Q2 2025 Under Armour Inc Earnings Call
and John Lee, of the American Heart Association. We thank you for your support. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.
[music].
Okay.
Thank you.
Speaker Change: Good morning, and welcome to the under Armour Q2, 'twenty 25 earnings Conference call.
Speaker Change: Good morning and welcome to the Under Armour Q2 2025 Earnings Conference Call.
All participants will be in listen only mode.
Speaker Change: Should you need assistance. Please signal conference specialist by Christmas Starkey, followed by zero.
Speaker Change: Today's presentation, there will be an opportunity to ask questions.
Speaker Change: That's a question you May press Star then one your telephone keypad.
Speaker Change: To withdraw your question. Please press Star then two.
Speaker Change: Please note this event is being recorded.
Speaker Change: I would now like to turn the call to Atlanta, Omega Senior Vice President Investor Relations Treasury and corporate development. Please go ahead.
Atlanta Omega: Good morning, and welcome to under Armour second 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 CFO, Dave Bergman.
Speaker Change: Our remarks today will include certain forward looking statements that reflect under armour management's current view of our business as of November seven 2024. 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 benefits may differ materially from those expressed or implied in the news.
Speaker Change: 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 10-K, and our quarterly reports on Form 10-Q. Today's discussion May also include non-GAAP references under armour believes these measures gives investors a helpful perspective on underlying business trends.
Speaker Change: [noise] 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 Dot under armour Dot com with that I'll turn the call over to Kevin. Thank.
Kevin Plank: Thank you Lance and to everyone for joining us on this morning's call.
Kevin Plank: At the halfway point of fiscal 'twenty five we're pleased with another quarter of profitability ahead of our outlook. That's the gross margin improvement from actions, we've taken to reduce promotions and discounting in our DTC businesses and ongoing initiatives that improved product costing.
Kevin Plank: Although we are early in our reset I believe this demonstrates that our strategies to strengthen this brand are beginning to gain traction. Our team is working incredibly hard and diligently to build a better business and so proud of this collective effort.
Kevin Plank: So we still have much work to do we're on offense and are committed of reconstituting the under armour brand deliberately and methodically.
Kevin Plank: With a roughly $50 million second quarter adjusted operating income beat compared to the outlook. We provided in August we are splitting the difference in allocating about half of those dollars to a revised adjusted operating income outlook for fiscal 'twenty five.
Kevin Plank: The half will be invested in marketing and brand building efforts to deepen our connection with consumers.
Kevin Plank: Q2 also marked another quarter of planting our flag as a sports house, meaning one of only a handful of athletic brands globally, who can credibly outfit athletes head to toe on field court or pitch in virtually any sport worthwhile endeavor.
Kevin Plank: We will defend and build on this position to exploit our global opportunity and to be clear under armour is more than just a single category of activity of athletic excellence and this breadth is what provides us with the sports house status to build from.
Kevin Plank: And what differentiates the UA sports house from the other brands on the podium with US is our position as the brand for the little Guy or a little girl, who does not have the size of our resources to truly compete therefore, we're not innovating so that our athletes and teams can run up the score, but simply to give them that fighting chance to.
Kevin Plank: Pete.
Kevin Plank: This tri heart persona and grit that defines Yue has four key attributes.
Kevin Plank: Italy's sports innovation and passion.
Kevin Plank: This is a constant news and describes our affinity for the underdog the athlete who puts in the work from pillow to podium looking for every edge possible from their training studying and especially from their gear.
Kevin Plank: The ones, who have no choice, but to apply the rule of 10000 hours to achieve excellence in their sport.
Kevin Plank: And it will also are seeking a competitive edge from the best Athletic performance apparel footwear and accessories on the planet. These are our under armour athletes.
Kevin Plank: Because of this we must use every resource and waking hour to help them improve.
Kevin Plank: This mindset drives our product storytelling and commercial strategies ultimately expressed by the perfectly balanced UA logo wear.
Kevin Plank: The top is the same as the bottom the left is the same as the right.
Kevin Plank: And an ambition or at the least the metaphor for the gear that we make performance apparel and footwear meant to prevent you from getting too hot or too cold targeting equilibrium in every wearing occasion.
Kevin Plank: Symbol of our athletes underdog spirit with something to prove.
