenue and margin opportunities. During the quarter, we initiated trials with mixed results as we dialed various promotional levels up and down to assess volume and ASP impacts, an excellent test and learn as we solidify our go-forward strategies.
Dave: Revenue in EMEA was flat on a reported and currency-neutral basis, with strength in our DTC business partially offset by a slight decline in wholesale.
Dave: APAC revenue was down 10% or down 7% on a currency-neutral basis, driven by declines in our wholesale and DTC businesses amid a softening macro that impacted consumer traffic and a highly competitive and promotional environment in the region.
Kevin Plank: We're also working to change our sortment and segmentation, including less made-for-outlet products, skewer reductions, elevated visual presentations, and full-price selling. All geared at harnessing this platform more effectively to generate capital for other parts of our business. Our loyalty program is also giving us an added boost in realizing improved long-term growth, profitability and higher brand engagement. With less than a year under our belts in North America, U.A. Rewards has grown quickly, and its performance has been a positive contributor.
Dave: In Latin America, revenue was up 16%, or up 12% on a currency-neutral basis, with solid growth among regional distributors.
Dave: From a channel perspective, first quarter wholesale revenue was down 8%, driven by softer demand in our full price and distributor businesses, along with lower sales to the off-price channel.
Dave: Direct-to-consumer revenue declined 12%, with a 25% decline in e-commerce as we work to evolve this channel to a more premium positioning via lower promotions and discounts.
Kevin Plank: The program has nearly five million members and is growing month by month. It's exciting too that about half of recent enrollments are new to the brand. This is an excellent sign of expanding our reach with unique visitors. Further, nearly 60% of our North American DTC revenue comes from U.A. Reward members, and we're showing roughly 50% higher revenue per consumer, along with a three-fold increase in the 90-day repurchase rate compared to non-members, so very encouraging for the long-term.
Dave: and sales from our own and operator retail stores were down 3%.
Dave: Licensing was down 14% due to declines in our North American and Japanese businesses.
Dave: By product type.
Dave: Apparel revenue was down 8% with declines across most categories, partially offset by relative strength in golf.
Dave: Footwear was down 15% with declines across most categories, partially offset by relative strength in outdoor and golf.
Kevin Plank: Now, shifting to wholesale. Following meetings with key global retail partners, I'm happy to report that they are encouraged by our progress and optimistic about the potential of our strategy. As mentioned, it will take time for the wholesale channel to inflect, we must allow for improved storytelling to take shape. In the interim, we're changing the script on what it means to be a UA partner, and are committed to strengthening our crucial account relationships in each distribution tier. In addition to working out improved segmentation with our current mix of products, we're partnering on better integrated planning and joint marketing opportunities.
Dave: And our accessories business was down 5%.
Dave: Our first quarter gross margin was up 110 basis points to 47.5%.
Dave: This increase was driven by 170 basis points of pricing benefits due to lower levels of discounting and promotions, mainly in our direct-to-consumer business, because of our actions to drive a more premium positioning of our brand.
Dave: and 40 basis points of supply chain benefits related to lower product costs and lower inventory reserves, partially driven by our first quarter overdrive.
Kevin Plank: In closing, though early in our journey to reconstitute Under Armour's brand strength, we're making tangible progress and building a more premium product offering. We're running smarter plays by tightening up our SGNA, reducing skews and materials, and beginning to elevate consumer shopping experiences. Amid the early progress we're making and air coming on board to fill a critical missing piece of our puzzle through the marketing lens, we'll continue to empower and evolve our culture to reduce complexity and be more deliberate in everything we do. I have every confidence that our improving level of execution will result in a better presentation of the Under Armour brand through building this sports house.
Dave: These benefits were partially offset by 60 basis points of headwinds from unfavorable regional and channel mix shifts and 50 basis points of unfavorable foreign currency impacts.
Dave: Our first quarter gross margin outperformance relative to the outlook we gave in May was due to three main factors.
Dave: First, we were even less promotional than planned in our DTC business, as we started to test strategies for also reducing promotional activity in our factory house outlet stores, including less depth and discounts, which was not contemplated in our prior outlet.
Dave: Second, inventory reserve needs were lower than planned, given a lower inventory balance and healthier overall composition.
Kevin Plank: There's much to do, but we're undeniably back on offense.
Dave: Third, we had some additional trailing benefits from year-over-year freight cost improvements compared to what was anticipated in our prior outlook.
Dave Bergman: With that, I'll hand it over to Dave for more details on the results and outlook. Thanks, Kevin.
Dave Bergman: Starting right in with the results, our first quarter of physical 2025, which came in better than our outlook. Revenue was down 10% to 1.2 billion, with a 14% decline in North America due to softer full price wholesale demand and lower sales to the off-priced channel. Our DTC business was also down during the quarter driven by mainly by a decline in our e-commerce business resulting from proactive strategies to reduce promotional activity and a decline in our retail store sales.
Dave: Moving down the P&L, our SG&A expenses increased 42% to $837 million in the first quarter.
Dave: Excluding a litigation reserve, net of an insurance receivable, and transformation expenses, adjusted SG&A expenses were down 6% to $555 million.
Dave: This was mainly due to ongoing cost management actions, including headcount reductions and lower marketing expenses for the quarter.
Dave Bergman: Revenue in a Mayo was flat on a reported and currency neutral basis with strength in our DTC business partially offset by a slight decline in wholesale. A pack revenue was down 10% or down 7% on a currency neutral basis driven by declines in our wholesale and DTC businesses amid a softening macro that impacted consumer traffic and a highly competitive and promotional environment in the region. In Latin America, revenue was up 16% or up 12% on a currency neutral basis with solid growth among regional distributors.
Dave: During the quarter, we recognized $25 million of restructuring charges and incurred $9 million of transformational expenses booked in SG&A.
Dave: We have now realized $34 million of the estimated $70 to $90 million in anticipated charges and expenses under our existing plan.
Dave: Bringing this together, we had an operating loss of $300 million, or excluding the litigation reserve, transformation expenses, and restructuring charges, our adjusted operating income was $8 million.
Dave: On the bottom line, we realized a diluted loss per share of $0.70.
Dave Bergman: From a channel perspective, first quarter wholesale revenue was down 8%, driven by softer demand in our full price and distributor businesses along with lower sales to the off-priced channel. Direct consumer revenue declined 12%, with a 25% decline in e-commerce as we work to evolve this channel to a more premium positioning via lower promotions and discounts. And sales from our own and operator retail stores were down 3%. Licensing was down 14% due to declines in our North American and Japanese businesses.
Dave: or an adjusted diluted earnings per share of one cent.
Dave: These results were ahead of our outlook due to our revenue and gross margin overdrive and better SG&A expense control.
Dave: From a balance sheet perspective, inventory was down 15% compared to last year, which was ahead of our expectations due to our revenue outperformance and effective inventory management.
Dave: We continue to expect that our year-end inventory will be in line with Fiscal 24.
Dave: At the end of the quarter, after paying down the remaining $81 million outstanding balance of our convertible senior notes,
Dave Bergman: By product type, a parallel revenue was down 8% with declines across most categories partially offset by relative strength in golf. Footwear was down 15% with declines across most categories, partially offset by relative strength in outdoor and golf. And our accessories business was down 5%.
Dave: and purchasing $40 million of Class C common stock, which retired 5.9 million shares, we had no borrowings under our $1.1 billion revolving credit facility, and a strong cash position of $885 million.
Dave Bergman: Our first quarter gross margin was up 110 basis points to 47.5%. This increase was driven by 170 basis points of pricing benefits due to lower levels of discounting and promotions, mainly in our direct consumer business because of our actions to drive a more premium positioning of our brand. And 40 basis points of supply chain benefits related to lower product costs and lower inventory reserves, partially driven by our first quarter overdrive. These benefits were partially offset by 60 basis points of headwinds from unfavorable regional and channel mix shifts and 50 basis points of unfavorable foreign currency impacts.
Dave: Shifting next to our Fiscal 25 Outlook.
Dave: Our expectation that full-year revenue will decline at a low double-digit percentage rate has not changed.
Dave: In summary, we exceeded our expectations in North America during the first quarter, and thus we are modestly improving our full year expectation for the region to now be down 14 to 16 percent.
Dave: However, the North American improvement in our full-year forecast is expected to be offset by increasing market pressures in APAC for the balance of the year.
Dave: Next, we expect a low single-digit percentage decline in our international business.
Dave: Within that, I'd like to give some regional color given the divergence in recent results between APAC and EMEA, and thus balance of year expectations.
Dave Bergman: Our first quarter gross margin out performance relative to the outlook we gave in May was due to three main factors. First, we were even less promotional than planned in our DTC business as we started the test strategies for also reducing promotion activity in our factory house outlet stores, including less depth and discounts, which was not contemplated in our prior outlook. Second, inventory reserve needs were lower than planned, given a lower inventory balance and healthier overall composition. Third, we had some additional trailing benefits from year-over-year freight cost improvements compared to what was anticipated in our prior outlook.
Dave: For Fiscal 25, we expect revenue in EMEA to be a flat as we continue to protect the brand strength we've built in the region amid an uncertain macro environment.
Dave: In APAC, we anticipate revenue will be down at a high single-digit percentage rate, reflecting lower consumer demand and traffic trends.
Dave: Moving to gross margin, although we saw a significant better than anticipated result in our first quarter, our expectation for a 75 to 100 basis point improvement for the full year has not changed.
Dave: There are three main reasons for this Q1 overdrive not passing through to the full year. First, emerging ocean freight costs headwinds.
Dave Bergman: Moving down the P&L, our SGN expenses increased 42% to 837 million in the first quarter. Excluding a litigation reserve, net of and insurance receivable and transformation expenses, adjusted SGNA expenses were down 6% to 555 million. This was mainly due to ongoing cost management actions, including headcount reductions and lower marketing expenses for the quarter. During the quarter, we recognized 25 million of restructuring charges and incurred 9 million of transformational expenses booked in SGNA. We have now realized 34 million of the estimated 70 to 90 million in anticipated charges and expenses under our existing plan.
Dave: Second, developing negative impacts from changes in foreign currency. And third, a more unfavorable channel mix due to lower licensing sales and challenged margins in the off-price channel.
Dave: Relative to SG&A, excluding the litigation reserve expense and the midpoint of total estimated charges and related expenses of our restructuring plan, adjusted SG&A is expected to decline at a low to mid single-digit percentage rate.
Dave: This includes anticipated savings of approximately $40 million in FY25 from restructuring actions this year.
Dave: Adjusted operating income is now anticipated to reach $140 to $160 million, up $10 million from our prior outlook.
Dave Bergman: Bringing this together, we had an operating loss of 300 million, or excluding the litigation reserve transformation expenses and restructuring charges, our adjusted operating income was 8 million. On the bottom line, we realized a diluted loss per share of 70 cents, or an adjusted diluted earnings per share of 1 cent. These results were ahead of our outlook due to our revenue and gross margin overdrive and better SGNA expense control.
Dave: An adjusted diluted earnings per share is expected to be $0.19 to $0.22.
Dave: Next, I'd like to give some color on our expectations for our second quarter, Fiscal 25, starting with revenue.
Dave: which we expect to be down approximately 12% compared to the prior year.
Dave: This decline assumes continued wholesale softness and proactive strategies to reduce promotional activities in our DTC business, particularly in North American e-commerce.
Dave Bergman: From a balance sheet perspective, inventory was down 15% compared to last year, which ahead of our expectations due to our revenue outperformance and effective inventory management. We continue to expect that our year end inventory will be in line with fiscal 24.
Dave: Second quarter gross margin is anticipated to be up 20 to 30 basis points due to benefits from lower product costing and less DTC discounting, partially offset by more expensive ocean freight and unfavorable foreign currency impacts.
Dave Bergman: At the end of the quarter, after paying down the remaining 81 million outstanding balance of our convertible senior notes and purchasing 40 million of class C common stock, which retired 5.9 million shares, we had no borrowings under our 1.1 billion revolving credit facility and a strong cash position of 885 million. Shifting next to our fiscal 25 outlook, our expectation that full-year revenue will decline at a low double-digit percentage rate has not changed.
Dave: Adjusted SG&A is expected to decline at a high single-digit rate in the second quarter, partially driven by approximately 4 to 5 percentage points from an anticipated insurance recovery related to litigation expenses paid in prior periods.
Dave: Additionally, this decline includes lower expenses related to headcount reductions and a shift in the timing of marketing expenses, which will be considerably higher in our third quarter.
Dave: This takes us to an expected second quarter adjusted operating income of $110-$120 million.
Dave Bergman: In summary, we exceeded our expectations in North America during the first quarter, and thus we are modestly improving our full-year expectation for the region to now be down 14 to 16 percent. However, the North American improvement in our full-year forecast is expected to be offset by increasing market pressures in APAC for the balance of the year. Next, we expect a low single-digit percentage decline in our international business.
Dave: and an $0.18 to $0.20 of adjusted diluted earnings per share.
Dave: Finally, some color on how we expect our cash to evolve in Fiscal 25.
Dave: After funding our legal settlement payment in the second quarter with cash on hand and our expected cash flow generation in fiscal 25, we expect to end the year with approximately $500 million in cash and no borrowings outstanding on our $1.1 billion revolver.
Dave Bergman: Within that, I'd like to give some regional color given a divergence in recent results between APAC and AMAIA and thus balance of year expectations. For fiscal 25, we expect revenue in AMAIA to be a flat, as we continue to protect the brand strength we've built in the region amid an uncertain macro-environment. In APAC, we anticipate revenue will be down at a high single-digit percentage rate, reflecting lower consumer demand and traffic trends.
Speaker Change: Now, to close out today's prepared remarks, I'd underscore that we are encouraged by the early progress we're making to reconstitute the Under Armour brand and are tracking well against our strategies.
Dave: With a leadership team and culture that gets more decisive quarter by quarter, we will continue to test and learn as we optimize our protective health strategy. And we are confident in our ability to establish the premium positioning we know the Under Armour brand deserves.
Dave Bergman: Moving to Gross Margin, although we saw a significant better than anticipated result in our first quarter, our expectation for a 75 to 100 basis point improvement for the full-year has not changed. There are three main reasons for this Q-1 overdrive not passing through to the full-year. First, emerging ocean freight cost headwinds. Second, developing negative impacts from changes in foreign currency. And third, a more unfavorable channel mix through the lower licensing sales and challenge margins in the off-priced channel.
Dave: and set a higher quality revenue base that leads to improved sustainable growth and profitability over the long term.
Speaker Change: With that, we'll open it up for questions. Operator?
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question, you may press star then 1 on your telephone keypad.
Speaker Change: If using a speakerphone, please pick up your headset before pressing the keys.
Speaker Change: To withdraw your question, please press star then 2.
Speaker Change: At this time, we'll pause momentarily to assemble our roster.
Dave Bergman: Relative to S-GNA, excluding the litigation reserve expense and the midpoint of total estimated charges and related expenses of our restructuring plan, adjusted S-GNA is expected to decline at a low to mid-single-digit percentage rate. This includes anticipated savings of approximately 40 million in fiscal 25 from restructuring actions this year.
Speaker Change: Our first question will come from Jay Sole with UBS. You may now go ahead.
Jay Sole: Great, thank you so much. Kevin, it's clear you see some good progress happening in the business. Can you just tell us about what gives you confidence in the company's ability to deliver on the sales growth guidance that's implied in the guidance for the second half of the year and what you see happening there? Thank you so much.
Dave Bergman: Adjusted operating income is now anticipated to reach 140 to 160 million, up 10 million from our prior outlook. And adjusted diluted earnings per share is expected to be 19 to 22 cents.
Kevin Plant: Yeah, thanks, Cher. I believe that we're...
Kevin Plant: I think we've got a really healthy...
Kevin Plant: view of the business right now. I think that, you know, what we did on the last call is we put ourselves in a position to make the best decisions for the brand.
Dave Bergman: Next, I'd like to give some color on our expectations for our second quarter, fiscal 25, starting with revenue, which we expect to be down approximately 12 percent compared to the prior year. This decline assumes continued wholesale softness and proactive strategies to reduce promotional activities in our DTC business, particularly in North American e-commerce. Second, quarter gross margin is anticipated to be up 20 to 30 basis points due to benefits from lower product costing and less DTC discounting, partially offset by more expensive ocean freight and unfavorable foreign currency impacts.
Speaker Change: You know, I've introduced this term sports house that we took to our partners and frankly to our team and anyone around this business of just understanding of sort of getting lost up in the moment of the day. We recognize where we are. We're not crazy about it, but we're also doing something to change, I think, the weather.
Kevin Plant: And so the effect that we're having, I think, is, number one, just slowly, prudently putting the best team together, which is everything, I think.
Speaker Change: really getting after our strategy, which is something that, you know, I don't think it's been off. I think it's been a matter of execution. And so making sure that our team is super clear on what the objectives are and what the definition of success is. And so
Dave Bergman: Adjusted S-GNA is expected to decline at a high single-digit rate in the second quarter, partially driven by approximately 4 to 5 percentage points from an anticipated insurance recovery related to litigation expenses paid in prior periods. Aditionally, this decline includes lower expenses related to headcount reductions and a shift in the timing of marketing expenses, which will be considerably higher in our third quarter.
Speaker Change: The addition of the ability to attract A-plus talent like bringing Eric on board is probably a great proof positive that we're heading in the right direction with that.
Speaker Change: So, I feel good and, you know, I think there's a lot of macro things that are going on right now that may affect what or where we are in the world.
Speaker Change: But, you know, we've got our head down and, you know, there's certainly no...
Speaker Change: There's not a lot of high fives yet, but there's definitely a growing sense of, in terms of what we've accomplished to date, there's definitely a sense of what's coming and we're very proud of that.
Dave Bergman: This takes us to an expected second quarter adjusted operating income of 110 to 120 million, and an 18 to 20 cents of adjusted deluded earnings per share.
Speaker Change: Got it. Okay, thank you so much.
Speaker Change: Our next question will come from Bob Drubal with Guggenheim. You may now go ahead.