Kevin Plank: Our North American DTC business was also down during the quarter driven by a continued decline in our ecommerce business, resulting from proactive strategies to reduce promotional activity and we also experienced lower retail store sales.
Kevin Plank: EMEA revenue was down 1% on a reported and currency neutral basis.
Kevin Plank: Given by a decline in our wholesale business, partially offset by strength in DTC.
Kevin Plank: Revenue in APAC was down 11% were down 10% on a currency neutral basis due to declines in our wholesale and DTC businesses.
Kevin Plank: Amid a soft macro environment that continues to impact consumer traffic.
Kevin Plank: In Latin America revenue was down 13% were down 4% on a currency neutral basis.
Kevin Plank: Growth in DTC, partially offset the decline in our wholesale and distributor businesses.
Kevin Plank: From a channel perspective, our wholesale revenue was down 12% in the second quarter, driven by softer demand in our full price and distributor businesses and lower sales to the off price channel.
Kevin Plank: Consumer revenue declined 8% with a 21% decrease in e-commerce as we expected given strategies to drive a more premium online presence through reduced promotions and discounts.
Kevin Plank: Sales from our owned and operated retail stores were flat in the quarter.
Kevin Plank: Licensing was down 13%, primarily due to a decline in our North American business.
Kevin Plank: By product type.
Kevin Plank: Apparel revenue was down 12% with declines across most categories in the quarter, while we had good performance in outdoor.
Kevin Plank: Footwear was down 11% with declines in most categories, however, relative strength in golf and team sports, particularly accretive products, partially offset the decline.
Kevin Plank: And our accessories business was up 2% in the quarter.
Kevin Plank: Our second quarter gross margin increased by 200 basis points to 49, 8%.
Kevin Plank: This increase compared to the prior year was driven by 120 basis points of supply chain benefits due mainly to lower product costs.
Kevin Plank: 50 basis points from a favorable channel mix, driven principally by a reduction in off price sales and.
Kevin Plank: And 40 basis points of pricing benefits due to lower discounting and promotions, mainly in our direct to consumer business as we work to drive a more premium position for our brand and lastly, we also had lower markdowns in the wholesale channel.
Kevin Plank: These benefits were partially offset by 10 basis points of headwinds from unfavorable foreign currency impacts and regional mix.
Kevin Plank: The significant gross margin outperformance in the quarter relative to the outlook. We provided in August was due to three main factors first we saw increased supply chain benefits from additional product cost savings compared to our plan along with lower than expected freight costs.
Kevin Plank: Wholesale markdowns and allowances were less than initially anticipated.
Kevin Plank: And third our channel mix was more favorable due to lower than planned sales to the off price channel.
Kevin Plank: Next SG&A expenses were down 15% to $520 million in the second quarter.
Kevin Plank: As mentioned on our last call our second quarter benefited from a shift in the timing of marketing expenses in this case about $15 million, which is in our third quarter outlook.
Kevin Plank: Excluding roughly $13 million and benefits from a litigation related insurance recovery and approximately $3 million and net transformation expenses related to our fiscal 'twenty five restructuring plan.
Kevin Plank: Second quarter, adjusted SG&A expenses were down 13% to $530 million.
Kevin Plank: This decrease was primarily driven by lower marketing expenses and some of our brand investments are concentrated in the second half of the year.
Kevin Plank: As anticipated, we also recognized a $27 million SG&A benefit due to an insurance recovery for legal fees incurred in previous years.
Kevin Plank: Lastly, ongoing cost management actions, including head count reductions also influenced the decrease.
Kevin Plank: Moving down the P&L, we recognized $3 million in restructuring charges, which together with a $3 million and transformation expenses booked in SG&A.
Kevin Plank: <unk> and $6 million in restructuring charges and related expenses for the quarter.
Kevin Plank: great addition to the team and really fit in. You know, he's someone that, you know, coming from the industry.
Kevin Plank: He not only speaks our language, he speaks our dialect, so the learning curve has been very small. And also, you deal with a good, confident executive. It's great to see. And so I think that's been really seamless. And coming in the mandate for Eric was really in three parts. His title was brand strategy, and first of all, within that was the strategy and for us to coordinate the strategic business plan for the organization.
Kevin Plank: lock us up between brand, financial, commercial objectives, because while we've had these things in place, I think a refined lens on them has been important.
Kevin Plank: The second thing I asked Eric to help with is really the operating model, which is...
Kevin Plank: Again, I'll use the word refining our category management structure and enhancing our go-to-market where we can just be more coordinated, and whether that's just here in the U.S. across
Kevin Plank: you know channels be it wholesale or retail or what we're doing in our factory house or online.
Kevin Plank: as well as what we're doing, you know, in other regions and coordinating so we feel like one large brand versus a lot of small pieces. And so, there'll be more to come on that. And then in marketing.
You know, it's one thing about this business where...
Kevin Plank: Really that the primary focus was Eric to help us, you know in the marketing component We've got a half a billion dollar plus budget for marketing, but it sure doesn't feel that way And so that's priority number one. I mentioned my prepared remarks our ambition or plan is to build a and to bring on a
Kevin Plank: a major campaign that we'll have in 2025. And that's just looking and saying...
Kevin Plank: It's not that we don't have enough money, we just don't like how we've been spending it. And so, us really getting surgical in the way that we're looking at that is important. And all this to, you know, contextualize this underdog persona as we, you know, head towards this sort of...
Kevin Plank: circling Fall-Winter 25. And this isn't a wait-and-see, and this isn't there's going to be some line that we cross in Fall-Winter 25.
Kevin Plank: There's several proofs of life that you'll see along the way from product and from brand and story, but it gives us a really good target and we're pleased of where we are right now. So taking a room in our marketing to build a comprehensive campaign.
relative to gross margin, you know, longer term.
Kevin Plank: There's nothing structurally prohibiting us from driving more towards 50% over time.
Kevin Plank: When you think about some of those longer-term tailwinds for next year and beyond.
Kevin Plank: continue lower promotions as we can continue this reset play. You know, higher mix of DTC percentage, including higher ASPs and better segmentation, etc. You know, there will be a continued headwind, we believe, with footwork growth outpacing apparel growth longer term.
Kevin Plank: but we're okay with that. And relative to the front half-back half, you know, relative to gross margin, and there's really a couple different things, there's gross margin, there's SG&A.
Kevin Plank: But gross margin, Q2 is generally our highest gross margin quarter to start, just as our brand.
Kevin Plank: And then when you think about the back half, we normally have more seasonal promotions in Q3, so that's something that's obviously coming into play here. And then also there are some supply chain headwinds in the back half with a little bit more ocean freight pressure and some tougher prior year comps.
Kevin Plank: So all of that is kind of built into our back half gross margin profit, and you can understand then why front half versus back half gross margin is a little bit different. But maybe taking that a step further and how it translates all the way down to operating income, there's even a bigger differential within SG&A spending.
You know, here.
Kevin Plank: You know, adjusted SG&A, we're thinking that we're going to be up year over year compared to a 10% decline in the first half, and you kind of ask, why is that?
Kevin Plank: You know, the second half obviously does not include a $27 million insurance recovery that we saw in Q2. And then the marketing is a really big piece. You know, we're actually planning roughly $40 million more of marketing investments in the back half of this year versus the front half.
Kevin Plank: as we kind of ramp up around key commercial moments and also, as Kevin mentioned, reinvesting some of the profitability upside. So when you kind of add that gross margin timing difference and you add the SG&A differences,
Kevin Plank: It kind of points to the front half of our year, for this fiscal year anyway, we're earning about 90% of our operating income for the full year. So it is a little bit interesting, and there's a lot of pieces there, but I just wanted to try and help make sure everybody grasped that.
Great. Thanks a lot, guys. Best of luck into holiday.
Thank you.
Our next question will come from Jay Soule with UBS.
You may now go ahead.
Speaker Change: Great, thank you so much. You know a lot of exciting things to talk about but Kevin I want to ask you about a comment you made that you're getting strong feedback on new products
Speaker Change: Can you just elaborate on that a little bit? Tell us a little bit more about these new products. Tell us more about the feedback you're getting. And if you give us a sense of how retailers are really responding in terms of their orders, that would be super interesting. Thank you.
Yeah, thank you, Jay. We've got...
Speaker Change: But we've got work to do and so, you know, I think right now we're we're running a bit of a bit of a better business but what's
Speaker Change: What's difficult in our industry with an 18-month go-to-market, typically, is we still have time before we'll start seeing a lot of these things hit the market, be it the product, especially, and the marketing, of course. As I mentioned, there'll be plenty of proofs of life.