Dave Bergman: Finally, some color on how we expect our cash to evolve in fiscal 25. After funding our legal settlement payment in the second quarter with cash on hand, and our expected cash flow generation in fiscal 25, we expect to end the year with approximately 500 million in cash and no borrowings outstanding on our 1.1 billion revolver.
Bob Drubal: Good morning. Just a couple of questions for me. The first one, Kevin, on the business overall, you seem to have a sharper direction in product.
Bob Drubal: Can you comment a little more on the evolution of your marketing, how long until you feel more confident about that? And then when you think about the brand marketing, what's working, what's not working? Where do you think you can do a better job and what does Eric bring to the table on that? Thanks.
Dave Bergman: Now, to close out today's prepared remarks, I'd underscore that we are encouraged by the early progress we're making to reconstitute the Under Armour brand and are tracking well against our strategies. With a leadership team and culture that gets more decisive quarter by quarter, we will continue to test and learn as we optimize or protect this health strategy.
Speaker Change: Thank you. On the last call, I think we did a good job laying out the importance of product, story, and region, and those three things working. We've also done a good job as part of the presentation that we took.
Dave Bergman: And we are confident in our ability to establish the premium positioning we know the Under Armour brand deserves and set a higher quality revenue base that leads to improved sustainable growth and profitability over the long term.
Speaker Change: you know, really around the world to our key partners and...
Bob Drubal: teammates, etc. And, you know, we told them that what's critical for Under Armour to do is to make sure that, you know, we're bringing in a talent. And I think if you look at, you know, the way that this table has evolved, the executive leadership team table has evolved, you know, over the last, frankly, you know, eight to ten months.
Operator: With that, we'll open it up for questions. Operator? We will now begin the question and answer session. To ask a question, you make a start in one on your telephone keypad. If using a speaker phone, please pick up your hands up before pressing Q. To a start a question, please post start in two.
Bob Drubal: It's pretty significant.
Bob Drubal: And product was a metaphor that I used to describe is where we brought in some A-plus talent between John Barbados, Yaron White, and of course, Yassine, who's heading that function up. But what makes them so powerful is the fact that they're joining a team of leaders of.
Operator: At this time, we'll pause momentarily to assemble a roster.
Speaker Change: of partners that we already have here in the business. Dan Leraire is 13 years, Kyle Blakely, 15 years, Jeanette Robertson, who's another dozen years at UA. We just have this, a real depth, I think, of talent. So I feel the same way of the impetus of someone like an Eric joining our business.
Jay Sole: Our first question will come from Jay Sol with UBS. You may now go ahead. Great. Thank you so much. Kevin, it's clear you see some good progress happening in the business. Can you just tell us about what gives you confidence in the company's ability to deliver on the sales growth guidance that's implied in the guidance for the second half of the year and what you see happening there? Thank you so much.
Speaker Change: of being able to balance out that Troika product story and region.
Speaker Change: of what we can do from a storytelling standpoint.
Speaker Change: Obviously, the biggest need, and I'll come back to marketing in a second, the biggest need that we have is...
Jay Sole: Yeah, thanks, Jay. I believe that we're... I think we've got a really healthy view of the business right now. I think that what we did on the last call, we put ourselves in a position to make the best decisions for the brand. I've introduced this term sports house that we took to our partners and frankly to our team and anyone around this business of just understanding of sort of getting lost up in the moment of the day.
Speaker Change: You know, we need to be aggressive in North America, and I just want to go back to people and...
Speaker Change: being able to reference a partner that I have and someone like Cara Trent who's leading their force and so
Speaker Change: There's definitely a new mix but it's something which I think is a formula so we're just
Speaker Change: We're stabilizing the business. We're being consistent with the strategy right now.
Speaker Change: and, frankly, after, you know, a very...
Jay Sole: We recognize where we are. We're not crazy about it, but we're also doing something to change, I think, the weather. And so the effect that we're having, I think, is number one, just slowly, prudently putting the best team together, which is everything. I think really getting after our strategy, which is something that, you know, I don't think it's been off. I think it's been a matter of execution. And so making sure that our team is super clear on what the objectives are and what the definition of success is.
Speaker Change: Probably too long of a time, an extended period of time, of the ability to bring in, you know, a professional like Eric.
Speaker Change: You know, my priorities when...
Speaker Change: You know, getting Eric here was number one, just landing the plane with someone who was...
Speaker Change: You know, such a terrific A-plus talent from the industry, but it was also thinking about how we could get them horizontal as quickly as possible. And so that's why the role of marketing is something that will really I think is the unlock for the brand. The terrific products are important, but I do feel like we're a company that's been...
Jay Sole: And so, you know, the addition of the ability to attract A-plus talent like bringing Eric on board is probably a great proof positive that we're, you know, heading in the right direction with that. So I feel good. And, you know, I think there's a lot of macro things that are going on right now that may affect what are where we are in the world. But, you know, we've got our head down.
Speaker Change: You know, left more to just selling on the logo and a price tag next to it versus articulating the actual depth of story that we have available, you know, about each incredible product that we build. So, you know, we're a company that's spent.
Speaker Change: You know, half a billion dollars, we'll be spending half a billion dollars in marketing, you know, just last year and this year, and I'm not sure that that's felt, and so there's a tremendous opportunity for us to go attack our 16 to 24-year-old varsity athlete consumer and do it in a very authentic way. We spent a lot of time just focused on the gym, and while that's important,
Jay Sole: And, you know, there's certainly no... There's not a lot of high fives yet, but there's definitely a growing sense of.., in terms of what we've accomplished to date. But there's definitely a sense of what's coming and we're very proud of that. God, okay, thank you so much.
Jay Sole: Thank you, Jay.
Speaker Change: We want to be focused on the field. We want to articulate our story through that voice and the products that will come from it. It's not just the time where these athletes are on the field either, but it's really focusing on the to and from and what sportswear can mean for us.
Bob Drubel: Our next question will come from Bob Drubel with Couguin Heine. You may now go ahead. Good morning. Just a couple of questions for me. The first one, Kevin, on the business overall, you seem to have a sharper direction in product. Can you comment a little more on the evolution of your marketing? How long until you feel more confident about that? And then, when you think about the brand marketing, what's working? What's not working?
Speaker Change: I believe the opportunity for UA is different in sportswear than maybe it is for other brands, but the way that we're going to convey that story is going to be a little bit different. We're going to do it through the authenticity that we have on the field, court, and pitch.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Simeon Siegel with BMO Capital Markets. You may now go ahead.
Bob Drubel: Where do you think you can do a better job and what does Eric bring to the table on that? Thanks. Thank you. On the last call, I think we did a good job laying out the importance of product story and region and those three things working. We've also done a good job as part of the presentation that we took really around the world to our key partners and teammates, etc. And we told them that what's critical for Under Armour to do is to make sure that we're bringing in aid talent.
Speaker Change: Thanks everyone. Good morning. Hope you're having a nice summer.
Speaker Change: So, Kevin, nice to see the first step in the brand re-elevation. Just when you think through the North America resets and that 25% skew reduction you mentioned, could you elaborate a little bit more on how that plays in terms of reducing specific categories, specific sports, retail partners, price points? Just you alluded to it, but maybe any more thoughts on how you're going to approach that would be helpful. And just as you think about that reduction.
Speaker Change: How are you thinking about units versus price expectations within the Revenue Guide? Thank you.
Bob Drubel: And I think if you look at the way that this table has evolved, the executive leadership team table has evolved over the last, frankly, eight to ten months, it's pretty significant. And product was a metaphor that I used to describe as where we brought in some A-plus talent between John Barbados, you're on white, and of course you're seeing who's heading that function up. But what makes them so powerful is the fact that they're joining a team of leaders of partners that we already have here in the business of Dan LaRera's 13 years, Kyle Blakely 15 years, Jeanette Robertson who's another dozen years at UA.
Speaker Change: Yeah, thanks, I mean.
Speaker Change: I think we're going to be, you know, really thoughtful. As I said in my prepared remarks, you know, this isn't going to be...
Speaker Change: Just one fell swoop. We're going to be thoughtful, we're going to be...
Speaker Change: Strategic and Surgical, where we decide to make...
Speaker Change: But frankly, the idea of the 25% SKU reduction, it's as much of a metaphor for the organization today as there's not a person in the world who doesn't feel like they've got too much on their plate. So the ability to remove 25% of the work...
Speaker Change: is an ambition for the team. And with that, you're reducing everything from factory visits to you know, lab dip approvals and all the other work and basis that comes with it. But you know, as we've said, you know, to be an Under Armour product,
Bob Drubel: We just have this a real depth, I think, of talent. So I feel the same way of the impetus of someone like an Eric joining our business of being able to balance out that Troyco product story and region of what we can do from a storytelling standpoint. And obviously the biggest need, and I'll come back to marketing in a second, the biggest need that we have is we need to be aggressive in North America.
Speaker Change: That's got to be a process and that has to be something which has to be vetted and gone through in a way which is it needs to be special. It can't just be another t-shirt or you know another shoe. It needs to be a true piece of performance product.
Speaker Change: that actually helps make you better. What we haven't done is we haven't done a good enough job, I believe, you know, communicating that and so ensuring that as we say in our vision statement, we provide you with performance products you never knew you needed and once you try them can't imagine living without, feels like the, you know, an opportunity that we need to get behind. Alright, so.
Bob Drubel: And I just want to go back to people and being able to reference a partner that I have in someone like Cara Trent, who's leading their force. And so there's definitely a new mix, but it's something which I think is a formula. So we're just we're stabilizing the business for being consistent with the strategy right now. And frankly, after a very probably too long of a time and extended period of time of the ability to bring in a professional like Eric.
Speaker Change: I think it really becomes simple to Simeon, is that we're going to focus on our base layer compression product. You know, it's really just going back to the foundations of the business.
Speaker Change: But we also have some things that have been working out and being prudent for us, like our Unstoppable collection.
Bob Drubel: My priorities when getting Eric here was number one, just landed a plane with someone who was such a terrific A-plus talent from the industry, but it was also thinking about how we could get him horizontal as quickly as possible. And so that's why the role of marketing is something that will really, I think, is the unlock for the brand. The terrific products are important, but I do feel like we're a company that's been left mortgages selling on the logo and a price tag next to it versus articulating the actual depth of story that we have available about each incredible product that we build.
Sharon Licati: It's getting behind when, you know, we've got Sharon Licati that will be competing.
Speaker Change: This Weekend in the Marathon wearing our...
Speaker Change: Velocity Elite 2 Runner is something which is incredible, the slip speed program is something we're going to get back.
Speaker Change: We want to make sure that Under Armour isn't just selling a brand on a t-shirt, it's not just a logo, it needs to be more. So contextualizing what that means for consumers is something which we're really definitely focused on. And not trying to do everything, we're not trying to boil the ocean.
Speaker Change: Incredibly deliberate.
Bob Drubel: So we're a company that's spent half a billion dollars or will be spending half a billion dollars in marketing just last year and this year. And I'm not sure that that's felt. And so there's a tremendous opportunity for us to go attack our 16 to 24 year old varsity athlete consumer and do it in a very authentic way. We spent a lot of time just focused on the gym. And while that's important, we want to be focused on the field.
Speaker Change: and Specific with the products that we're going after and making sure that we're doing a great job of articulating the story as to why there's performance benefits because
Speaker Change: That's the thing for me that as I've...
Speaker Change: you know, had to sit and sort of, you know, maybe watch the business from...
Speaker Change: It's something where I'm looking and saying the unleash that we have and the ability to articulate the incredible stories of the powers of the fabrics, the moisture management, the compression.
Bob Drubel: We want to articulate our story through that voice and the products that will come from it. It's not just the time where these athletes are on the field either, but it's really focusing on the two and from what sportswear can mean for us because I believe the opportunity for UA is different in sportswear than it may be it is for other brands, but the way that we're going to convey that story is going to be a little bit different. We're going to do it through the authenticity that we have on the field court and pitch. Thank you.
Speaker Change: regenerative capabilities that are in things like UA Rush or Vanish as we call it today, you know, these are the opportunities that we have. So every Under Armour product is something which is special and unique and I feel like we're gonna make sure that we get credit for that.
Speaker Change: That's really great. That's exciting. Dave, any thoughts on the units versus price in the guide? And then just if I can also just throw one more, looking at what you repurchased this quarter, how are you thinking about the approach to buybacks? Just given where the stock is, seems like you're retaking brand control and recognizing the cash settlement.
Simeon Siegel: Our next question will come from Simeon Siegel with BMO Capital Markets. You may now go ahead. Thanks, everyone. Good morning. Hope you can have a nice summer. So, Kevin nice to see the first step in the brand renovation. Just when you think through the North America resets and that 25% few reduction you mentioned, could you elaborate a little bit more on how that plays in terms of reducing specific categories to explore its retail partners price points just you alluded to it, but maybe any more thoughts on how you're going to approach that would be helpful.
Speaker Change: Thanks, guys.
Dave: Sure. Yeah, I mean, I think, you know, adding on to what Kevin said, from a price value perspective, you know, we are definitely focusing more on ASP and ASP growth.
Speaker Change: When you think about the SKU reduction, you know, we are trying to target a little bit more reduction in kind of the good level product and protect and really be able to invest in kind of the better and best level product.
Speaker Change: All at the same time that we're, you know, working our way out of some of the deeper discounting and promotions, especially within
Simeon Siegel: And just as you think about that reduction, how are you thinking about units versus price expectations within the revenue guide? Thank you. Yeah, thanks, I mean, I think we're going to be, you know, really thoughtful. As I said in my prepare remarks, you know, this isn't going to be you know, just just one fell swoop. We're going to be thoughtful. We're going to be strategic and surgical with where we decide to make trends.
Speaker Change: North America Ecom, so when you kind of bring that whole equation together, you know, that should lead to driving continued gross margin expansion.
Speaker Change: which we think is super important for the brand and for the overall business.
Speaker Change: That is part of that strategy that comes into play and trying to make sure that we're balancing.
Speaker Change: relative to the SKU development and the higher margin product versus lower margin product and also how that plays into segmentation and continuing kind of step step forward better and better and how we segment which we've we've taken some good strides in the last year or two but you know there's still some more room to go there as well.
Simeon Siegel: But frankly, the idea of the 25% skewed reduction, it's as much of a metaphor for the organization today is there's not a person in the world who doesn't feel like they've got too much on their plate. So, the ability to remove 25% of the work is an ambition for the team. And with that, you're reducing everything from factory visits to, you know, lab dip approvals and all the other work and basis that comes with it.
Speaker Change: Relative to the share buyback program, obviously we are pleased to have the new $500 million program set up. We executed on $40 million of that in Q1.
Simeon Siegel: But, you know, as we've said, you know, to be an underarmor product, that's got to be a process and that has to be something which has to be vetted and gone through in a way which is it needs to be special. It can't just be another t-shirt or, you know, another shoe. It needs to be a true piece of performance product that actually makes, you know, helps make you better. And what we haven't done is we haven't done a good enough job, I believe, you know, communicating that.
Speaker Change: and, you know, understanding that we've had some pretty big cash outflows recently with the settlement and paying down the convertible debt.
Speaker Change: You know, we are continuing to kind of look at our future cash flow and making sure that we've got the war chest that we want to continue to protect.
Speaker Change: For any kind of curves in the road, you know, as we had to deal with recently, or, you know, being able to invest in new ideas and new talent and new experiences.
Simeon Siegel: And so ensuring that as we say in our vision statement to provide you with performance products, you never knew you needed and once you try them, can't imagine living without bills like the, you know, an opportunity that we need to get behind. So I think it really becomes simple too, I mean, is that we're going to focus on our base layer compression product. You know, it's really just going back to the foundations of the business.
Speaker Change: Similar to the recent Unless acquisition that we're working through.
Speaker Change: I don't know that we're going to pursue the share buyback in a huge way this year, but we are going to continue to evaluate it each quarter and make moves as prudent, especially with thinking where the stock price is right now.
Simeon Siegel: But we also have some things that have been working out and being proven for us like our unstoppable collection. It's getting behind when, you know, we've got Sharon Locati that'll be competing this weekend in the marathon, wearing our velocity elite two runners is something which is incredible. The slip speed program is something we're going to get back behind. But we want to make sure that under almost and just selling, you know, a brand on a t-shirt.
Speaker Change: Great, thanks a lot guys, best luck for the rest of your year.
Speaker Change: Thank you. Thank you.
Speaker Change: Our next question will come from Geoff Lowry with Redburn. You may now go ahead.
Geoff Lowry: Yeah, afternoon team. I appreciate that the US is your main focus at the moment, but could you talk a little bit more about the performance of the brand in NDA and APAC and how much is market versus your own reset activity in those regions? Thank you.
Simeon Siegel: It's not just the logo. It needs to be more and so contextualizing what that means for consumers is something which, you know, we're really definitely focused on. And not trying to do everything. We're not trying to boil the ocean. So we want to be incredibly deliberate and specific with the products that we're going after and making sure that we're doing a great job of articulating the story as to why the performance benefits.
Simeon Siegel: Because that's the thing for me that as I've, you know, had to sit and sort of, you know, maybe watch the business from a distance. It's something where I'm looking and saying the unleashed that we have the ability to articulate the incredible stories of the powers of the fabrics, the moisture management, the compression, the regenerative capabilities that are in things like UA rush or vanishes we call today. You know, these are the opportunities that we have.
Speaker Change: long-term and Kevin Ross who's now running that business for us and so it's someone who's a vet who's worked here in the States and obviously been over in Europe now but just took over as recently as January or February of this year.
Speaker Change: But I think we're doing a really good job. Number one, we came from a good base and EMEA is probably our strongest region from a momentum standpoint, particularly in the UK.
Simeon Siegel: So every under-ever product is something which is special and unique. And I feel like we're going to make sure that we get credit for that. That's really great. That's exciting. Dave, any thoughts on the unit versus price in the guide? And then just if I can also just throw a more looking at what you re-purchase this quarter, how are you thinking about the approach to buybacks? Just giving where the stock is seems like you're re-taking brand control and recognizing the cash.
Speaker Change: Timely enough, actually, in France, in Paris,
Speaker Change: with what's happening at the Olympics right now.
Speaker Change: But there's work to be done. I think we're doing a good job playing to the size of the business that we are. We crossed a billion dollars.