Speaker Change: We've got I think our pipeline right now with what you've seen, our product team, John Barbados, Yaron, our entire group plus this incredible group of experts that we've had here in place at UA. I think our product pipeline is really as healthy as I've seen it. We've got a lot of things that are exciting, we've got some
Speaker Change: drops that are coming for Q1 of calendar 25 but then as I said it's really going to be an anchor around fall winter 25 and so we're going to give you a lot more color at our investor day coming up December 12th as well so we want to make sure that people make a point to come see and visit us there it'll be somewhat qualitative and what we're doing is going through the topics of talking about the business
Kevin Plank: But, you know, we've got an update to our Slip Speed product that's coming in first quarter, which should be really exciting.
Kevin Plank: And then again, I think that we're doing a good job in some of the places we're winning. You know, it's the basics. It's UA compression and base layer that's working for us right now. Unstoppable is a franchise that you've heard us talk about consistently. The Vanished Men, as I mentioned in the prepared remarks, as well as Outer War, are doing pretty well for us, too.
Kevin Plank: What we found is, I feel like we've got this organization where the pipes are laid.
Kevin Plank: Not only to the product, but making sure that we're getting the shelf space and the relationships that we have with retailers as well. Making sure that we're sequencing also is doing a good job with the way that we can tell the stories of those products on e-com. But making sure we're spending, making $1 spend like $3 as we say here at UA, and really getting the bang for the buck when it comes to making it a compelling story.
Kevin Plank: Just going through product and making sure that product and story have this function. I mentioned product marketing and commercial working together, but something as simplistic as I've said before on the calls is...
Kevin Plank: You know, what it is, what it does, and how it makes you better.
Kevin Plank: you know, going to retail at times, you know, we've become a bit of a brand that's being sold on price, and there's just so much more to the incredible products that we make. And so, with our story there, you know, you're just selling shirts and shoes, and the world doesn't need another capable, parallel footwear brand. The world needs hope. And that's what we think Under Armour can be, and so that's really...
Kevin Plank: I'm not sure sort of where this inflects for the business, but one thing I can tell you is that we don't know exactly when it is, but it's not too distant of when this brand inflects, and that will be the real metric that we're looking to build forward on.
Speaker Change: Our next question will come from Bob Druble with Guggenheim. You may now go ahead.
Speaker Change: Hi, good morning. Just on North America, Kevin, when you look at where North America is and the reset, you know, how is it working and do you expect North America to grow in FY26?
Yeah, thank you, Bob.
Kevin Plank: We're not looking at 26 just yet but let me tell you a few things that we're thinking and we do know about about North America. We've got we've got work to do in this market but we also have a brand that has great affinity and I don't believe the consumers mad at us. We just have to give them a reason to want to engage with us again.
Kevin Plank: Probably one of the things I'm most proud of in the first seven months of being back in the CEO chair is identifying and defining for
Kevin Plank: our own team as well as beginning to for our consumers of who we are and who we stand for which is this underdog thematic that you'll begin to see come through and that's not meant to be a little translation but more the directionally of what and who we are because it's just frankly authentic and we think we're the only ones who could hold that position.
Kevin Plank: But we think it's going to mean something here in the U.S. especially. And then we'll see that it gives you the ability to set the tone for both EMEA and APAC as well. This revenue step-down that we've done, it's allowed us to test some things. We've reset our e-commerce business. And as a part of that, you saw the significant benefit it's had to gross margin.
Kevin Plank: This underscores for us that there was a test. The world wants Under Armour. We're a brand that's earned the right to exist and that we're a premium brand. And so as long as we sort of clear out some of the noise that we've had around some of the lower ASD products and get ourselves to a more full-priced front foot tenor, I think you'll see the strength from us.
Kevin Plank: But that's not going to happen from wishful thinking either, or just a fancy ad campaign. It means better products. And so what the team has done...
Kevin Plank: from taking us from competing on price to competing on science and design.
Kevin Plank: But this is going to take some time. As I mentioned, there are probably several proofs of life that you'll be able to see. Some of them may be a lottery ticket.
Kevin Plank: You never know. It's why I like to say that success and mediocrity are typically next to our neighbors. So how far away are you? But we have some product we really like that's coming in. As I mentioned, that slip speed in the first quarter is really powerful. This neo-last expression that we have coming is going to be really exciting. And then sportswear for UA is also a huge opportunity where you'll continue to see our bent there really begin to grow.
But the shift to more premium
Kevin Plank: One thing I want to be clear on is I don't think that we we don't have to stop selling good level in order to Premiumize this brand we just need to focus more on some of our our better and best level product And so I think a lot of the things with from the product and the story side and then of course the relationships at the Accounts what we're doing with our own ecom and our own store faces well matters
Kevin Plank: But some of these bigger structural things, as I mentioned, what Eric's doing in adding to an incredibly talented executive team, I feel that we've assembled.
Kevin Plank: category management is going to make a difference to SKU rationalization eliminating 25% of our SKUs over the next 12 to 18 months just gives us just clear focus and makes it easier for the consumer all that with a healthy attention on cost management of course and so
Kevin Plank: We want to elevate the brand experience. We want to do that in our factory houses. I think there's some pretty significant margin opportunity for us there, our brand houses of course.
Kevin Plank: and then just these relationships with wholesalers. You know, I said in my prepared remarks this idea of ensuring that our, you know, strategic partners know their strategic partners.
Kevin Plank: And that extends beyond just our customers. It goes to our factories. It goes through our vendors. It goes really across the board for this brand.
I think that North America is, as we've...
Kevin Plank: Stabilizing this ship, we think that there's great upside for Under Armour, but we're incredibly optimistic and we like where we are, we like our team, we like the position we have, we think we got a pretty good shot.
Speaker Change: Great. And if I could just jump in with one more. I think Dave mentioned additional marketing dollars in the second half. What will those dollars be spent on?
Thanks, Bob. Let me take that.
Um...
Kevin Plank: We're thrilled with the overdrive of $50 million. It's big money, but we're going to split that and give $25 million of it to the bottom line, and then we're also going to be putting that across the different regions with EMEA, APAC, and the Americas. This is going to be a lot of top-of-the-funnel brand building in Europe, where I think all three regions are pretty much in different places as well. Europe's probably our strongest region right now. We've already got a campaign that's in place and in flight, so we're going to be bolstering that.
Kevin Plank: We're going to be a little more defensive in APAC, which is an area that we think that
Kevin Plank: We're really going to dig in and I'm going to spend more time
Kevin Plank: on China and our business there as well. Beginning in the first quarter as we turn into the new year.
Kevin Plank: And then here in the U.S., we're going to put a proportion of that towards some of our topofunnel.
again with the fiscal year going through March.
Kevin Plank: as we roll into fiscal year 26, this underdog position that we have. But there's a lot of great things that happened in the first quarter of 2025, specifically the 2025 NBA All-Star Game, which is going to be held in San Francisco.
Kevin Plank: should be like a homecoming for Stephan who will be hosting that effectively. Super Bowl, March Madness, and so there's a lot of places where again we can just start getting this perspective of the brand which is maybe a bit of a new Under Armour but something which feels incredibly natural in just who and what we are.
Thank you.
Thank you. Thanks, Bob.
Speaker Change: Hey, thanks guys. Two questions. First, as you guys further embrace the underdog persona, as I think you called it, Kevin, what does it mean for how you're going to use professional athletes as brand ambassadors going forward? Should we expect any change there? And then second, in this case, if you can just give an update on where you think inventory levels and promotional levels are in each of your major markets right now and as you look out the holiday.
Speaker Change: Yeah, thanks, Paul. I think that this persona is something which, you know, this isn't lost on...
Speaker Change: you know that pros don't don't apply to it and of course the changing landscape what NIL means and what's happening with sports marketing and sports marketing assets.
Speaker Change: The unique aspect of UA when we talk about being a sports house, it means that we sort of run the spectrum from...
to American football, to football in Europe, to...
Speaker Change: basketball and you know there's probably no better example of you know what I describe as that underdog athlete is those that weren't given all of God's gifts but
Speaker Change: somehow have to, you know, work a little harder and train a little more and apply that rule of 10,000. Probably Stephen Curry is the one who's changed the game of basketball by doing exactly that. He didn't come out and he wasn't the tallest, the biggest, or the fastest, but he just...