Simeon Siegel: Gentlemen. Thanks guys. Sure. Yeah, I mean, I think, you know, adding on to what Kevin said, from a price value perspective, you know, we are definitely focusing more on ASP and ASP growth. When you think about the skewer reduction, you know, we are trying to target a little bit more reduction in kind of the good level product and protect and really be able to invest in kind of the better and best level product.
Speaker Change: in the past year and that's something which gives us some size and scale and what we're doing is we're doing it through the lens of authenticity of you know on the pitch We've got some you know incredible athletes like Tony Rudiger We've got a great kid named Furman Lopez as I spoke about is on the Spanish national team will be
Speaker Change: competing against France in the final there. And there's really a lens, I think, that we're doing, a really targeted approach in both men's and women's football on the pitch.
Simeon Siegel: All at the same time that we're, you know, working our way out of some of the deeper discounted planning and promotions, especially within North America e-commerce. So when you kind of bring that whole equation together, you know, that should lead to driving continued gross margin expansion, which we think is super important for the brand and for the overall business. So, that is part of that strategy that comes into play and trying to make sure that we're balancing relative to the skew development and the higher margin product versus lower margin product and also how that plays in the segmentation and continuing kind of step forward.
Speaker Change: And we're also staying really close to our partnerships, JD and Sports Director are incredibly important to us.
Speaker Change: and as we see our growth and so wholesale is important.
Speaker Change: But we also expect to grow our DTC business and we're investing in this, you know, accordingly and longer term, you know It's it's an evolution of a quality story not unlike
Speaker Change: we've learned here in the U.S.
Speaker Change: We're applying some of the lessons of what we saw, you know, happen in the U.S. We're not crazy about where we are right now in North America.
Speaker Change: And so we are doing a pretty good job, I think, applying the lessons of how do we make sure we can advance ourselves with what we do.
Simeon Siegel: Better and better and how we segment, which we've we've taken some good strides in the last year or two, but, you know, there's still some more room to go there as well. You know, relative to the share buyback program, you know, obviously, we are pleased to have the new 500 million program set up. We executed on 40 million of that in Q1 and, you know, understanding that we've had some pretty big cash outflows recently with the settlement and paying down the convertible debt.
Speaker Change: In Europe and so I think we're being really patient with the business, which is why you're not seeing maybe a bigger Accelerator there is that we weren't we're going to be a little more cautious and make sure number one aware of the macro environment But really looking for quality and from a long-term standpoint
Simeon Siegel: You know, we are continuing to kind of look at our future cash flow and making sure that we've got the war chest that we want to continue to protect for any kind of curves in the road, you know, as we had to deal with recently, or, you know, being able to invest in new ideas and new talent and new experiences similar to the recent on less acquisition that we're working through. So, you know, I don't know that we're going to pursue the share buyback in a huge way this year, but we are going to continue to evaluate it each quarter and make moves as prudent, especially with, you know, thinking where the stock price is right now. Great. Thanks a lot guys, best luck for the rest of the year. Thank you.
Speaker Change: In APAC, it's a little bit more complicated.
Speaker Change: It's a massive region with its own climate, frankly, and something that we're dealing with. But the macro pressures there are something that we're aware of.
Speaker Change: I was over there in May and will be back in September working with our leader Jason Archer there as well. This region just requires a little more attention from the home office, so we're looking at how we can be more helpful to lean into our APAC business.
Speaker Change: From a size and scale standpoint, just to remind everyone, on a global basis, Under Armour has more than 1,900 stores around the world.
Speaker Change: The majority of these are in APAC, the majority of those are, you know, in China. But that's why we're excited to get Stephen Curry back on tour in September .
Speaker Change: which will be, you know, hopefully a bit of a fuse for, you know, getting the region going or at least reminding people that we're there. But there's a lot to cut through from not only the global brands, but the local brands, so it's a little bit different.
Speaker Change: And beyond China, that, you know, I think that the macro is something which we're just watching the consumer and some of the softening there, some of the other regions of what's happening in Japan or South Korea is a bit complicated from an economic standpoint or a macroeconomic standpoint there.
Jeff Lowery: Our next question will come from Jeff Lowry with Redburn. You may now go ahead. Yeah, after no team, I appreciate that the US is your main focus at the moment, but could you talk a little bit more about the performance of the brand in and the A and APAC and how much is market versus your own reset activity and those regions. Thank you. Thank you very much. We'll start with Europe where, you know, we've got a sort of an underarm or long term in Kevin Ross, who's now running that business force.
Speaker Change: But, you know, we think our opportunity is large and, you know, APAC is going to be a massive unlock for us too. So hopefully that gives you a little bit of color.
Speaker Change: That's great. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Our next question will come from Jim Duffy with Stiefel. You may now go ahead.
Speaker Change: Thank you. Good morning. Hi Dave. Hi Kevin. Morning Jim. I want to talk about
Jeff Lowery: And so it's someone who's a bad who's worked here in the States and obviously been over in Europe now, but just took over as recently as January or February of this year. But I think we're doing a really good job. Number one, we came from a good base and May is probably our strongest region from a momentum standpoint, particularly in the UK and, you know, timely enough actually in France and Paris were, you know, sort of an underground favorite.
Jim Duffy: Some of the management hires, you've added a lot of great talent, Erica, great addition to the team.
Jim Duffy: Kevin, the title of EVP of Brand Strategy, that suggests a lot of responsibility overlap with your historical areas of focus.
Speaker Change: Can you maybe speak to your vision for the partnership with Eric? Clearly, this was part of the discussion during the recruitment process. And then with Eric on board, where do you expect to be spending more of your time?
Jeff Lowery: With what's happening at the Olympics right now, but there's there's there's work to be done. I think we're doing a good job playing to the size of the business that we are. You know, we crossed a billion dollars in the past year and that's something which gives us some size and scale and what we're doing is we're doing it to the lens of authenticity of, you know, on the pitch. We've got some, you know, incredible athletes like Tony Routiger, we've got a great kid named Furman Lopez as I spoke about is on the Spanish national team will be competing against France and the final there.
Kevin Plant: Yeah, thank you. You know, it's not... Thanks, Simeon. It doesn't feel too different than, you know...
Speaker Change: This may be a little bit of free bird, but building the brand the first time.
Speaker Change: You know, you never really focused on...
Speaker Change: Sort of complementing skill sets as much as you said if you can get a pro
Speaker Change: I'm a pretty good journalist, so I've got the ability to plug other places.
Speaker Change: bring in a professional like Eric on who, you know, he's got, he's a multidisciplinary expert as well but with
Jeff Lowery: And there's really a lens. I think that we're doing a really targeted approach in both men's and women's football on the pitch. And we're also staying really close to our partnerships JD and sports director incredibly important to us. And as we see our growth and so wholesale is important, but we'll also expect to grow our TTC business and we're investing in this, you know, accordingly and longer term. You know, it's an evolution of a quality story, not unlike we've learned here in the US.
Speaker Change: Having his focus over marketing and, frankly, our strategy work, as I said, is a way to get Eric horizontal in the organization, that he can have that impact. And where I think our biggest need is right now is really in that product region and story balance.
Speaker Change: and we just we haven't had that I think that strength of leadership that's required.
Jeff Lowery: We're applying from the lessons of what we saw, you know, happen in the US where we're not crazy about where we are right now in North America. And so we are doing a pretty good job. I think applying the lessons of how do we make sure we can, you know, advance ourselves with what we do in Europe. And so I think we're being really patient with the business, which is why you're not seeing maybe a bigger accelerator there is that we weren't we're going to be a little more cautious and make sure number one aware of the macro environment, but really looking for quality from a long term standpoint.
Speaker Change: for us to be successful.
Eric Ly: Eric is going to be leaning in there and responsible for billing that out and I'm not lost on what is that going to mean for me because there's plenty of other things to do and that's where I think it is my job to make sure that I'm leveling up. Let me just give a little color on the the acquisition but you know
Speaker Change: Getting Eric here is that UNLESS will continue to be its own independent organization for us.
Speaker Change: I think bringing in sort of the ESG approach that they have with plant-based regenerative fashion is something that is something which is a priority in the organization, and Eric, of course, will help us articulate that.
Jeff Lowery: In APAC, it's a little bit more complicated. It's obviously it's a massive region with its own climate, frankly, frankly, and something that we're dealing with. But the macro pressures there are something that we're aware of. I was over there in May and we back in September working with our leader Jason Archer there as well. This region just requires a little more tension from the home office. So we're looking at how we can be more helpful to lean into our APAC business.
Speaker Change: But I think...
Speaker Change: What we want to do is make sure that the largest need that we had was just getting someone who can be the partner to Yasin and to Kara. You know, decision rights and the operating model is one of the things that always comes up and one of the things that Eric specifically did.
Speaker Change: You know, add Adi.
Speaker Change: back in 13 or 14 when he took over there was just working on the operating model of how product and
Jeff Lowery: You know, from a size and scale standpoint, just to remind everyone on a global basis, Unurmer has more than 1,900 stores around the world. The majority of these are an APAC majority of those are in China. But that's why we're going to excited to get stuff and curry back on tour in September, which will be, you know, hopefully a bit of a fuse for getting the region going or at least reminding people that we're there.
Speaker Change: and Region, and, and...
Eric Ly: And marketing all work together. So that'll be a real a real balance and a real plus for so
Speaker Change: I'm not worried about having things to do. I'm just lucky and appreciative that we were able to attract someone like Eric. So I think it's the beginning of many more to come.
Speaker Change: I've got to tell you just one thing, maybe on a personal level, which is, it feels like there's definitely, there's something a bit anew, and a bit of a shift, and so, we're not declaring victory, we're not beating our chest for sure, but we've got a lot of work to do, but we like the direction that we're heading in right now.
Jeff Lowery: But there's a lot to cut through from not only the global brands, but the local brands. So it's a little bit, little bit different. And beyond China that, you know, I think that the macro is something which we're just watching the consumer and some of the softening there, some of the other regions of what's happening in Japan or South Korea is a bit complicated from an economic standpoint or macro economic standpoint there. But, you know, we think our opportunity is large and, you know, APAC is going to be a massive unlock force too. So hopefully that gives you a little bit of color. That's great.
Jim Duffy: Thank you so much. Thank you.
Eric Ly: Great. Thanks for that. And then, Dave, just a quick one on the D2C margins. Can you remind us when you'll anniversary the less promotional approach in D2C and get to more normalized comparisons on the D2C margins?
Dave: Yeah, it's a great question. I mean, generally speaking, you know, it'll continue to be a benefit for us through the year, a little bit bigger in the front half versus the back half.
Jim Duffy: Our next question will come from Jim Duffy with Diffle. You may now go ahead. Thank you. Good morning. Hi, Dave. Hi, Kevin. Good morning, Jim. I want to talk about some of the management hires. You added a lot of great talent. Eric, a great addition to the team. Kevin, the title of EVP of brand strategy. That suggests a lot of responsibility overlap with your historical areas of focus. And you may be speaking to your vision for the partnership with Eric.
Speaker Change: And then as we step out of this fiscal year, we should be more on a comparable basis relative to, you know, the e-com gross margins and promotion levels as we've been, you know, kind of chipping away to get to a really nice healthy level by the end of this fiscal year.
Speaker Change: You know, and we're continuing to kind of test on the factory house side, which could be something that we play into more to continue to become more premium as we step into fiscal 26.
Speaker Change: Thank you, guys.
Speaker Change: [inaudible]
Jim Duffy: Clearly this was part of the discussion during the recruitment process. And then with Eric on board, where do you expect to be spending more of your time? Yeah, thank you. It doesn't feel too different than maybe a little bit of free bird, but building the brand in the first time. You never really focused on complementing skill sets. If you can get a pro, I'm a pretty good journalist. So I got the ability to plug other places and bring in a professional like Eric on who he's got a multidisciplinary expert as well.
Speaker Change: Our next question will come from Paul Lejuez with Citi. You may now go ahead.
Paul Lejuez: Hey, thanks guys. I just wanted to ask a question on your guidance. You updated the full year, you gave third quarter. I just wanted to make sure I heard correctly. I think you said 110 to 120.
Speaker Change: And that would imply...
Speaker Change: A pretty large percentage of the full year coming from the first half.
Speaker Change: Much smaller from the second half. So just want to understand.
Dave: What your outlook is in the second half, both from a gross margin and SG&A perspective, that would lead to some pretty weak numbers, I think, in the second half, based on the guidance, if I heard it correctly, and then just separately on the factory business.
Jim Duffy: But with having his focus over marketing, and frankly, our strategy work, as I said, is a way to get Eric horizontal in the organization that he can have that impact. And where I think our biggest need is right now is really in that product region and story balance. And we just we haven't had that, I think that strength of leadership that's required for us to be successful. So Eric is going to be leaning in there and responsible for building that out.
Speaker Change: I think you mentioned mixed results when you adjusted prices, if you could just talk about what you saw as you moved prices around and what the ultimate plan is for the factory business in terms of number of stores and what role that serves within the company. Thanks.
Dave: Sure, Paul. When you think about kind of front half versus back half...
Speaker Change: A couple things come into play there. You know, first of all, when you think about Q1...
Jim Duffy: And I'm not lost on what is that going to mean for me because there's plenty of other things to do. And that's where I think it is my job is to make sure that I'm leveling up. Let me just give a little color on the acquisition. But you know, getting Eric here is that, unless we'll continue to be its own independent organization force. And, you know, I think bringing in sort of the ESG approach that they have with plant-based regenerative fashion is something that is something which is a priority in the organization and Eric of course will help us articulate that.
Dave: and that overdrive and then, you know, what does that mean for the full year. Again, keep in mind that, you know, in the back half we are expecting a little bit more developing APAC revenue pressure.
Dave: We're also expecting a little bit higher ocean freight costs than we originally planned.
Dave: There's also been some increasing FX pressure, and you know, there's a little bit of caution that we have as well, just when you think about kind of the recent economic trends.
Jim Duffy: But I think what we want to do is make sure that the largest need that we had was just getting someone who can be the partner to you seen and to Cara. You know, decision rights and the operating model is one of the things that always comes up and one of the things that Eric specifically did at Audi back in 13 or 14 when he took over there. Which is working on the operating model of how product and region and and and and marketing all work together.
Dave: But in general, from an operating income perspective, historically, we've definitely run...
Dave: higher amounts in the first half of the year and a little bit lower in the back half of the year. Some of that, if you think about Q2, that's historically a high revenue dollar quarter for us.
Dave: And it's also generally a higher gross margin percentage quarter for us, so driving bigger gross margin dollars in Q2 is...
Dave: is kind of a historical trend for us.
Jim Duffy: So that'll be a real real balance and a real plus for us. So I'm not worried about having things to do. I'm just lucky and appreciative that we were able to track someone like Eric. So I think it's the beginning of many more to come. But I've got to tell you just one thing maybe on a personal level. Which is it feels like there's definitely there's something a bit of new and a bit of a shift. And so we're not declaring victory. We're not beating our chest for sure. But we've got a lot of work to do. But we like the direction that we're heading in right now. Great. Thanks for that.
Dave: And then that higher front half profitability is also kind of amplified this year by the planned insurance recovery relative to legal invoices paid prior to this year that I mentioned, and also shifting some of our planned marketing spend out to Q3 and Q4.
Dave: And, you know, maybe the last thing I'd mention there is, you know, back half forecast. [inaudible]
Dave: also carries more incentive compensation.
Dave: compared to the prior year back half, where we were adjusting down, unfortunately, and reversing some of that incentive compensation.
Dave Bergman: And then Dave, just a quick one on the D to C margins. Can you remind us when you'll anniversary the less promotional approach in D to C and get to more normalize comparison on the D to C margins? Yeah, that's a great question. I mean, generally speaking, you know, it'll continue to be a benefit for us through the year, a little bit bigger in the front half, versus the back half. And then as we step out of this fiscal year, we should be more on a comparable basis relative to, you know, the ECOM gross margins of promotion levels as we've been, you know, kind of chipping away to get to a really nice healthy level by the end of this fiscal year.
Dave: that was recorded in earlier quarters last year. So when you add all those factors together, you know, it points to the front half being, you know, a substantial portion of our full year operating income, which is how we have things laid out in the plan.
Dave: And on your second question relative to, you know, factory house, I would say that, you know, we did step into testing some
Dave: Lower promotion levels and less promotion levels, and we actually hadn't really planned on doing that, but as we stepped into that more deeply in e-com...
Dave: And we were excited about the results there on Ecom. We decided to start testing that a little bit on Factory House. And I would say that, you know, it was both the price level, the depth of the discount, and the results were really kind of mixed, to be honest. You know, we're experimenting, we're learning, we're seeking balance.
Dave Bergman: You know, and we're continuing to kind of test on the factor health side. Which could be something that we play into more to continue to become more premium as we step into fiscal 26. Thank you guys. You're welcome. Thank you.
Dave: You know we did give up a little bit of revenue when we were doing that and so we're continuing to kind of test and learn on the factory house side but right now I would say that the results from that are mixed and we've got some more work to do.
Paul Lejuez: Our next question will come from Paul Lejuez with city. You may not go ahead. Hey, guys, I'm just going to ask a question here, your guidance, you updated the full year, you gave quarter. I just wanted to make sure I heard correctly. I think you said one 10 to 120. And that would imply, you know, pretty large percentage of the full year coming from the first half much smaller from the second half.
Speaker Change: Thank you. Good luck.
Paul Lejuez: Thanks, Paul.
Speaker Change: Our next question will come from Laurent Vasilescu with PNB Paribas.
Speaker Change: You may now go ahead.
Laurent Vasilescu: So, good morning. Thanks very much for taking my question. Dave, I wanted to ask...
Paul Lejuez: I just want to understand what your outlook is in the second half, you both from gross margin, yesterday perspective that would lead to some pretty neat numbers. I think in the second half based on the guidance, if I heard it correctly, and then just separately on the factory business. I think you mentioned mixed results. When you adjusted prices, you could just talk about what you saw as you move prices around and what the ultimate plan is for the factory business in terms of numbers, stores, and what role that serves within the company.