Speaker Change: he took a focus on something that allowed him to compete there. So we think we can do this both high and low, with elite levels like Estefan, all the way down to the more personal stories that you'll see at the NIL collegiate level as well. And so I'm not sure if you asked me to line up all those that feel like they're going through a hard time right now, had to overcome something pretty difficult and try to get to where they are. That's a pretty consistent feeling is that just about everybody feels that way. So we think we're going to tap into that and we think it's incredibly true and authentic to who and what this brand is as well. So we think there's a bit of an unlock for us there.
Speaker Change: And this is Dave, you know, relative to the inventory question.
Speaker Change: I think what we're seeing is the industry inventory levels are definitely a little better positioned today, though I think there's still some retailer conservatism out there that's kind of leaning towards...
Kevin Plank: a little softer demand, and it's also still a very intense competitive environment. So, you know, we're still seeing a little bit of retailer conservatism remaining, and therefore kind of reluctance to kind of go after big increases in orders, etc. But, you know, as far as, you know, where we see ourselves,
Kevin Plank: You know, we think the overall size of our inventory is good right now in the market and what we have in our DHs.
Kevin Plank: We expect that level to fall a little bit more as we close out the year.
Kevin Plank: And on the composition of our inventory, you know, the majority is...
is current season with active demand.
So the aging of our inventory is in good shape.
And there are significant differences by region and product type.
Kevin Plank: But there's not really much to call out as far as where we stand as far as aging or anything like that. So we continue to manage well. We think we're in a good spot. We're going to start working further on inventory turns in the future years, but we're pretty comfortable with where we are right now.
Thanks. Thanks, Paul.
Our next question will come from Brian Nagel with Oppenheimer.
You may now go ahead.
Hey guys, good morning. Thanks for taking my question.
Kevin Plank: A couple of questions. First off, tariffs are now another hot topic. Any thoughts there from Under Armour, from a sourcing perspective, how you would be able to manage any increase in tariffs?
You know, Kevin, you talked about in your comments.
Kevin Plank: just to be able to push back to wholesale and re-engage you with your wholesale partners. I know it's early, but where are we in those conversations, and how are some of those initial conversations going? I guess the question I'm asking is, you're talking to these wholesale partners, what is it they're really looking for, and what timetable from Andromeda?
Speaker Change: Hey, Brian, this is Dave. I'll jump in on the tariffs.
Kevin Plank: You know, as we're sitting here today, obviously, you know, we've got the election results and we're going to keep an eye on how that kind of unfolds.
Kevin Plank: It'll be interesting to see how things develop with whether we still have a split Congress or not. I think that's really going to impact some things if it goes one way or if it stays split. And we're going to continue to monitor it. Obviously, there could be some higher tariffs. There could be some U.S. duty implications.
Kevin Plank: that could impact our cost of goods sold and gross margin and a little bit with income tax expense.
Kevin Plank: But it's something that we were prepared to manage pretty well before. We'll continue to manage it as best we can going forward. So right now, we're not anticipating any real sizable impacts, but it's something we're going to keep monitoring.
Kevin Plank: Kevin, do you want to jump on the wholesale partners? Yeah, thanks, Brian. I think that, you know, I've had a...
Kevin Plank: Essentially, when you talk to our counts is, you know, they're, they're, they're...
Kevin Plank: They're generally so happy and looking for partners that can break through. I mean, you've got to remember, a lot of the people we do business with, they've had, the majority of them are open to buy, like greater than 40, 50, 60%. It's typically been dominated by one brand, so when they say they're rooting for you, they really mean it. But I imagine they say that to lots of partners.
Kevin Plank: So what we have to do is we have to find product that cuts through.
Kevin Plank: And I've got to say, my first seven months, I've had the benefit of being everywhere from.
across Europe from Manchester to
from Amsterdam to London, across Latin America.
Kevin Plank: across Asia, as well as taking in some football games, as well as going to see our key partners and customers that we have here.
Kevin Plank: There has been, you know, no mold has been growing underneath of our feet. We are certainly moving and making sure that we're sitting down and talking to customers.
Kevin Plank: We're also, with our new headquarters, we've also been inviting a lot of people here to show them that we play a great home game.
Kevin Plank: and I'll let people feel what's happening with this brand because
Kevin Plank: It's hard to say is that, you know, as I said, the brand will inflect.
Kevin Plank: sooner than the business will inflect. And you can start to feel that. I think that between Yasin and the product teams and now with Eric coming on board, to be able to unlock that.