Laurent Vasilescu: for the guidance. Should we still assume wholesale is down low double digits and DTC down 10% for the year? And then with e-commerce,
Speaker Change: down 25%. Is that the right way to think about it going forward and is there are there any lessons learned that you think you can apply to the rest of the business from the pullback in promotions in e-commerce?
Speaker Change: Thank you. Thank you.
Speaker Change: Sure, yeah, I would say that on full year, you know, we still are looking at wholesale down, kind of a low double digit percentage, kind of in that 10 to 12 percent range.
Paul Lejuez: Sure, Paul, when you think about kind of front half versus back half, a couple things come into play there. You know, first of all, when you think about Q1. And that overdrive, and then, you know, what does that mean for the full year? Again, keep in mind that, you know, in the back half, we are expecting a little bit more developing APAC revenue pressure. We're also expecting a little bit higher ocean freight costs than we originally planned.
Paul Lejuez: and then DTC being down approximately 10% or so and that is mainly driven by our decisions to kind of reset the brand, especially in North America.
Paul Lejuez: There's also been some increasing FX pressure. And, you know, there's a little bit of caution that we have as well just when you think about kind of the recent economic trends. But in general, from an operating income perspective, historically, we've definitely run higher amounts in the first half of the year and a little bit lower in the back half of the year. Some of that, if you think about Q2, that's historically a high revenue dollar quarter for us.
Paul Lejuez: with the e-com pullback on promotions and...
Paul Lejuez: Also you know an elevated product assortment there.
Paul Lejuez: Thank you for listening. We'll see you next time.
Paul Lejuez: Relative to EECOM specific, we're not necessarily giving guidance on that.
Paul Lejuez: um but
Speaker Change: You would definitely see that being the over-indexed decrease within the DTC being down 10%.
Paul Lejuez: So definitely down more than 10%, maybe not the full 25 that we saw in Q1, when you think about full year. But again, that is intentional. Most of that is intentional as we continue to drive through those promotional decisions within North America.
Paul Lejuez: and
Paul Lejuez: And it's also generally a higher gross margin percentage quarter for us. So driving bigger, gross margin dollars in Q2 is kind of a historical trend for us. And then that higher front half profitability is also kind of amplified this year by the planned insurance recovery relative to legal invoices paid prior to this year that I mentioned. And also shifting some of our planned marketing spend out to Q3 and Q4. And maybe the last thing I mentioned there is back half forecast also carries more incentive compensation compared to the prior year back half where we were adjusting down unfortunately and reversing some of that incentive compensation that was recorded in earlier quarters last year.
Paul Lejuez: Hey Laurent, maybe I can just...
Laurent Vasilescu: Let me pile on that, too, because I think it's really instructive of what happened and what we were able to do through the lens of our full-price e-commerce website that, frankly, hadn't been quite as full-price a year ago.
Laurent: You know, about 65% of what we were selling a year ago was promotional, and about 35% full price. And, you know, with what we did by reducing, you know, significantly reducing promotion days,
Paul Lejuez: We didn't quite invert it, but we made significant progress in terms of getting to full price sales.
Paul Lejuez: And so what that did as well is not only did it help us with, you saw some of the gross margin flow through for ourselves, but it also helps the algorithms on our partner websites on, you know, the Amazon algorithm that goes around. And so you just watched a general rising tide raise all boats here.
Paul Lejuez: So when you add all those factors together, it points to the front half being a substantial portion of our full year operating income, which is how we have things laid out in the plan. Um. Now, on your second question relative to factory house, I would say that we did step into testing some lower promotion levels and less promotion levels, and we actually hadn't really planned on doing that, but as we stepped into that more deeply in E-Com and we were excited about the results there on E-Com, we decided to start testing that a little bit on factory house.
Paul Lejuez: So, as that's occurring, it's something that's pretty instructive as we're thinking about...
Speaker Change: We keep talking about repairing the brand or what we're doing with the brand or how healthy the brand is right now.
Paul Lejuez: I would say that it was both the price level, the depth of the discount, and the results were really kind of mixed, to be honest. We're experimenting, we're learning, we're seeking balance, we did give up a little bit of revenue when we were doing that, and so we're continuing to kind of test and learn on the factory house side, but right now I would say that the results from that are mixed and we've got some more work to do. Thank you, good luck. Thanks, Paul.
Speaker Change: All those things are top of mind and top on the list of what we're going to do, but I think we're starting to see some of the models of the ways that we can invest, and it will actually pay off in return for us. And so we'll be applying that. Again, we don't have all the facts, but we like some of the indications that we're seeing right now. We sure like driving a more full-priced business, and that $47.5 gross margin is something which would be a pretty good indicator for the health of how we're doing.
Dave: Thank you, Kevin. Yeah, in fact, yeah, the gross margin, nice gross margin beat on the first quarter. Dave, I think you mentioned there were three factors.
Speaker Change: that are incremental to the headwinds for the full year. I think you've mentioned, you know, ocean freight effects and mixed.
Speaker Change: Can you kind of bridge it for us, how much those were in terms of incremental headwinds versus 90 days ago as we think about the full year guy on the gross margin?
Laurent Vasilescu: Our next question will come from Laurent, follow suit key with PNB Peruvus, you may now go ahead. Good morning. Thanks very much for taking me my question. Dave, I wanted to ask for the guidance, should we still assume wholesale is down, low double digits, and DTC down 10% for the year, and then with E-Com or down 25%, is that the right way to think about it going forward, and is there any lessons learned that you think you can apply to the rest of the business from the pullback and promotions in E-Comers?
Speaker Change: Yeah, I mean, I think, you know, what I was trying to elaborate on is the main year-over-year drivers that are, you know, behind our full-year improvement.
Laurent Vasilescu: Sure, yeah, I would say that on full year, we still are looking at wholesale down kind of a low double digit percentage, kind of in that 10 to 12% range, and then DTC being down approximately 10% or so, and that is mainly driven by our decisions to kind of reset the brand, especially in North America, with the E-Com pullback on promotions, and also an elevated product assortment there. Related to E-Com specific, we're not necessarily giving guidance on that, but you would definitely see that being the over indexed decrease within the DTC being down 10%, so definitely down more than 10%, maybe not the full 25 that we saw on Q1 when you think about full year, but again that is intentional, most of that is intentional as we continue to drive through those promotional decisions within North America.
Speaker Change: still are heavily weighted to the favorable pricing with less DTT discounting and also the supply chain benefits related to the improved product costing. Those are the two real big positives on the full year.
Speaker Change: And, you know, obviously we saw a little bit of extra benefit there as we went through Q1.
Speaker Change: But as we look forward, the impact on freight costs is probably the largest kind of newer developing headwind that's kind of taking away some of that Q1 overdrive.
Speaker Change: And then a close second to that would be, you know, the foreign currency headwinds that have been developing that we saw during the first three months and that are projected a little bit forward.
Speaker Change: The change in mix due to licensing sales and some of the challenge margins on the off-price channel, that's a little bit of a smaller developing headwind. The first two around freight costs and FX are a little bit bigger.
Speaker Change: Okay, thank you. Congrats again on the beat, and good luck with back to school.
Speaker Change: Our next question will come from Sam Poser with Williams Trading. You may now go ahead.
Sam Poser: Many of my questions have been answered. Thank you guys for taking my question.
Sam Poser: I was wondering, just a follow-up on the back half guidance.
Speaker Change: When you said that there's a shift out of marketing spend, out of Q...
Laurent Vasilescu: Hey, Laurent, maybe I can just, let me pile on that too, because I think it's really instructive of what happened and what we're able to do through the lens of our full price e-commerce website that frankly had been quite as full price a year ago. We were about 65% of what we were selling a year ago was promotional, and about 35% full price, and with what we did by reducing significantly reducing promotion days, we didn't quite invert it, but we made significant progress in terms of getting to full price sales.
Speaker Change: Q2, are we going to see, is that going to go more into Q4 because as sort of the beginning of this setup for where you're anticipating improvements into Fiscal 26?
Speaker Change: Well actually, some of Q1's bottom line overdrive was
Speaker Change: You know shifting some of that marketing spend
Speaker Change: to Q3 and Q4, and then similar with Q2 as well. So we are...
Laurent Vasilescu: And so what that did as well is not only did it help us, you saw some of the growth margin flow through for ourselves, but it also helps the algorithms on our partner websites, on the Amazon algorithm that goes around. And so you just watched a general rising tide raise all boats here, so as that's occurring if something that's pretty instructive as we're thinking about, we keep talking about repairing the brand or what we're doing with the brand or how the healthy the brand is right now.
Speaker Change: Backloading a little bit more in the back half on marketing than we originally anticipated.
Speaker Change: In Our Outlook.
Speaker Change: But it's not all relative to Q4. I mean, some of it is laying into the brand for going into fiscal 26 and beyond, but also making sure that we're really supporting the back-to-school and also the holiday sales that are in – the holiday sales mainly that are in –
Laurent Vasilescu: All those things are top of mind and top on the list of what we're going to do, but I think we're starting to see some of the models of the ways that we can invest, and it'll actually pay off in return for us. And so we'll be applying that again, we don't have all the facts, but we like some of the indications that we're seeing right now, we sure like driving a more full price business and that 47-5 growth margin is something which is be a pretty good indicator for the health of how we're doing.
Speaker Change: 2-3 for us or calendar 2-4.
Speaker Change: Thank you, and then secondly...
Speaker Change: The...
Speaker Change: Kevin, in what you were saying, there sort of, there sort of is a combination of...
Kevin Plant: You have you mentioned having patience and having and wanting to do things quickly
Speaker Change: And I guess the question is, what is the sort of game plan look for turning around to getting North America sort of on the track you want to and, you know, how are you balancing
Laurent Vasilescu: Thank you, Kevin. Yeah, in fact, yeah, the Gross Margin, nice gross margin beat on the first quarter. Dave, I think you mentioned there were three factors that are incremental to the headwinds for the full year. I think you mentioned, you know, ocean freight affects and mix from license business. Maybe could you, could you, could you kind of bridge it for us? How much those were, in terms of incremental headwinds versus 90 days ago as we think about the full year guy on the gross margin?
Speaker Change: You know, patience, brand, speed, all of that, as you, as we look forward.
Speaker Change: I turned 52 on Tuesday, Sam. I've actually been growing and maturing, I guess, you know. Thank you for the happy birthday. I've been...
Laurent Vasilescu: Yeah, I mean, I think, you know, what I was trying to elaborate on is the the main year of year drivers that are, you know, behind our full year improvement still are heavily weighted to the favorable pricing with less DTT discounting and also the supply chain benefits related to the improved product costing. Those are the two real big positives on the full year. And, you know, obviously we saw a little bit of extra benefit there as we went through Q1, but as we look forward, the impact on freight costs is probably the largest kind of newer developing headwind that's kind of taking away some of that Q1 overdrive.
Speaker Change: You know, as an entrepreneur, you always feel late. You feel like it's got to be done, you know, tomorrow. And that's something which has been somewhat of a strength, and at times, it can be difficult, especially as you get large and need to scale as an organization.
Speaker Change: I think really coming into our own as a business, you know, we are opening this new headquarters, which is beautiful here in Baltimore, and I don't know if that's exactly where shareholders would have liked us to spend money, but this thing is built, and it's going to be an incredible edifice for us.
Laurent Vasilescu: And then a close second to that would be, you know, the foreign currency headwinds that have been developing that we saw during the first three months and that are projected a little bit forward. The change in mix due to licensing sales and some of the challenge margins on the off-price channel, that's a little bit of a smaller developing headwind. The first two around freight costs and that facts are a little bit bigger. Okay, thank you. Congrats again on the beat and good luck with back to school. Thank you. Thanks.
Speaker Change: that today we think is going to be a massive asset for the business. So I think really it's the maturity of just recognizing the hand that we have. And, you know, I've used this analogy of I've had a pair of twos and we've had a royal flush before, and today we have neither. But we've been able to win with both.
Speaker Change: So I feel pretty good about the hand that we have and just looking at the assets and you know, I've sort of said, you know,
Speaker Change: We've got a hundred things to fix at UA and you know of those hundred things I'd say probably 70-75 percent of them are self-inflicted. The good news about that is that we can
Speaker Change: We can identify them, we can tweak them, we can make them better. And the other great thing is that while we have a hundred things to fix, we also have a thousand things going for us.
Speaker Change: You know, when I think about just the sports marketing aspect of, you know, I'm not going to let Dave hear this, but I think with, you know, Notre Dame and IMG, you know, there's probably enough just to build a sports brand with the credibility of, you know, one of the best high schools and if not the best high school and one of the best colleges, it's not the best college.
Sam Poser: Our next question will come from Sam Poser with Williams treating. You may now go ahead. Well, many of my questions have been answered. Thank you guys for taking my question. I was wondering just to follow up on the back cap guidance. When you said that there's a shift out of marketing spend out of Q2, are we going to see, is that going to go more into Q4 because as sort of the beginning of this setup for where you're anticipating improvements into fiscal 26?
Speaker Change: you know in the country and so that that's that's very sort of regional in terms of how I think about it North America but
Speaker Change: It's gonna come in time, you know, we we we have the
Speaker Change: We've got half a billion dollars suspended marketing. It doesn't feel like we're spending it. I want that impact to be there. You know, we've got an incredible, I think
Speaker Change: just platform that we have with performance and technical and design and style and we just haven't played our best game there yet so I'm really excited about this next chapter maybe applying the lessons that have been learned over the years they talked about we're thinking about Europe and
Sam Poser: Well, actually for some of Q1's bottom line overdrive was, you know, shifting some of that marketing spend to Q3 and Q4 and then similar with Q2 as well. So we are back loading a little bit more in the back cap on marketing than we originally anticipated in our outlook, but it's not all relative to Q4. I mean, some of it is laying into the brand for going into fiscal 26 and beyond, but also making sure that we're really supporting the back to school and also the holiday sales that are in, the holiday sales mainly that are in Q3 for us or calendar Q4.
Speaker Change: Looking at what's happened in the U.S. and how we can sort of maybe make better decisions and choices there, but...
Eric Ly: We've got a great hand to play. I think we're putting an A-plus team together. It's super exciting of having a dude, and I say that like a dude, like Eric, coming on board to join our team because we've got some really good UA experts, industry experts that are surrounding this table and just put us in a position to...
Speaker Change: We can't guarantee anything, but I like our chances and I'll play this hand every day.
Speaker Change: If I can just follow up real quick, I mean I'm really talking about timing and and and like
Sam Poser: Thank you. And then secondly, Kevin, and what you were saying, there sort of, there sort of is a combination of You mentioned having patience and wanting to do things quickly and I guess the question is what is the sort of game plan look that turning around to getting North America sort of on the track you want to and how are you balancing patience, brand speed, all of that as we look forward?
Speaker Change: Like are are you thinking of building this out in like getting the North America turned around is it going to take? You know 18 months, and you're going to do it sort of slow and steady or Or is this you know what sort of what what kind of time frame do you have with your in your own definition of getting?
Speaker Change: North America on the right track. I mean, how are you thinking about that? It is a 12-month thing or an 18-month thing. That's what I'm trying to get my... Yeah, I think after the last call we sort of pinned people to fall 25 and so we sort of gave ourselves this 18-month outlook, but to be honest, we're not... I don't know if there's...
Speaker Change: I don't know if there's a definition where you say we're done, this is just going to be a constant iteration and work in progress.
Speaker Change: and ...
Sam Poser: I turn 52 on Tuesday, Sam. I've actually been growing in mature I guess. Thank you for the happy birthday. As an entrepreneur you always feel late, you feel like it's got to be done tomorrow and that's something which has been somewhat of a strength and at times it can be difficult, especially as you get large and need to scale as an organization. But I think really coming into our own as a business you know we were opening this new headquarters which is beautiful here in Baltimore and I don't know if that's exactly where shareholders would have liked to us to spend money but this thing is built and it's going to be an incredible edifice for us that today we think it's going to be a massive asset for the business.
Speaker Change: You know, so I think you'll start seeing it. And again, we're not sitting on our hands until fall 25. We've got some great product in the marketplace right now. You know, there's an incredible things we have. We have with, you know, our Meridian platform, you know, our unstoppable platform that our team has been on for a while. And so, you know, our base layer platform, there's just some easy things that we can do.
Speaker Change: to make sure that we're getting full credit. I don't think that people see us as a…
Speaker Change: You know, unless you did grow up 15 or 20 years ago, I'm not sure if you, you know, see compression as being, you know, Under Armour's founding product. And so we need to make sure that we're giving the respect to tell the story of the products that we're building.
Speaker Change: So, I'm really confident and excited about how that, you know, I can't emphasize enough of where an organization that just needs to be focused on product, story, region, make sure those three aspects are coming together quickly, so.
Sam Poser: So I think really it's a matured of just recognizing the hand that we have and you know I've used this analogy of how to pair twos and we've had a world flush before and today we have neither but we've been able to win with both. So I feel pretty good about the hand that we have and just looking at the assets and you know I've sort of said you know we've got a hundred things to fix at UA and you know of those hundred things I'd say probably 70 75% of them are self inflicted.
Speaker Change: Yeah, I don't know if it's long, but you're going to see constant progress. I think you'll see things like, wow, that was a really great spot from UA. That was a really cool product. You know, there's some things that you can get behind. And then you'll watch us begin to, you know, do the skew reduction, distort toward the products that are working. And it doesn't just mean it'll be best level products, but
Sam Poser: The good news about that is that we can we can identify them we can we can tweak them we can make them better and the other great things is that while we have a hundred things to fix we also have a thousand things going for us. You know when I think about just the sports marketing aspect of you know I'm not going to let Dave hear this but I think with you know Notre Dame and IMG you know this is probably enough just to build a sports brand with the credibility of you know one of the best high schools and not the best high school one of the best colleges is not the best college you know in the country.
Speaker Change: You know that's that characteristic I said is that we don't have to abandon you know some of the current consumers we have in order to start making more you know better and best level premium product.
Speaker Change: And I think, Sam, you know, even though we're not ready to talk about, you know, Fiscal 26 or 27,
Sam Poser: revenues for North America. One thing you can be assured of is that we're going to keep driving forward on being a healthier business in North America. And I think that's that's really what we're excited about right now, and we'll talk more about the future incoming calls.