Kevin Plank: everything does something every product is meant to help you get better and so whether that's the performance products we put on field or whether it's us entering a category like sportswear there's a differentiator that makes it UA
Kevin Plank: benefits that we're able to story tell, making sure, because I don't think our story has been told.
Kevin Plank: either A, who this brand is or B, what the products do.
Kevin Plank: We're going to do a much better job of that. So these retailers are rooting for us, and we feel an obligation to do a good job for them. We've got a longstandingā¦
Kevin Plank: history, but we don't have as much shelf space as we once had, and so it's our job to earn that season by season, and we feel really good about what the future looks like. Unfortunately, it's not going to happen all at once, but we are certainly in this fight.
I appreciate all the color. Thank you.
Thank you. Thanks Brian.
Pardon me, John, you and I may be muted.
Kevin Plank: We lost the polo call. There were two on there, operator. Maybe try the second one. There were two in the queue under John. Not sure what happened.
Okay, one moment.
Speaker Change: John, if you would like to join the queue, please press star then 1.
I guess we lost him to Pluto.
Kevin Plank: Yep, we'll go ahead and conclude our call on that then. And John, if you're listening and can't get in, we'll give you a follow-up call on that. Appreciate it, buddy. So thank you everyone for joining us today on our second quarter fiscal 2025 call. Much appreciated. Terrific. Thanks, everyone. Thank you.
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Speaker Change: Good morning and welcome to the Under Armour Q2 2025 Earnings Conference Call.
Speaker Change: All participants will be on listen-only motion. Should you need assistance, please signal conference specialists by pressing the star key followed by zero.
Speaker Change: At today's presentation, there will be an opportunity to ask questions.
Speaker Change: If you have a question, you may press star 1 on your telephone keypad.
To withdraw your question, please press star 1 and 2.
Please note this event is being recorded.
Speaker Change: I'd now like to turn the call to Lance Allega, Senior Vice President, Investor Relations, Treasury and Corporate Development. Please go ahead.
Kevin Plank: Good morning and welcome to Under Armour's second 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 CFO Dave Bergman.
Speaker Change: Our remarks today will include certain forward-looking statements that reflect Under Armour Management's current view of our business as of November 7, 2024.
Speaker Change: These statements may include projections for our business in the present and future quarters and fiscal years.
Speaker Change: Forward-looking statements are not guarantees of future business performance, and our actual benefits may differ materially from those expressed or implied in the views 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 10-K and our quarterly reports on Form 10-Q.
Speaker Change: Today's discussion may also include non-GAAP references. Under Armour believes these measures give investors a helpful perspective on underlying business trends.
Kevin Plank: When applicable, these measures are reconciled to the most comparable U.S. GAAP measures. Reconciliations, along with other pertinent information, can be found in this morning's press release and at about.underarmor.com. With that, I'll turn the call over to Kevin.
Kevin Plank: Thank you, Lance, and to everyone for joining us on this morning's call.
Kevin Plank: At the halfway point of Fiscal 25, we're pleased with another quarter of profitability ahead of our outlook, thanks to gross margin improvement from actions we've taken to reduce promotions and discounting in our DTC businesses, and ongoing initiatives that improve product costing.
Kevin Plank: Although we are early in our reset, I believe this demonstrates that our strategies to strengthen this brand are beginning to gain traction.
Kevin Plank: Our team is working incredibly hard and diligently to build a better business, and I'm so proud of this collective effort.
Kevin Plank: Though we still have much work to do, we are on offense and are committed to reconstituting the Under Armour brand, deliberately and methodically.
Kevin Plank: With a roughly $50 million second quarter adjusted operating income beat compared to the outlook we provided in August, we are splitting the difference and allocating about half of those dollars to our revised adjusted operating income outlook for fiscal 25.
Kevin Plank: The other half will be invested in marketing and brand building efforts to deepen our connection with consumers.
Kevin Plank: Q2 also marked another quarter of planting our flag as a sports house, meaning one of only a handful of athletic brands globally who can credibly outfit athletes head-to-toe on field, court, or pitch in virtually any sport or athletic endeavor.
Kevin Plank: We will defend and build on this position to exploit our global opportunity.
Kevin Plank: And to be clear, UNRM is more than just a single category or activity of athletic excellence. And this breadth is what provides us with the sports house status to build from.
Thank you.
Kevin Plank: And what differentiates the UA Sports House from the other brands on the podium with us is our position as the brand for the little guy or little girl.
Kevin Plank: who has not had the size or resources to truly compete.
Kevin Plank: Therefore, we are not innovating so that our athletes and teams can run up a score, but simply to give them that fighting chance to compete.
Kevin Plank: This try-hard persona and grit that defines UA has four key attributes.
athletes, sports, innovation, and passion.
Kevin Plank: This is our constant muse and describes our affinity for the underdog, the athlete who puts in the work, from pillow to podium, looking for every edge possible from their training, studying, and especially from their gear.
Kevin Plank: The ones who have no choice but to apply the rule of 10,000 hours to achieve excellence in their sport And who also are seeking a competitive edge from the best athletic performance apparel footwear and accessories on the planet These are our Under Armour athletes
Kevin Plank: Because of this, we must use every resource and waking hour to help them improve.
Kevin Plank: This mindset drives our product, storytelling, and commercial strategies, ultimately expressed by the perfectly balanced UA logo.
Kevin Plank: where the top is the same as the bottom, the left is the same as the right.
Kevin Plank: And an ambition, or at the least, the metaphor for the gear that we make. Performance apparel and footwear meant to prevent you from getting too hot or too cold. Targeting equilibrium in every wearing occasion.
Kevin Plank: The symbol of our athletes underdog spirit was something to prove.
Kevin Plank: being clear about who we are and where we're going, front and center in all interactions.
including those with retailers, athletes, and teammates.
Kevin Plank: A direction that is being received well as we've taken this narrative to our partners and we will build on from here.
Kevin Plank: As a podium brand with a foundation of performance products forged at the highest levels of athletic competition, we work tirelessly to deliver head-to-toe outfitting with style, fit, form, and function.
Kevin Plank: Across the high school, club, and professional levels, UA must give athletes an edge to perform, feel, and look their best.
Kevin Plank: We will honor our nearly 30-year history with that hard-earned place on the podium by elevating our products, amplifying our stories, delivering best-in-class service, and empowering our team to drive consistent execution.
Kevin Plank: As we have said previously, this chapter is not a repeat of the first time building the brand. There will certainly be parts that rhyme. We plan to utilize every tactic, relationship, strategy, or ethos that served this brand in the past to our benefit.
One of those is certainly product, story, service, and team.
Kevin Plank: Four powerful dimensions that, when working in concert, can drive this brand to greater heights.
Kevin Plank: This is what we have brought to life, what we are evangelizing internally and externally, and what we are executing against.
Kevin Plank: The elevation of our product offering continues to gain momentum. This includes a critical mass of new products designed and developed by our expert product team, with an immediate focus on our men's apparel business and footwear, as well as a significant evolution in style and innovation offerings as we work toward fall winter 25.
Kevin Plank: Based on previews and the initial sell-in cycle, we've received strong feedback showcasing products with brand new innovations, refreshed design direction, and a holistic approach to outfitting our core revenue categories, training, running, basketball, sportswear, and golf.
Kevin Plank: In the meantime, we've refocused and relaunched basics like base layer compression, where we have market leadership, which gives us the ability to change our trajectory.
Kevin Plank: This includes recent success in premium distribution with heat gear, franchises like Unstoppable, particularly Fleece, as well as our Vanish training collection and an increasing but targeted selection of UA sportswear.
in addition to what we call Trojan horse products.
Kevin Plank: Recently articulated in accessories with the self-form uncrushable hat, where we showcase what underarmors take on a category as seemingly ordinary as a ball cap, that traditionally has been only the logo on the front that differentiates it from other brands.
Kevin Plank: and applied the performance lens of stretch, recovery, and moisture management, which also allow us to charge a premium of $45 to a category that typically sells for less than $25.
Kevin Plank: This is the type of consistent innovation and premiumization you should now expect from UA with the purpose of making your consumer wonder. They put this much performance thinking into a hat, I wonder what their shirts and shoes are like.
Kevin Plank: In footwear, we're making some of the greatest strides with our enhanced product team having an impact. There's much work to do, as we're experiencing challenging results in the near term, particularly in our good level products.
Kevin Plank: While it will be a couple of seasons until it hits the market, we've taken a different tact here, with good level, refining and eliminating redundant skews, assigning our best footwear designers to work on some of our lower ASP products, but that have big volumes, like the UA Assert, whose volume is in the millions of pairs.