Sam Poser: And so that that's that's very sort of regional in terms of how I think about it North America but it's going to come in time you know we we we have the we've got half a billion dollars suspended marketing. It doesn't feel like we're spending it I want that impact to be there you know we've got an incredible I think just platform that we have with performance and technical and design and style and we just haven't played our best game there yet.
Sam Poser: Thank you very much.
Sam Poser: Thank you, Sam.
Speaker Change: This concludes our question and answer session as well as the conference. Thank you for attending today's presentation. You may now disconnect.
Sam Poser: So I'm really excited about this next chapter of maybe applying the lessons that that have been learned over the years they talk about we're thinking about Europe and looking at what's happened in the US and how we can sort of maybe make better decisions and choices there but we've got a great hand to play I think we're putting an A plus team together. It's super exciting of having a dude and I say that like a dude like Eric coming on board to join our team because we've got some really good UA experts industry experts that are surrounding this table and just put us in a position to you know we can't guarantee anything but I like our chances and I'll play this hand every day.
Sam Poser: If I can just follow up real quick I mean I'm really talking about timing and and and like like are you thinking of building this out in like getting the North America turned around is it going to take you know 18 months and you're going to do it sort of slow and steady or or is this you know what sort of what kind of timeframe do you have with your own definition of getting, and North America on the right track. I mean, how are you thinking about that?
Sam Poser: It is a 12-month thing or 18-month thing. That's what I'm trying to get married. Yeah, I think after the last call, we sort of pin people to fall 25 and so we sort of gave ourselves this 18-month outlook. But to be honest, I don't know if there's a definition where you say we've done, we're done. This is just going to be a constant iteration and work in progress. And so I think you'll start seeing it.
Sam Poser: And again, we're not sitting on our hands until fall 25. We've got some great product in the marketplace right now. There's incredible things we have with our Meridian platform, unstoppable platform that our team has been on for a while. And so our base layer platform, there's just some easy things that we can do to make sure that we're getting full credit is that I don't think that people see us as unless you did grow up 15 or 20 years ago.
Sam Poser: I'm not sure if you see compression as being, you know, unarmaged founding product. And so we need to make sure that we're giving the respect to tell the story of the products that we're building. So I'm really confident and excited about how that, you know, I can't emphasize enough of where an organization that just needs to be focused on product story region. Make sure those three aspects are coming together quickly. So yeah, I don't know if it's long, but you're going to see constant progress.
Sam Poser: I think you'll see things like, wow, that was a really great spot from UA. That was a really cool product. You know, there's some things that you can get behind. And then you'll watch us begin to, you know, do the skewer reduction distort for the products that are working. And it doesn't just mean it'll be best level products. But, you know, that's that characteristic, I said, is that we don't have to abandon, you know, some of the current consumers we have in order to just start making more, you know, better and best level premium product.
Sam Poser: And I think Sam, you know, even though we're not ready to talk about, you know, fiscal 26 or 27 revenues for North America, one thing you can be assured of is that we're going to keep driving forward on being a healthier business in North America. And I think that's that's really what we're excited about right now. And we'll talk more about the future and come and calls. All right. Thank you very much. Thank you, Sam.
Operator: This concludes our question and answer session as well as the conference. Thank you for today's presentation. You may now disconnect.
Speaker Change: Thanks for watching!
Speaker Change: Washington, D.C. Ben Sirten, Washington, D.C. Cory Peres, Washington, D.C. Heath J. T disconnect from dial-up
Speaker Change: why
Operator: Thank you. Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Paul Lejuez Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Matthew Boss, Samuel Poser, James Duffy, Simeon Siegel, Good morning and welcome to the Under Armour First Quarter 2025 earnings conference call.
Speaker Change: Good morning and welcome to the Under Armour First Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions.
Speaker Change: To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2.
Speaker Change: Please note this event is being recorded.
Lance Allega: I would now like to turn the call over to Lance Allega, SDP, Investor Relations, Treasury and Corporate Development. Please go ahead.
Speaker Change: Good morning and welcome to Under Armour's first quarter fiscal 2025 earnings conference call. Today's event is being recorded for replay.
Speaker Change: Joining us on today's call are Under Armour President and CEO Kevin Plank and CFO Dave Bergman.
Speaker Change: Our remarks today will include certain forward-looking statements that reflect Under Armour's management's current view of our business as of August 8, 2024.
Speaker Change: These statements may include projections for our business in the present and future quarters and fiscal years. Forward-looking statements are not guarantees of future business performance, and our actual results may differ materially from those expressed or implied in the views provided.
Speaker Change: Statements made are subject to risks and other uncertainties detailed in this morning's press release and documents filed regularly with the SEC, including our annual report on Form 10-K and our quarterly reports on Form 10-Q . Today's discussion may also include non-GAAP references.
Kevin Plant: Under Armour believes these measures give investors a helpful perspective on underlying business trends. When applicable, these measures are reconciled to the most comparable U.S. GAAP measures . Reconciliations, along with other pertinent information, can be found this morning's press release and at about.underarmour.com. With that, I'll turn the call over to Kevin.
Kevin Plant: Thank you, Lance, and good morning, everyone, for joining us on today's call.
Kevin Plant: With the first quarter of Fiscal 25 behind us, I'm pleased that we've started the year ahead of expectations, and I'm encouraged by the early progress we're making in executing our Protective Self Strategy.
Kevin Plant: At the center of this strategy, we've recently declared to our team and partners that Under Armour is a sports house, a term that we're using to define the landscape in which we compete.
Kevin Plant: The sports industry's version of the only handful of brands from Europe who've earned the right to refer to themselves as fashion houses.
Lance Allega: Across the sports brand landscape, we believe there are less than five brands that could be represented on this podium for sports globally.
Lance Allega: and that we are one of them.
Speaker Change: earned over a 29-year history the credibility to show up in virtually any athletic endeavor on the field, pitch, or court as an outfitter and be seen by athletes in the more than 100 countries where we do business today and are generally famous as an authentic brand, an authentic sports house brand.
Speaker Change: This rare air amongst the landscape of the sports industry is an aspect of UA that we feel is incredibly unique. And just one of the attributes of strength we see for ourselves. We contemplate the opportunity that Under Armour has in front of us.
Speaker Change: We believe this authenticity gives us an advantage as we reconstitute our brand strength and execute our strategy.
Speaker Change: To make that happen, this, of course, begins and ends with our culture.
Speaker Change: elevating its importance in visibility, raising the bar of our culture across the enterprise, and like our brand positioning work, we're also reconstituting this.
Speaker Change: Our culture is unique in how it describes our brand, the athletes we have, and the ones we plan to attract.
Speaker Change: In this spirit, we've redefined who and what we stand for within our strategic plan, as discussed in our last call, the who we are being about athletes, sports, innovation, and passion.
Speaker Change: And we have a passion for, in its simplest definition, the underdog. The athlete who is not given all of God's gifts of talent. And despite what they're missing...
Lance Allega: All participants will be in listen only mode. Should you use assistance? Please say no conference specialist by question the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then when your telephone keypad to this draw your question, please press star then two. Please note that this is being recorded.
Speaker Change: It is not tall or fast enough or strong or swift or clever enough. For all those who have to stay late after practice to work on a skill or study harder than the rest, this is our underdog.
Speaker Change: And because of this, U.A.'s athletes must use every resource and waking hour to make themselves better.
Lance Allega: I would now like to turn the conference over to Lance Allega, SDP, Investor Relations, Treasury, and Corporate Development. Please go ahead. Good morning and welcome to Under Armour's first quarter fiscal 2025 earnings conference call. Today's event is being recorded for replay. Joining us on today's call are Under Armour President and CEO Kevin Plank and CSO Dave Bergman. Our remarks today will include certain forward-looking statements that reflect Under Armour's management's current view of our business as of August 8th, 2024.
Speaker Change: Said differently, we don't innovate as a brand for athletes so that they can run up a score. We expect every product we build to provide an edge for our athletes, just to give them a fighting chance to compete.
Speaker Change: This mentality is what drives our innovation agenda and manifests through grit.
Speaker Change: an oversized chip on the shoulder that is UA's beacon, an underdog spirit that can never be counted out.
Lance Allega: These statements may include projections for our business in the present and future quarters and fiscal years. Forward-looking statements are not guarantees a future business performance. Our actual results may differ materially from those expressed or implied interviews provided. Statements made are subject to risks and other uncertainties detailed this morning's press release and documents filed regularly with the SEC, including our annual report on form 10K and our quarterly reports on form 10Q. Today's discussion may also include non-GAAP references.
Speaker Change: Each day this UA team will operate with responsibility to do everything in our power to push the boundaries of innovation that makes athletes perform better. And above all else, we recognize the privilege and joy it is to work in sports.
Speaker Change: Our aspired culture will be the output of bringing this to life.
Speaker Change: In this effort, we must become more deliberate in everything we do, recognizing the difference between experimentation and intentionality, and have the right talent and agile decision-making abilities to ensure we can do this consistently at a high level.
Lance Allega: Under Armour believes these measures give investors a helpful perspective on underlying business trends. When applicable, these measures are reconciled to the most comparable US gap measures. Reconciliation along with other pertin information can be found this morning's press release and at about.underarmour.com.
Speaker Change: As such, we have invested meaningfully and experienced leaders to supercharge our ability to execute differently than in years past.
Speaker Change: We're not just building a company, we're building a brand. And the reason is that a brand is so much more valuable than just a company.
Kevin Plank: With that, I'll turn the call over to Kevin. Thank you, Lance, and good morning everyone for joining us on today's call. With the first quarter of fiscal 25 behind us, I'm pleased that we started the year ahead of expectations and I'm encouraged by the early progress we're making in executing our protective South strategy. At the center of this strategy, we've recently declared to our team and partners that under Armour is a sports house, a term that we're using to define the landscape in which we compete.
Speaker Change: We're building the UA brand with purpose.
Speaker Change: One iteration, one success, one day at a time.
Speaker Change: Looking back at the last four months since assuming the CEO chair, we still have much work to do.
Speaker Change: But I'm proud of what's been accomplished to date.
Speaker Change: including implementing a nine-month go-to-market process to complement our 18-month calendar with a self-form on Crushable Hat being our first delivered product now available and in stock online.
Kevin Plank: The sports industries version of the only handful of brands from Europe who've earned the right to refer to themselves as fashion houses. Across the sports brand landscape, we believe there are less than five brands that could be represented on this podium for sports globally and that we are one of them. Earned over our 29 year history, the credibility to show up in virtually any athletic endeavor on the field pitch or court as an outfitter and be seen by athletes in the more than 100 countries where we do business today and are generally famous as an authentic brand and authentic sports house brand.
Speaker Change: We also began to work to reduce our SKU style count by 25%.
Speaker Change: implementing a category management structure and right sizing our organization with a headcount reduction that, while painful, is now complete.
Speaker Change: However, we're still building too.
Erick Litkey: This brings me to the announcement we made a couple days ago, the appointment of 30 year industry veteran Eric Liedtke as Under Armour's EVP of Brand Strategy.
Speaker Change: Following a 26-year career at Adidas, culminating in his roles as brand president and executive board member, we're thrilled to welcome him.
Kevin Plank: This rare error amongst the landscape of the sports industries and aspect of UA that we feel is incredibly unique and just one of the attributes of strength we see for ourselves, we contemplate the opportunity that under Armour has in front of us. We believe this authenticity gives us an advantage as we reconstitute our brand strength and execute our strategy. To make that happen, this of course begins and ends with our culture, elevating its importance and visibility, raising the bar of our culture across the enterprise and like our brand positioning work, we're also reconstituting this.
Speaker Change: Complimenting one of the strongest product teams we've had in nearly a decade, Eric's proven track record of transformational brand growth and strategy will be an incredible asset to our product and regional leaders and our broader executive leadership team at this crucial time.
Speaker Change: As EVP of Brand Strategy, Eric will oversee our brand marketing, corporate strategy, consumer insights, sports marketing, creative, and loyalty functions.
Speaker Change: In addition, Eric will be tasked with building out our marketing organization, including its Go Forward leadership that will report to him.
Kevin Plank: Our culture is unique in how it describes our brand, the athletes we have and the ones we plan to attract. In this spirit we redefined who and what we stand for within our strategic plan. As discussed in our last call, the who we are being about athletes, sports, innovation and passion. Now, we have a passion for, in its simplest definition, the underdog. The athlete who is not given all of God's gifts of talent, and despite what they're missing, is not tall or fast enough or strong or swift or clever enough.
Speaker Change: On our last call, we outlined what needed to be done immediately, distilled the key points of our strategy into a presentation that's now been delivered to all 16,000 UA teammates, and taken on the road to our key retail partners, factories, and franchisees globally across North America, EMEA, and APAC.
Erick Litkey: From quick hallway talks to two- to three-hour meetings and presentations, we had transparent two-way conversations to gain perspective about how to take better care of our brand.
Kevin Plank: For all those who have to stay late after practice to work on a skill or study harder than the rest, this is our underdog. And because of this, UAs athletes must use every resource and waking hour to make themselves better. Said differently, we don't innovate as a brand for our athletes so that they can run up the score. We expect every product we build to provide an edge for our athletes just to give them a fighting chance to compete.
Erick Litkey: These interactions have provided well-rounded insights into our strengths and areas of opportunity.
Speaker Change: such as being faster and bringing products to market, more intentional and committed storytelling for our launches, serving as a better business partner, and driving deeper connections with athletes to ignite brand love.
Speaker Change: Constant theme across these exchanges, parallel to the spirit of many of our investor conversations, is the optimism in Under Armour's ability to deliver a premium positioning and unleash our full potential.
Erick Litkey: In the product construct of good, better, and best, we believe that UA can do business in all three, including as it relates to price, a unique characteristic of being an authentic sports podium brand.
Kevin Plank: This mentality is what drives our innovation agenda and manifests through grit, an oversized chip in the shoulder that is UAs beacon, an underdog spirit that can never be counted out. Each day, this UAT will operate with responsibility to do everything in our power to push the boundaries of innovation that makes athletes perform better. And above all else, we recognize the privilege and joy it is to work in sports. Our aspired culture will be the output of bringing this to life.
Erick Litkey: This is probably the most significant business advantage of being a sports house and why we believe we can drive more premium positioning while not abandoning good level altogether.
Erick Litkey: This range is one of the reasons I know we can attract A-plus talent to join us in this next chapter.
Kevin Plank: In this effort, we must become more deliberate in everything we do, recognizing the difference between experimentation and intentionality and have the right talent and agile decision-making abilities to ensure we can do this consistently at a high level. As such, we've invested meaningfully in experienced leaders to supercharge our ability to execute differently than in years past. We're not just building a company, we're building a brand. And the reason is that a brand is so much more valuable than just a company.
Erick Litkey: And this potential is evident when we combine innovative products, outstanding design, and thoughtful storytelling, we delight athletes with performance solutions they never knew they needed and now cannot imagine living without.
Erick Litkey: This, in conjunction with our strength in product team and feedback based on early sharing of our evolving product line architecture, is encouraging.
Erick Litkey: We aim to scale this more broadly across every product we make with renewed energy, story, clarity and alignment across the company.
Kevin Plank: We're building a UAP brand with purpose, one iteration, one success, one day at a time. Looking back in the last four months and assuming the CEO chair, we still have much work to do. But I'm proud of what's been accomplished to date, including implementing a nine-month go-to-market process to complement our 18-month calendar with a self-form and crushable hat being our first delivered product, and now available and in stock online. We also began the work to reduce our skew style count by 25 percent, implementing a category management structure, and right-sideding our organization with a head count reduction that, while painful, is now complete. However, we're still building, too.
Erick Litkey: With that, I'll highlight each element of our Protect This House strategy, starting with building better products and storytelling.
Erick Litkey: Central to the evolution of our product organization has been the re-architecture of leadership and structure over the past year.
Jassine Saidi: With Jassine Saidi, leading a talented and experienced team of apparel, footwear, innovation, and design experts.
Erick Litkey: By order of operations, product was the most immediate fix and frankly longest lead time UA needed to address.
Erick Litkey: I'm very confident in the work this team is executing, including a more centralized vision across product, merchandise, and marketing that will enable us to correct our past inconsistencies, always editing and innovating to drive our brand forward.
Kevin Plank: This brings me to the announcement we made a couple of days ago. The appointment of 30-year industry veteran Eric Litke as unormous EVP of brand strategy. Following a 26-year career at Adidas, culminating in his roles as brand president and executive board member, we're thrilled to welcome him. Complimenting one of the strongest product teams we've had in nearly a decade, Eric's proven track record of transformational brand growth and strategy will be an incredible asset to our product and regional leaders and our broader executive leadership team at this crucial time.
Erick Litkey: With new leadership also came new priorities.
Erick Litkey: And we're progressing well with our category portfolio realignment. This brings greater simplicity to the business and adds focus to our core sports categories, yielding much clearer roles and responsibilities for our product teams to identify and execute go-to-market plans that are ideally optimized for the highest quantitative and qualitative returns.
Erick Litkey: As mentioned on our last call, our fall winter 25 season is when this team's efforts will begin to show up more robustly with new design language and improved balance between performance and style. A pivotal season that we will build into subsequent ones.
Kevin Plank: As EVP of brand strategy, Eric will oversee our brand marketing, corporate strategy, consumer insights, sports marketing, creative and loyalty functions. In addition, Eric will be tasked with building out our marketing organization, including its go-forward leadership that will report to him. On our last call, we outlined what needed to be done immediately. To fill the key points of our strategy into a presentation that's now been delivered to all 16,000 UA teammates and take it on the road to our key retail partners, factories, and franchisees globally across North America, America, and APEC.
Erick Litkey: Yet, that doesn't mean we're just sitting back, waiting for next year. We're working to elevate our core men's apparel business with a refined assortment, infusing it with industry-leading performance technologies in a more deliberate design direction.
Erick Litkey: At the same time, we're sequencing investments in our footwear and women's businesses to reinvigorate consideration among two of our largest long-term growth opportunities.
Erick Litkey: We're also shifting towards a head-to-toe approach across our largest categories by employing key franchises, trend-right styles, and innovations to underscore an always-on authenticity.
Kevin Plank: From Quick Hallway Talks to 2-3-hour meetings and presentations, we had transparent two-way conversations to gain perspective about how to take better care of our brand. These interactions have provided well-rounded insights into our strengths and areas of opportunity, such as being faster and bring products to market, more intentional and committed storytelling for our launches, serving as a better business partner and driving deeper connections with athletes to ignite brand love. Of constant theme across these exchanges, parallel to the spirit of many of our investor conversations is the optimism and underarmament ability to deliver a premium positioning and unleash our full potential.
Erick Litkey: Looking at the season ahead, fall winter 24, we're going to see an uptick in our sportswear offering with more to and from wearing occasions for the 16 to 24 year old varsity team sport athlete who we target.
Erick Litkey: This includes the launch of high-performance streetwear in Unstoppable, versatile style and athletic performance in Meridian.
Erick Litkey: Elevated Warm-Ups and Sport-Inspired Looks in our Icon Fleece Collection.
Erick Litkey: infinite and phantom running launches and finally in basketball the Curry 12 along with a first signature shoe for D'Aaron Fox of the Sacramento Kings
Erick Litkey: Our next most significant effort is driving an improved demand creation ecosystem through compelling storytelling and aligned merchandising.
Kevin Plank: In the product construct of good, better and best, we believe that UA can do business in all three, including as it relates to price, a unique characteristic of being an authentic sports podium brand. This is probably the most significant business advantage of being a sports house and why we believe we can drive a more premium positioning while not abandoning good level altogether. This range is one of the reasons I know we can attract a plus talent to join us in this next chapter.
Erick Litkey: We've begun to optimize our marketing organization, including efforts to clean up our messaging, particularly in North America.
Erick Litkey: A great example is our use of performance marketing. Last year, when we sent an email to consumers, two-thirds of these messages were about discounts or promotions, and one-third were focused on full-price selling and storytelling.
Erick Litkey: This year, that ratio is now inverted, which, although early, is showing signs of positive traction and perception.
Kevin Plank: This potential is evident when we combine innovative products, outstanding design and thoughtful storytelling we delight athletes for performance solutions they never knew they needed and now cannot imagine living without. This in conjunction with our strength and product team and feedback based on early sharing of our evolving product line architecture is encouraging. We aim to scale this more broadly across every product we make with renewed energy, story, clarity and alignment across the company.
Erick Litkey: So, it's encouraging to imagine how a year's impact might improve our brand affinity.
Erick Litkey: In addition to not simply leading on the retail floor or online with price, we will ensure that we are telling a story about the product advantages, with messaging focused on premium franchises and inspirational connections around key retail and sports moments.
Erick Litkey: In North America, upcoming back-to-school activations highlight key franchises across team sports, apparel, footwear, and sportswear styles.
Kevin Plank: With that, I highlight each element of our protective house strategy, starting with building better products and storytelling. Central to the evolution of our product organization has been the re-architecture of leadership and structure over the past year. With Cassine Citi leading a talented experience team of apparel, footwear, innovation and design experts. By order of operations, product was the most immediate fix and frankly longest lead time UA needed to address. I'm very confident the work this team is executing, including a more centralized vision across product merchandise and marketing that will enable us to correct our past inconsistencies, always editing and innovating to drive our brand forward.
Erick Litkey: The Elite 24 Basketball Showcase this coming weekend in New York City and our All-America Volleyball and American Football events in Orlando in January give us an excellent platform to connect even more deeply with young team sport athletes.
Erick Litkey: In Asia-Pacific, Stephen Curry will be taking his first tour across China since 2019 this September .
Erick Litkey: And we're generating brand heat through social media and activations, leading to millions of new followers and thousands of new member enrollments in just the first few days.
Erick Litkey: With four major cities on tap, we look forward to September's tour and the energy it will bring to the Chinese market.
Kevin Plank: With new leadership also came new priorities and we're progressing well with our category portfolio re-alignment. This brings greater simplicity to the business and adds focus to our core sports categories, yielding much clearer roles and responsibilities for our product teams to identify and execute go-to-market plans that are ideally optimized for the highest quantitative and qualitative returns. As mentioned on our last call, our fall winter 25 season is when this team's efforts will begin to show up more robustly with new design language and improve balance between performance and style.
Speaker Change: In Europe , across EMEA, football has been a sharp point in driving brand affinity. With you, it's been unlocking our sportswear consideration.
Erick Litkey: Activations during critical sports moments, including the English Premier League, Champions League Final, and the Euro Championships.
Erick Litkey: focused on our iconic HeatGear compression apparel and the Clone Magnetico boot featuring a young stable of UA athletes including Tony Rudiger of Real Madrid, Eddy and Ketia of Arsenal. We are very much in this conversation in European football.
Kevin Plank: A pivotal season that we will build into subsequent ones, yet that doesn't mean we're just sitting back waiting for next year. We're working to elevate our core men's apparel business with refined assortment, infusing it with industry leading performance technologies in a more deliberate design direction. At the same time, we're sequencing investments in our footwear and women's businesses to reinvigorate consideration among two of our largest long-term growth offers. We're also shifting towards a head-to-toe approach across our largest categories by employing key franchises, trend-right styles, and innovations to underscore and always on authenticity.
Erick Litkey: We're also increasing our investment in paid social media influencers.
Erick Litkey: Over the next few years, we intend to double the number of influencers in our creator program to lean into fresh new content to drive reach and engagement.
Erick Litkey: In line with this, we signed University of Miami Women's College basketball players Haley and Hannah Cavender to a multi-year partnership. This serves as a metaphor for tying together sport authenticity and influencer relevance. With nearly 7 million followers across Instagram and TikTok, it's great to welcome them to the brand.
Erick Litkey: Another first quarter highlight was demonstrating staying on our front foot with collegiate assets, including extending our partnership with the University of Maryland to be the exclusive outfitter of athletics programs, including 19 varsity sports and universities club in intramural sports.
Kevin Plank: Looking at the season ahead, Fall Winter 24, we're going to see an uptick in our sportswear offering, with more to and from wearing occasions for the 16 to 24-year-old varsity team-sport athlete who we target. This includes the launch of high-performance streetwear and unstoppable, versatile style and athletic performance and meridian, elevated warm-ups and sport-inspired looks in our icon-fleece collection, infinite and phantom-running launches, and finally, in basketball, the Curry 12, along with a first signature shoe for de-air and fox of the Sacramento Kings.
Erick Litkey: With now 7 Power 4 teams for UA, 85 Division 1 squads, and 350 Division 2 and Division 3 schools, our NCAA presence is a testament to Under Armour being a brand that athletes trust. A true sports house.
Erick Litkey: We also announced our new partnership with USA Football, the official and exclusive uniform apparel and footwear provider, including the U.S. men's and women's national teams.
Kevin Plank: Our next most significant effort is driving improved demand-creation ecosystem through compelling storytelling and aligned merchandising. We've begun to optimize our marketing organization, including efforts to clean up our messaging, particularly in North America. Great example is our use of performance marketing. Last year, when we sent an email to consumers, two-thirds of these messages were about discounts or promotions, and one-third were focused on full-price selling and storytelling. This year, that ratio is now inverted, which, although early, is showing signs of positive traction and perception, so it's encouraging to imagine how a year's impact might improve our brand affinity.
Erick Litkey: This is also an excellent opportunity to have a front and center grassroots pathway to defining flag football across more than a million member athletes by integrating it into our existing UA Next platform.
Erick Litkey: We're very excited about this, especially as it leads to flag football's debut at the 2028 Summer Olympics in Los Angeles, where UA will be the official outfitter for Team USA competing on the gridiron.
Erick Litkey: And speaking of the Olympics, with more than 70 athletes from 26 countries across 28 sports representing UA, we've had a fantastic roster on the world's largest, most famous athletic stage.
Erick Litkey: A few call-outs, of course, are Stephen Curry and Kelsey Plum on the U.S. men's and women's basketball teams.
Kevin Plank: In addition to not simply leading on the retail floor or online with price, we'll ensure that we are telling a story about the product advantages, with messaging focused on premium franchises and inspirational connections around key retail and sports moments. In North America, upcoming back-to-school activations highlight key franchises across team sports, apparel, footwear and sportswear styles. The Elite 24 basketball showcase this coming weekend in New York City. In our All-America, volleyball, and American football events in Orlando in January, give us an excellent platform to connect even more deeply with young team sport athletes.
Speaker Change: New York City Marathon winner Sharon Locati, representing Kenya at her first games. And Fermin Lopez, a key Spanish player, who's led his team to the final of the Olympic football tournament by scoring four goals and two assists in just five games.
Speaker Change: Next up is our second strategic priority, running smart plays and our work to optimize our business to clean up unnecessary complexity.
Speaker Change: Meaning growth by constraint.
Speaker Change: Our approach here is simple. Test all existing rules to determine how to take advantage of all business dimensions more efficiently.
Speaker Change: Accordingly, no area is left unturned, and all systems, structures, and processes must have a clear and well-defined purpose and output and definition of success.
Kevin Plank: In Asia Pacific, Stephen Curry will be taking his first tour across China since 2019 this September, and we're generating brand heat through social media and activations, leading to millions of new followers and thousands of new member enrollments in just the first few days. With four major cities on tap, we look forward to September's tour and the energy will bring to the Chinese market. In Europe across the Mayah, football has been a sharp point in driving brand affinity with youth and unlocking our sportswear consideration.
Speaker Change: Though a difficult decision, our restructuring program has given us a head start in streamlining the organization.
Speaker Change: During the quarter, we right-sized our workforce and are executing various transformational initiatives and advancing considerations around facilities, software, and other areas.
Speaker Change: As a result of some of this work, we've begun laying out projects to automate tasks in decision-making processes using both traditional and AI solutions to unlock data-driven insights and operational improvements. So, very promising for long-term efficiency gains.
Kevin Plank: Activations during critical sports moments, including the English Premier League, Champions League Final, and the Euro Championships focused on our iconic key-care compression apparel and the Clone Magnetico boot featuring a young stable of U.A, athletes including Tony Rutiger of Ralph Madrid, Eddie and Ketia of Arsenal. We're very much in this conversation in European football. We're also increasing our investment in paid social media influencers. Over the next few years, we intended double the number of influencers in our creator program to lean into fresh new content to drive reach and engagement.
Speaker Change: An output of complexity led to the creation of, frankly, too many products that, without proper segmentation and marketplace differentiation, have challenged brand affinity. In this respect, I've tasked our team with achieving a 25% SKU reduction over the next 18 months, and we're making solid progress toward this objective.
Speaker Change: This is not, however, a blanket strategy across our good that are best construct.
Speaker Change: Nor does it apply to all categories equally. We're being surgical in this effort, distorting toward areas of opportunity with the highest returns, both financially and strategically, from a brand-building perspective, and purposely over-indexing towards better and best-level products as we elevate our brand positioning.
Kevin Plank: In line with this, we sign University Miami Women's College basketball players, Haley and Hannah Cavendr, to a multi-year partnership. This serves as a metaphor for trying to get her sport authenticity and influence or relevance. With nearly 7 million followers across Instagram and TikTok, it's great to welcome them to the brand. Another first quarter highlight was demonstrating staying on our front foot with collegiate assets, including extending our partnership with the University of Maryland to be the exclusive outfit of Athletics program, including 19 varsity sports and the University's club in intramural sports.
Speaker Change: We're also working to become smarter, more efficient by modernizing our supply chain with two primary objectives.
sean kren: Improving our end-to-end planning and cross-channel capabilities, led by Chief Supply Chain Officer Sean Curran, our end-to-end planning work spans multiple disciplines.
sean kren: Aiming to enhance our ability to plan better and protect our consumers' needs, to optimize our assortments and manage inventory across regions, channels, and retail doors.
Speaker Change: We've also started a multi-year distribution and logistics modernization initiative to enable cross-channel capabilities to optimize cost, maximize speed, ensure inventory availability and increase service levels across our DTC and wholesale businesses.
Kevin Plank: We also announced our new partnership with USA Football, the official exclusive uniform apparel and footwear provider, including the US men's and women's national teams. This is also an excellent opportunity to have a front and center grassroots pathway to the finding flag football across more than a million member athletes by integrating it into our existing UA next platform. We're very excited about this, especially as it leads to flag football's debut at the 2028 Summer Olympics in Los Angeles, where UA will be the official outfiter for Team USA competing on the gridiron.
Speaker Change: That takes us to our third priority, elevating consumer experiences, where we're focused on driving excellence across our direct consumer and wholesale businesses.
Speaker Change: In DTC, the first quarter marked the beginning of our journey to elevate our North American e-commerce business toward a more significant and premium consideration.
Speaker Change: As expected, our e-commerce revenue is down, driven by roughly a third fewer promotional days than last year. However, positively...
Speaker Change: The percentage of full-price sales in our digital channel rose significantly, along with a reduced mix of outlet and clearance sales. So although still in the early days of this strategy, we're optimistic about initial performance metrics, which include higher average order values.
Kevin Plank: And speaking of the Olympics, with more than 70 athletes from 26 countries across 28 sports representing UA, we've had a fantastic roster on the world's largest, most famous athletic stage. A few car outs, of course, are Steppen Curry and Kelsey Plum on the US men's and women's basketball teams. New York City Marathon winner Sharon Locati representing Kenya at our first games. And Furman Lopez, a key Spanish player, who's led his team to the final of the Olympic football tournament by scoring four goals and two assists in just five games.
Speaker Change: Regarding physical retail, we're focused on delivering service excellence and identifying areas to improve, upselling, repeat business, and profitability.
Speaker Change: To support this, we're testing a new full-price brand house concept and are pleased with the initial results. Seeing an improvement in productivity and revenue per visitor.
Speaker Change: With cleaner sight lines and more curated product assortment, including nearly 50% fewer skews, and an evolved in-store presentation, athletes can more easily see and feel the power of the Under Armour brand.
Kevin Plank: Next up is our second strategic priority, running smart plays and our work to optimize our business to clean up unnecessary complexity, meaning growth by constraint. Our approach here is simple. Test all existing rules to determine how to take advantage of all business dimensions more efficiently. Accordingly, no areas left unturned in all systems, structures and processes must have a clear and well-defined purpose and output and definition of success. Though a difficult decision, our restructuring program has given us a head start in streamlining the organization.
Speaker Change: All of this will come together even more beautifully later this year as we open our new flagship store at our new headquarters here in Baltimore before the end of December .
Speaker Change: In our factory house outlets, we're digging in to optimize this business better, especially in North America, which is critical to balancing future revenue and margin opportunities.
Speaker Change: During the quarter we initiated trials with mixed results as we dialed various promotional levels up and down to assess volume and ASP impacts. An excellent test and learn as we solidify our go-forward strategies.
Kevin Plank: During the quarter we right sized our workforce and are executing various transformational initiatives and advancing considerations around facilities, software and other areas. As a result of some of this work, we've begun laying out projects to automate tasks and decision making processes using both traditional and AI solutions to unlock data driven insights and operational improvements. So very promising for long term efficiency gains and output of complexity led to the creation of frankly too many products that without proper segmentation and marketplace differentiation have challenged brand affinity.
Speaker Change: We're also working to change our assortment and segmentation, including less made-for-outlet products, SKU reductions, elevated visual presentations, and full-price selling. All geared at harnessing this platform more effectively to generate capital for other parts of our business.
Kevin Plank: In this respect, I've tasked our team with achieving a 25% skewer reduction over the next 18 months and we're making solid progress toward the subjective. This is not however a blanket strategy across our good, better best construct. In order to apply to all categories equally, we're being surgical in this effort, distorting toward areas of opportunity with the highest returns, both financially and strategically from a brand building perspective and purposely over indexing towards better and best level products as we elevate our brand position.
Kevin Plank: We're also working to become smarter, more efficient by modernizing our supply chain with two primary objectives improving our end-to-end planning and cross-channel capabilities led by Chief Supply Chain Officer Sean Kern, our end-to-end planning work spans multiple disciplines aiming to enhance our ability to plan better and protect our consumer's needs to optimize our assortments and manage inventory across regions, channels, and retail doors. We've also started a multi-year distribution logistics modernization initiative to enable cross-channel capabilities to optimize cost, maximize speed, ensure inventory availability and increased service levels across our DTC and wholesale businesses.
Kevin Plank: That takes us to our third priority, elevating consumer experiences, where we're focused on driving excellence across our direct consumer and wholesale businesses. In DTC, the first quarter marked the beginning of our journey to elevate our North American e-commerce business toward a more significant and premium consideration. As expected, our e-commerce revenue was down, driven by roughly a third fewer promotional days than last year. However, positively, the percentage of full-price sales in our digital channel rose significantly, along with a reduced mix of outlet and clearance sales.
Kevin Plank: So, although still the early days of this strategy were optimistic about initial performance metrics, which include higher average order values. Regarding physical retail, we're focused on delivering service excellence and identifying areas to improve, upselling, repeat business, and profitability. To support this, we're testing a new full-price brand-house concept and are pleased with the initial results, seeing an improvement in productivity and revenue per visitor. With cleaner sight lines and more curated product assortment, including nearly 50% fewer skews, and an evolved in-store presentation, athletes can more easily see and feel the power of the underarmament brand.
Kevin Plank: All of this will come together even more beautifully later this year as we open our new flagship store at our new headquarters here in Baltimore before the end of December. In our factory house outlets, we're digging in to optimize this business better, especially in North America, which is critical to balancing future revenue and margin opportunities. During the quarter, we initiated trials with mixed results as we dialed various promotional levels up and down to assess volume and ASP impacts, an excellent test and learn as we solidify our go-forward strategies.
Kevin Plank: We're also working to change our assortment and segmentation, including less made-for-outlet products, skew reductions, elevated visual presentations, and full-price selling. All geared at harnessing this platform more effectively to generate capital for other parts of our business. Our loyalty program is also giving us an added boost in realizing improved long-term growth, profitability, and higher brand engagement. With less than a year under our belts in North America, U.A. Rewards has grown quickly and its performance has been a positive contributor.
Kevin Plank: The program has nearly five million members and is growing month by month. Exciting, too, that about half of recent enrollments are new to the brand. This is an excellent sign of expanding our reach with unique visitors. Further, nearly 60% of our North American DTC revenue comes from U.A. Reward members, and we're showing roughly 50% higher revenue per consumer along with a three-fold increase in the 90-day repurchase rate compared to non-members, so very encouraging for the long term.
Kevin Plank: Now, shifting to wholesale. Following meetings with key global retail partners, I'm happy to report that they are encouraged by our progress and optimistic about the potential of our strategy. As mentioned, it will take time for the wholesale channel to inflect. We must allow for improved storytelling to take shape. In the interim, we're changing the script on what it means to be a UA partner. And our committed strengthening our crucial account relationships in each distribution tier. In addition to working out improved segmentation with our current mix of products, we're partnering on better integrated planning and joint marketing opportunities.
Kevin Plank: In closing, though early in our journey to reconstitute Under Armour's brand strength, we're making tangible progress in building a more premium product offering. We're running smarter plays by tightening up our S-GNA, reducing skews and materials, and beginning to elevate consumer shopping experiences, amid the early progress we're making and air coming on board to fill a critical missing piece of our puzzle through the marketing lens. We'll continue to empower and evolve our culture to reduce complexity and be more deliberate in everything we do. I have every confidence that our improving level of execution will result in a better presentation of the Under Armour brand through building this sports house. There's much to do, but we're undeniably back on offends.
Dave Bergman: With that, I'll hand it over to Dave for more details on the results and outlook. Thanks, Kevin. Starting right in with the results, our first quarter of fiscal 2025, which came in better than our outlook. Revenue was down 10% to 1.2 billion, with a 14% decline in North America to the softer full price wholesale demand and lower sales to the off-priced channel. Our DTC business was also down during the quarter, driven mainly by a decline in our e-commerce business, resulting from proactive strategies to reduce promotional activity and a decline in our retail store sales.
Dave Bergman: Revenue in Emeo was flat on a reported and currency neutral basis, with strength in our DTC business partially offset by a slight decline in wholesale. A-pack revenue was down 10% for down 7% on a currency neutral basis, driven by declines in our wholesale and DTC businesses amid a softening macro that impacted consumer traffic and a highly competitive and promotional environment in the region. In Latin America, revenue was up 16%, or up 12% on a currency neutral basis, with solid growth among regional distributors.
Dave Bergman: From a channel perspective, first quarter wholesale revenue was down 8%, driven by softer demand in our full price and distributor businesses along with lower sales to the off-priced channel. Direct-to-consumer revenue declined 12%, with a 25% decline in e-commerce as we work to evolve this channel to a more premium positioning via lower promotions and discounts. And sales from our own and operator retail stores were down 3%. Life and thing was down 14% due to declines in our North American and Japanese businesses.
Dave Bergman: By product type, a parallel revenue was down 8% with declines across most categories partially offset by relative strength and goal. Footwear was down 15% with declines across most categories, partially offset by relative strength in outdoor and golf. And our accessories business was down 5%. Our first quarter gross margin was up 110 basis points to 47.5%. This increase was driven by 170 basis points of pricing benefits due to lower levels of discounting and promotions mainly in our direct consumer business because of our actions to drive a more premium positioning of our brand.
Dave Bergman: And 40 basis points of supply chain benefits related to lower product costs and lower inventory reserves partially driven by our first quarter overdrive. These benefits were partially offset by 60 basis points of headwinds from unfavorable regional and channel mix shifts and 50 basis points of unfavorable foreign currency impacts. Our first quarter gross margin out performance relative to the outlook we gave in May was due to three main factors. First, we were even less promotional than planned in our DTC business as we started the test strategies for also reducing promotion activity in our factory house outlet stores including less depth and discounts which was not contemplated in our prior outlook.
Dave Bergman: Second, inventory reserve needs were lower than planned given a lower inventory balance and healthier overall composition. Third, we had some additional trailing benefits from year-over-year freight cost improvements compared to what was anticipated in our prior outlook. Moving down the P&L, our S&A expenses increased 42% to 837 million in the first quarter excluding a litigation reserve, net of and insurance receivable and transformation expenses adjusted S&A expenses were down 6% to 555 million.
Dave Bergman: This was mainly due to ongoing cost management actions including headcount reductions and lower marketing expenses for the quarter. During the quarter, we recognized 25 million of restructuring charges and incurred 9 million of transformational expenses booked in S&A. We have now realized 34 million of the estimated 70 to 90 million in anticipated charges and expenses under our existing plan. Bringing this together, we had an operating loss of 300 million or excluding the litigation reserve, transformation expenses and restructuring charges are adjusted operating income with 8 million.
Dave Bergman: On the bottom line, we realized a deluded loss per share of 70 cents or an adjusted deluded earnings per share of one cent. These results were ahead of our outlook due to our revenue and gross margin overdrive and better S&A expense control. From a balance sheet perspective, inventory was down 15% compared to last year, which was ahead of our expectations due to our revenue outperformance and effective inventory management. We continue to expect that our year end inventory will be in line with fiscal 24.
Dave Bergman: At the end of the quarter, after paying down the remaining 81 million outstanding balance of our convertible senior notes and purchasing 40 million of class C common stock, which retired 5.9 million shares, we had no borrowings under our 1.1 billion revolving credit facility and a strong cash position of 885 million. Shifting next to our fiscal 25 outlook, our expectation that full-year revenue will decline at a low double-digit percentage rate has not changed.
Dave Bergman: In summary, we exceeded our expectations in North America during the first quarter, and thus, we are modestly improving our full-year expectation for the region to now be down 14 to 16%. However, the North American improvement in our full-year forecast is expected to be offset by increasing market pressures in APAC for the balance of the year. Next, we expect a low single-digit percentage decline in our international business. Within that, I'd like to give some regional color given a divergence in recent results between APAC and AMAIA and thus balance-of-year expectations.
Dave Bergman: For fiscal 25, we expect revenue in AMAIA to be a flat, as we continue to protect the brand strength we built in the region amid an uncertain macro-environment. In APAC, we anticipate revenue will be down at a high single-digit percentage rate, reflecting lower consumer demand and traffic trends. Moving to gross margin, although we saw a significant better-than-anticipated result in our first quarter, our expectation for a 75-to-100 basis-point improvement for the full-year has not changed.
Dave Bergman: There are three main reasons for this Q1 overdrive not passing through to the full-year. First, emerging ocean freight cost headwinds. Second, developing negative impacts from changes in foreign currency. And third, a more unfavorable channel mix through the lower licensing sales and challenge margins in the off-priced channel. Relative to SGNA, excluding the litigation reserve expense and the midpoint of total estimated charges and related expenses of our restructuring plan, adjusted SGNA is expected to decline at a low to mid-single-digit percentage rate.
Dave Bergman: This includes anticipated savings of approximately 40 million in fiscal 25 from restructuring actions this year. Adjusted operating income is now anticipated to reach 140 to 160 million, up 10 million from our prior outlook. And adjusted diluted earnings per share is expected to be 19 to 22 cents.
Dave Bergman: Next, I'd like to give some color on our expectations for our second quarter fiscal 25 starting with revenue, which we expect to be down approximately 12 percent compared to the prior year. This decline assumes continued wholesale softness and proactive strategies to reduce promotional activities in our DTC business, particularly in North American e-commerce. Second, quarter gross margin is anticipated to be up 20 to 30 basis points due to benefits from lower product costing and less DTC discounted, partially offset by more expensive ocean freight and unfavorable foreign currency impacts.
Dave Bergman: Adjusted SGNA is expected to decline at a high single-digit rate in the second quarter, partially driven by approximately 4 to 5 percentage points from an anticipated insurance recovery related to litigation expenses paid in prior periods. Additionally, this decline includes lower expenses related to headcount reductions and a shift in the timing of marketing expenses, which will be considerably higher in our third quarter. This takes us to an expected second quarter adjusted operating income of 110 to 120 million, and an 18 to 20 cents of adjusted deluded earnings per share.
Dave Bergman: Finally, some color on how we expect our cash to evolve in fiscal 25. After funding our legal settlement payment in the second quarter with cash on hand and our expected cash flow generation in fiscal 25, we expect to end the year with approximately 500 million in cash and no borrowings outstanding on our 1.1 billion revolver.
Dave Bergman: Now, to close out today's prepared remarks, I'd underscore that we are encouraged by the early progress we're making to reconstitute the underarmour brand and are tracking well against our strategies. With a leadership team and culture that gets more decisive quarter by quarter, we will continue to test and learn as we optimize or protect this health strategy. And we are confident in our ability to establish the premium positioning we know the underarmour brand deserves. And set a higher quality revenue base that leads to improved, sustainable growth and profitability over the long term.
Operator: With that, we'll open it up for questions. Operator? We will now begin the question and answer session. To ask a question, you may press start in one on your telephone keypad. If using a speaker phone, please pick up your hands up before pressing Q. To a broader question, please press start in two. At this time, we'll pause momentarily to assemble a roster.
Jay Sole: Our first question will come from Jay Sol with UBS. You may now go ahead. Great. Thank you so much. Kevin, it's clear you see some good progress happening in the business. Can you just tell us about what gives you confidence in the company's ability to deliver on the sales growth guidance that's implied in the guidance for the second half of the year and what you see happening there. Thank you so much.
Jay Sole: Yeah, thanks. I believe that we're, I think we've got a really healthy view of the business right now. I think that what we did on the last call, we put ourselves in a position to make the best decisions for the brand. I've introduced this term sports house that we took to our partners and frankly to our team and anyone around this business of just understanding of not sort of getting lost up in the moment of the day.
Jay Sole: We recognize where we are. We're not crazy about it, but we're also doing something to change, I think, the weather. And so the effect that we're having, I think, is number one, just slowly, prudently putting the best team together, which is everything. I think really getting after our strategy, which is something that, you know, I don't think it's been off. I think it's been a matter of execution. And so making sure that our team is super clear on what the objectives are and what the definition of successes.
Jay Sole: And so, you know, the addition of the ability to attract a plus talent, like bringing Eric on board is probably a great proof positive that we're, you know, heading in the right direction with that. So I feel good and, you know, I think there's a lot of macro things that are going on right now that may affect what are where we are in the world. But, you know, we've got our head down and, you know, there's certainly no, there's not a lot of high five yet, but there's definitely a growing sense of, in terms of what we've accomplished to date. But, there's definitely a sense of what's coming and we're very proud of that. Thank you so much. Thank you, Jay.
Bob Drubel: Our next question will come from Bob Drubel with Cougain Heim. You may now go ahead. Good morning. Just a couple of questions for me. On the first one, Kevin, on the business overall, you seem to have a sharper direction in product. Can you comment a little more on the evolution of your marketing? How long, you know, until you feel more confident about that? And then, you know, when you think about the brand marketing, you know, what's working?
Bob Drubel: What's not working? You know, where do you think you can do a better job and what does Eric bring to the table on that? Thanks. Thank you. On the last call, I think we get a good job laying out the importance of product of story and region and those three things working. We've also done a good job as part of the presentation that we took, you know, really around the world to our key partners and teammates, et cetera.
Bob Drubel: And, you know, we told them that what's critical for Under Armour to do is to make sure that, you know, we're bringing in aid talent. And I think if you look at, you know, the way that this table has evolved, the executive leadership team table has evolved, you know, over the last, frankly, you know, 8 to 10 months, it's pretty significant. And, you know, product was a metaphor that I used to describe as where, you know, we brought in some, you know, a plus talent between John Barbados, you're on white.
Bob Drubel: And of course, you're seeing who's heading that function up. But what makes them so powerful is the fact that they're joining a team of leaders of partners that we already have here in the business of Dan LaRera's 13 years, Kyle Blakely 15 years, Jeanette Robertson, who's another, you know, dozen years at UA. You know, we just have this, you know, a real depth, I think, of talent. So I feel the same way of, you know, of the empathists of someone like an Eric joining our business of being able to balance out that troika of product story and region of what we can do from a storytelling standpoint.
Bob Drubel: And, you know, obviously the biggest need, and I'll come back to marketing in a second, and the biggest need that we have is, you know, we need to be aggressive in North America. And I just want to go back to people and being able to reference a partner that I have and someone like Cara Trent, who's leading there for us. And so, you're, you're, there's definitely a new mix, but it's something which I think is a formula.
Bob Drubel: So we're just, we're stabilizing the business, we're being consistent with the strategy right now. And frankly, after, you know, a very, probably too long of a time and extended period of time of the ability to bring in, you know, a professional like Eric, you know, who, my priorities when, you know, getting Eric here was number one, just landed a plane with someone who was, you know, such a, a terrific A-plus talent from the industry.
Bob Drubel: But I was also thinking about how we could get him horizontal as quickly as possible. And so that's why the role of marketing is something that will really, I think, is the unlock for the brand. The terrific products are important, but I do feel like we're a company that's been, you know, left more to just selling on the logo and a price tag next to it versus articulating the actual depth of story that we have available, you know, about each incredible product that we build.
Bob Drubel: So, you know, we're, we're a company that's spent, you know, half a billion dollars, it'll be spending half a billion dollars in marketing, you know, just last year and this year. And I'm not sure that that's felt. And so there's a tremendous opportunity for us to go attack our 16 to 24 year old varsity athlete consumer and do it in a very authentic way. We spent a lot of time just focused on the gym.
Bob Drubel: And while that's important, we want to be focused on the field. We want to articulate our story, you know, through that voice and the products that will come from it. It's not just the time where these athletes are on the field either, but it's really focusing on the two and from on what sportswear can mean for us because I believe the opportunity for UA is different in sportswear than it maybe it is for for other brands, but the way that we're going to convey that story is going to be a little bit different. We're going to do it through the authenticity that we have on the field court and pitch. Thank you.
Simeon Siegel: Our next question, we'll go from Simeon Siegel with BMO Capital Markets. You may now go ahead. Thank you, everyone. Good morning. Hope you can have a nice summer. So, Kevin, nice to see the first step in the brand renovation. When you think through the North America resets and that 25% few reduction you mentioned, could you elaborate a little bit more on how that plays in terms of reducing specific categories to explore its retail partners price points?
Simeon Siegel: That's just, you alluded to it, but maybe any more thoughts on how you're going to approach that would be helpful. And just as you think about that reduction, how are you thinking about units versus price expectations within the revenue guide? Thank you. Yeah, thanks, Simeon. I think we're going to be, you know, really thoughtful as I said in my prepare remarks, you know, this isn't going to be, you know, just just one fell swoop.
Simeon Siegel: We're going to be thoughtful. We're going to be strategic and surgical with where we decide to make trends. But frankly, the idea of the 25% skewer reduction, it's as much of a metaphor for the organization today is there's not a person in the world who doesn't feel like they've got too much on their plate. So the ability to remove 25% of the work is an ambition for the team. And with that, you're reducing everything from factory visits to, you know, lab dip approvals and all the other work and basis that comes with it.
Simeon Siegel: But, you know, as we've said, you know, to be an underarmer product, that's got to be a process. And that has to be something which has to be vetted and gone through in a way which is it needs to be special. It can't just be another t-shirt or, you know, another shoe. It needs to be a true piece of performance product that actually makes, you know, helps make you better. And what we haven't done is we haven't done a good enough job, I believe, you know, communicating that.
Simeon Siegel: And so ensuring that as we say in our vision statement, we provide you with performance products you never knew you needed and once you try them can't imagine living without feels like the, you know, an opportunity that we need to get behind. So, I think it really becomes simple too, I mean, is that we're going to focus on our base layer compression product. You know, it's really just going back to the foundations of the business.
Simeon Siegel: But we also have some things that have been working out and being proven for us like our unstoppable collection. It's getting behind when, you know, we've got Sharon Locate able to be competing this weekend in the marathon, wearing our velocity elite to runners is something which is incredible, the slip speed program or something we're going to get back behind. But we want to make sure that under almost and just selling, you know, a brand on a t-shirt.
Simeon Siegel: It's not just the logo. It needs to be more and so contextualizing what that means for consumers or something which, you know, we're really definitely focused on and not trying to do everything we're not trying to boil the ocean. So we want to be incredibly deliberate and specific with the products that we're going after and making sure that we're doing a great job or articulating the story as to why their performance benefits.
Simeon Siegel: Because that's the thing for me that as I've, you know, had to sit and sort of, you know, maybe watch the business from a distance. It's something where I'm looking and saying the unleash that we have the ability to articulate the incredible stories of the powers of the fabrics, the moisture management, the compression, the regenerative capabilities that are in things like UA rush or vanishes we call today. You know, these are the opportunities that we have. So every undercover product is something which is special and unique. And I feel like we're going to make sure that we get credit for that. That's really great. That's exciting.
Dave Bergman: Dave, any thoughts on the unit versus price in the guide and then just if I can also just throw a more looking at what you repurchase this quarter. How are you thinking about the approach to buybacks just given where the stock is? You're like you're rethinking brand control and recognizing the cash. Gentlemen. Thanks, guys. Sure. Yeah, I mean, I think, you know, adding on to what Kevin said from a price value perspective, you know, we are definitely focusing more on ASP and ASP growth.
Dave Bergman: When you think about the skewer reduction, you know, we are trying to target a little bit more reduction in kind of the good level product and protect and really build and invest in kind of a better and best level product. All at the same time that we're, you know, working our way out of some of the deeper discounted planning and promotions, especially within North America e-commerce. So when you kind of bring that whole equation together, you know, that should lead to driving continued gross margin expansion, which we think is super important for the brand and for the overall business.
Dave Bergman: So that is part of that strategy that comes into play and trying to make sure that we're balancing relative to the skew development and the higher margin product versus lower margin product and also how that plays in the segmentation and continuing to kind of step forward. Better and better and how we segment, which we've we've taken some good strides in the last year or two, but you know, there's still some more room to go there as well.
Dave Bergman: You know, relative to the share buyback program, you know, obviously we are pleased to have the new 500 million program set up. We executed on 40 million of that in Q one and, you know, understanding that we've had some pretty big cash outflows recently with with the settlement and paying down the convertible debt. You know, we are continuing to kind of look at our future cash flow and making sure that we've got the war chest that we want to continue to protect for any kind of curves in the road, you know, as we had to deal with recently or, you know, being able to invest in new ideas and new talent and new experiences similar to the recent on less acquisition that we're working through.
Dave Bergman: So, you know, I don't know that we're going to pursue the share buyback in a huge way this year, but we are going to continue to evaluate it each quarter and make moves as prudent, especially with, you know, thinking where the stock price is right now. Great. Thanks a lot guys, best luck for the rest of the year. Thank you.
Jeff Lowery: Our next question will come from Jeff Lowry with Redburn. You may now go ahead. Yeah, afternoon team. I appreciate that the US is your main focus at the moment, but could you talk a little bit more about the performance of the brand in and the A and APAC and how much is market versus your own reset activity and those regions. Thank you. Thank you very much. We'll start with Europe where, you know, we've got a sort of an underarm or long term in Kevin Ross, who's now running that business force.
Jeff Lowery: And so it's someone who's a vet who's worked here in the States and obviously been over in Europe now, but just took over as recently as January or February of this year. But I think we're doing a really good job. Number one, we came from a good base and May is probably our strongest region from a momentum standpoint, particularly in the UK and, you know, timely enough actually in France and Paris were, you know, sort of an underground favorite with what's happening at the Olympics right now.
Jeff Lowery: But there's there's there's work to be done. I think we're doing a good job playing to the size of the business that we are, you know, we crossed a billion dollars in the past year. And that's something which gives us some size and scale. And what we're doing is we're doing it through the lens of authenticity of, you know, on the pitch. We've got some, you know, incredible athletes like Tony Rudiger.
Jeff Lowery: We've got a great kid named Ferman Lopez, as I spoke about is on the Spanish national team will be competing against France in the final there. And there's really a lens. I think that we're doing a really targeted approach in both men's and women's football on the pitch. And we're also staying really close to our partnerships, JD and sports director and incredibly important to us. And as we see our growth and so wholesale is important, but we're also expected to grow our TTC business and we're investing in this, you know, accordingly.
Jeff Lowery: In longer term, you know, it's an evolution of a quality story, not unlike we've learned here in the US. We're applying from the lessons of what we saw, you know, happen in the US where we're not crazy about where we are right now in North America. And so we're we are doing a pretty good job. I think applying the lessons of how do we make sure we can, you know, advance ourselves with what we do in Europe.
Jeff Lowery: And so I think we're being really patient with the business, which is why you're not seeing maybe a bigger accelerator there is that we weren't we're going to be a little more cautious and make sure number one, aware of the macro environment, but really looking for quality from the long term standpoint. In APAC, it's it's a little bit more complicated is it obviously it's a it's a massive region with with its its own climate, frankly, frankly, and something that we're dealing with, but the macro pressures there, something that we're aware of.
Jeff Lowery: I was over there in in May, and we back in September, working with our leader Jason Archer there as well, this region just requires a little more attention from the home office. So we're looking at how we can be more helpful to lean into our our APAC business, you know, from a size and scale standpoint, just to remind everyone on a global basis under has more than 1,900 stores around the world.
Jeff Lowery: The majority of these are an APAC majority of those are in China, but that's why we're going to excited to get stuff and curry back on tour in September, which will be, you know, hopefully a bit of a fuse for, you know, getting the region going or at least reminding people that were there. But there's a lot to cut through from not only the global brands, but the local brands, so it's a little bit little bit different.
Jeff Lowery: And beyond China, that, you know, I think that the macro is something which we're just watching the consumer and some of the softening there, some of the other regions of what's happening in Japan or South Korea is a bit complicated from an economic standpoint or macro economic standpoint there. But, you know, we think our opportunity is large and, you know, APAC is going to be a massive unlock for us too, so hopefully that gives you a little bit of color.
Jim Duffy: That's great. Thank you so much. Thank you.
Jim Duffy: Our next question will come from Jim Duffy with Diffle. You may now go ahead. Thank you. Good morning. Hi, Dave. Hi, Kevin. Good morning, Jim. I want to talk about some of the management hires. You added a lot of great talent. Eric, a great addition to the team. Kevin, the title of EVP of Brand Strategy. That suggests a lot of responsibility overlap with your historical areas of focus. You may be speaking to your vision for the partnership with Eric.
Jim Duffy: Clearly this was part of the discussion during the recruitment process. And then with Eric on board, where do you expect to be spending more of your time? Yeah, thank you. It doesn't feel too different than it may be a little bit of free bird, but building the brand in the first time. You never really focused on complementing skill sets. If you can get a pro, I'm a pretty good journalist. So I got the ability to plug other places and bring in a professional like Eric on who he's got a multidisciplinary expert as well.
Jim Duffy: But with having his focus over marketing and frankly our strategy work, as I said, is a way to get Eric horizontal in the organization that he can have that impact. Where I think our biggest need is right now is really in that product region and story balance. And we just we haven't had that I think that strength of leadership that's required for us to be successful. So Eric is going to be leaning in there and responsible for building that out.
Jim Duffy: And I'm not lost on what is that going to mean for me because there's plenty of other things to do. And that's where I think it is my job is to make sure that I'm leveling up. Let me just give a little color on the acquisition, but you know, getting Eric here is that unless we'll continue to be its own independent organization force and, you know, I think bringing in sort of the ESG approach that they have with plant based regenerative fashion is something that is is something which is a priority in the organization and Eric of course will help us articulate that.
Jim Duffy: But I think what we want to do is make sure that the largest need that we had was just getting someone who can be the partner to you seen and to Cara. You know, decision rights and the operating model is one of the things that always comes up and one of the things that Eric specifically did, you know, at Audi back in 13 or 14 when he took over there was just working on the operating model of how product and and region and and and.
Jim Duffy: And marketing all work together, so that'll be a real real balance and a real plus for us. So I'm not worried about having things to do. I'm just lucky and appreciative that we were able to track someone like Eric. So I think it's the beginning of many more to come, but I've got to tell you just one thing maybe on a personal level, which is it feels like there's definitely there's something a bit of new and a bit of a shift. And so we're not declaring victory. We're not beating our chest for sure, but we've got a lot of work to do, but we like the direction that we're heading in right now. Great. Thanks for that.
Dave Bergman: And then Dave, just a quick one on the D to see margins. Can you remind us when you'll anniversary the less promotional approach in D to see and get to more normalize comparison on the D to see margins. Yeah, that's a great question. I mean, generally speaking, you know, it'll continue to be a benefit for us through the year, a little bit bigger in the front half versus the back half. And then as we step out of this fiscal year, we should be more on a comparable basis relative to, you know, the e-com gross margins of promotion levels as we've been, you know, kind of chipping away to get to a really nice healthy level by the end of this fiscal year.
Dave Bergman: You know, and we're continuing to kind of test on the factor health side. Which could be something that we play into more to continue to become more premium as we step into fiscal 26. Thank you guys. You're welcome. Thank you.
Paul Lejuez: Our next question will come from Paul Lejuez with city. You may not go ahead. Pete, thank you guys. I'm just going to ask a question here, your guidance. You updated the full year. You gave quarter. I just wanted to make sure I heard correctly. I think you said one 10 to 120. And that would imply pretty large percentage of the full year coming from the first half much smaller from the second half.
Paul Lejuez: So just want to understand what your outlook is in the second half. You both from gross margin. Next you name perspective that would lead to it's a pretty neat numbers. I think in the second half based on the guidance, if I heard it correctly. And then just to separately on the factory business. I think you mentioned mixed results when you adjusted prices. You could just talk about what you saw as you move prices around and what the ultimate plan is for the factory business in terms of number stores and what role that serves within the company.
Paul Lejuez: Thanks. Sure, Paul, when you think about kind of front half versus back half, a couple things come into play there. You know, first of all, when you think about Q one. And that overdrive. And then, you know, what does that mean for the full year. Again, keep in mind that, you know, in the back half, we are expecting a little bit more developing APAC revenue pressure. We're also expecting a little bit higher ocean freight costs than we originally planned.
Paul Lejuez: There's also been some increasing effects pressure. And, you know, there's a little bit of caution that we have as well, just when you think about kind of a recent economic trends. But in general, from an operating income perspective, historically, we've definitely run higher amounts in the first half of the year and a little bit lower in the back half of the year. Some of that, if you think about Q two, that's historically a high revenue dollar quarter for us.
Paul Lejuez: And it's also generally a higher gross margin percentage quarter for us. So driving bigger gross margin dollars in Q two is kind of a historical trend for us. And then that higher front half profitability is also kind of amplified this year by the planned insurance recovery relative to legal invoices paid prior to this year that I mentioned. And also shifting some of our planned marketing spend out to Q three and Q four.
Paul Lejuez: And, you know, maybe the last thing I'd mention there is, you know, back half forecast also carries more incentive compensation compared to the prior year back half where we were adjusting down unfortunately and reversing some of that incentive compensation that was recorded in earlier quarters last year. So when you add all those factors together, you know, it points to the front half being, you know, a substantial portion of our full year operating income, which is how we have things laid out in the plan.
Paul Lejuez: Now, on your second question relative to factory house, I would say that we did step into testing some lower promotion levels and less promotion levels and we actually hadn't really planned on doing that, but as we stepped into that more deeply in e-commerce and we were excited about the results there on e-commerce, we decided to start testing that a little bit on factory house. I would say that it was both the price level, the depth of the discount and the results were really kind of mixed to be honest, we're experimenting, we're learning, we're seeking balance, we did give up a little bit of revenue when we were doing that and so we're continuing to kind of test and learn on the factory house side, but right now I would say that the results from that are mixed and we've got some more work to do. Thank you, good luck, thanks Paul.
Laurent Vasilescu: Our next question will come from Laurent, follow suit key with PNB per week or others, you may now go ahead. Good morning, thanks very much for taking my question, Dave, I wanted to ask for the guidance, should we still assume wholesale is down, low double digits and DTC is down 10% for the year and then with e-commerce down 25%, is that the right way to think about it going forward and is there any lessons learned that you think you can apply to the rest of the business from the pullback and promotions in e-commerce?
Laurent Vasilescu: Sure, yeah, I would say that on full year, we still are looking at wholesale down kind of a low double digit percentage kind of in that 10-12% range and then DTC being down approximately 10% or so and that is mainly driven by our decisions to kind of reset the brand, especially in North America with the e-commerce pullback on promotions and also an elevated product assortment there. Related to e-commerce specific, we're not necessarily giving guidance on that but you would definitely see that being the over indexed decrease within the DTC being down 10%, so definitely down more than 10%, maybe not the full 25 that we saw in Q1 when you think about full year, but again that is intentional, most of that is intentional as we continue to drive through those promotional decisions within North America.
Laurent Vasilescu: Hey, Laurent, let me pile on that too because I think it's really instructive of what happened and what we're able to do through the lens of our full price e-commerce website that frankly hadn't been quite as full price a year ago. We were about 65% of what we were selling a year ago was promotional and about 35% full price and with what we did by reducing significantly reducing promotion days. We didn't quite invert it but we made significant progress in terms of getting to full price sales and so what that did as well is not only did it help us with you saw some the gross margin flow through for ourselves but it also helps the algorithms on our partner websites on the Amazon algorithm that goes around and so you just watched a general rising type result boats here.
Laurent Vasilescu: So as that's occurring it's something that's pretty instructive as we're thinking about you know we keep talking about repairing the brand or what we're doing with the brand or how the healthy the brand is right now. All those things are top of mind and top on the list of what we're going to do but I think we're starting to see some of the models of the ways that we can invest and it'll actually pay off and return for us and so we'll be applying that again we don't have all the facts but we like some of the indications that we're seeing right now we sure like driving a more full price business and that 475 gross margin is something which is be a pretty good indicator for the health of how we're doing.
Laurent Vasilescu: Thank you, Kevin. Yeah, in fact, yeah, the Gross Margin, nice Gross Margin beat on the first quarter. David, I think you mentioned there were three factors that are incremental to the headwinds for the full year. I think you mentioned ocean freight effects and mix from licensed business. Maybe could you for the audience, could you kind of bridge it for us? How much of those were in terms of incremental headwinds versus 90 days ago as we think about the full year guy on the Gross Margin?
Laurent Vasilescu: Yeah, I mean, I think, you know, what I was trying to elaborate on is the main year of year drivers that are, you know, behind our full year improvement still are heavily weighted to the favorable pricing with less DTT discounting and also the supply chain benefits related to the improved product costing those are the two real big positives on the full year. And, you know, obviously we saw a little bit of extra benefit there as we went through Q1, but as we look forward, the impact on freight costs is probably the largest kind of newer developing headwind that's kind of taking away some of that Q1 overdrive.
Laurent Vasilescu: And then a close second to that would be, you know, the foreign currency headwinds that have been developing that we saw during the first three months and that are projected a little bit forward. The change in mix due to licensing sales and some of the challenge margins on the off price channel, that's a little bit of a smaller developing headwind, the first two around freight costs and that facts are a little bit bigger. Okay, thank you. Congrats again on the beat and good luck with back to school. Thank you.
Sam Poser: Thanks. Our next question will come from Sam Pozer with Williams treating. You may now go ahead. Well, many of my questions have been answered. Thank you guys for taking my question. I was wondering just a follow up on the back half guidance when your ship you said that there's a shift out of marketing spend out of out of Q2. Are we going to see, is that going to go more into Q4 because as sort of the beginning of this setup for where you're anticipating improvements into fiscal 26?
Sam Poser: Well, actually, so some of Q1's bottom line overdrive was shifting some of that marketing spend to Q3 and Q4 and then similar with Q2 as well. So we are back loading a little bit more in the back half on marketing than we originally anticipated in our outlook, but it's not all relative to Q4. I mean, some of it is laying into the brand for going into fiscal 26 and beyond, but also making sure that we're really supporting the back to school and also the holiday sales that are in Q3 for us or calendar Q4.
Sam Poser: Thank you. And then secondly, secondly, Kevin and what you were saying, they're sort of, they're sort of is a combination of You mentioned having patience and wanting to do things quickly, and I guess the question is what is the sort of game plan look for turning around to getting North America on the track you want to and how are you balancing patience, brand, speed, all of that as we look forward? I turn 52 on Tuesday, Sam.
Sam Poser: I've actually been growing in mature, I guess. Thank you for the happy birthday. As an entrepreneur, you always feel late. It's got to be done tomorrow, and that's something which has been somewhat of a strength and at times it can be difficult, especially you get large and need to scale as an organization. But I think really coming into our own as a business, we were opening this new headquarters, which is beautiful here in Baltimore.
Sam Poser: I don't know if that's exactly where shareholders would have liked to us to spend money, but this thing is built, and it's going to be an incredible edifice for us that today we think it's going to be a massive asset for the business. So I think really it's matured of just recognizing the hand that we have. I've used this analogy of how to pair two's and we've had a world flush before, and today we have neither, but we've been able to win with both.
Sam Poser: I feel pretty good about the hand that we have, and just looking at the assets. I've sort of said, we've got 100 things to fix at UA, and of those 100 things, I'd say probably 75% of them are self-inflicted. The good news about that is that we can identify them. We can tweak them. We can make them better. The other great thing is that while we have 100 things to fix, we also have 1,000 things going for us.
Sam Poser: When I think about just the sports marketing aspect, I'm not going to let Dave hear this, but I think with Notre Dame and IMG, this is probably enough just to build a sports brand with the credibility of one of the best high schools, and it's not the best high school, and one of the best colleges, it's not the best college in the country. That's very regional in terms of how I think about it in North America, but it's going to come in time.
Sam Poser: We've got half a billion dollars to spend in marketing. It doesn't feel like we're spending it. I want that impact to be there. We've got an incredible, I think, just platform that we have with performance and technical and design and style, and we just haven't played our best game there yet. I'm really excited about this next chapter of maybe applying the lessons that have been learned over the years. They talk about, we're thinking about Europe and looking at what's happened in the US and how we can maybe make better decisions and choices there, but we've got a great hand to play.
Sam Poser: I think we're putting an A-plus team together. It's super exciting of having a dude, and I say that like a dude, like Eric, coming on board to join our team because we've got some really good UA experts, industry experts that are surrounding this table and just put us in a position to, we can't guarantee anything, but I like our chances and I'll play this hand every day. If I can just follow up real quick, I mean, I'm really talking about timing, and are you thinking of building this out in getting the North America turned around?
Sam Poser: Is it going to take 18 months and you're going to do it sort of slow and steady? What kind of time frame do you have in your own definition of getting... North America on the right track. How are you thinking about that? It is a 12 month thing or 18 month thing. That's what I'm trying to get married. I think after the last call, we sort of pin people to fall 25 and so we sort of gave ourselves this 18 month outlook.
Sam Poser: But to be honest, I don't know if there's a definition where you say we've done, we're done. This is just going to be a constant iteration and work in progress. So I think you'll start seeing it. Again, we're not sitting on our hands until fall 25. We've got some great product in the marketplace right now. There's incredible things we have with our meridian platform, unstoppable platform that our team has been on for a while and so our base layer platform.
Sam Poser: There's just some easy things that we can do to make sure that we're getting full credit. I don't think that people see us as unless you did grow up 15 or 20 years ago. I'm not sure if you see compression as being an underarmist founding product and so we need to make sure that we're giving the respect to tell the story of the products that we're building. So I'm really confident and excited about how that I can't emphasize enough of where an organization that just needs to be focused on product story region.
Sam Poser: Make sure those three aspects are coming together quickly. So yeah, I don't know if it's long, but you're going to see constant progress. I think you'll see things like, wow, that was a really great spot from the UA. That was a really cool product. There's some things that you can get behind. And then you'll watch us begin to do the skewer reduction, distort for the products that are working. And it doesn't just mean it'll be best level products, but that's that characteristic I said is that we don't have to abandon some of the current consumers we have in order to just start making more better and best level premium product.
Sam Poser: And I think Sam, you know, even though we're not ready to talk about, you know, fiscal 26 or 27 revenues for North America, one thing you can be assured of is that we're going to keep driving forward on being a healthier business in North America. And I think that's that's really what we're excited about right now and we'll talk more about the future and coming calls.
Sam Poser: Thank you very much. Thank you, Sam.
Operator: This concludes our question and answer session as well as the conference. Thank you for today's presentation. You may not.