Q3 2025 Under Armour Inc Earnings Call
Good day and welcome to the under armour third quarter.
2025 earnings conference call.
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Please note. This event is being recorded I would now like to turn the conference over to Lance <unk> Senior Vice President of Investor Relations Treasury and corporate development. Please go ahead.
Good morning, and welcome to under Armours <unk> third 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 David 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 February six 2025.
Speaker Change: 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 interviews provide it Steve.
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 under armour believes these measures give investors a helpful perspective on underlying business trends.
Kevin: Applicable to 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 about under armour Dot com with that I will turn the call over to Kevin.
Kevin: Thank you Lance and everyone joining us on this morning's call.
Kevin: Our fiscal third quarter results exceeded expectations driven by strong gross margin performance with revenue also surpassing our forecast.
Kevin: With these results I'm pleased we were able to raise our full year outlook again.
Kevin: Constraining that our strategies to reposition the under armour brand are gaining traction.
Kevin: Much of the credit goes to our actions of reducing promotions and discounts in our ecommerce business, which has contributed nicely to improve gross margin this year.
Kevin: Key metrics for our consumers value our brand and our core validation of the pricing power, we intend to increase leverage over time as we work to improve the quality of our revenue from mostly good level product to more better and best level under armour that consumers will choose to buy.
Kevin: As discussed at our Investor meeting in December the idea of balance in our logo structure is fundamental to our ambition for the brand. We are building and how we expect to run the business efficiently going forward. This.
Kevin: This will take time, but our strategy is sound and beginning to take root as each day, we get stronger than the one before.
Kevin: Also at our Investor meeting, we provided a comprehensive overview of our product brand and commercial strategies, along with other key initiatives designed to enhance <unk> ability to achieve better long term financial results focusing on product story service and team.
We are fully committed to these strategies, including launching and improve product lineup in fall winter of 'twenty five establishing a distinctive underdog news in our storytelling and implementing intentional disciplined marketplace management across our regions.
Kevin: Perhaps most importantly, we wanted you to meet our management team experience your energy and dedication to this exceptional brand clarifying where we are where we are headed and how our leadership talent will drive our objectives.
As a brand rooted in sports that create solutions for athletes are human connection and dedication to achieving challenging goals are in our DNA.
Kevin: Grounded in athletic performance, our sports House identity offers a significant advantage in our mission to reposition under armour.
Kevin: It's unique to only a handful of athletic brands, which can outfit athletes on any field corridor pitch across virtually any athletic endeavor worldwide.
Kevin: However, sitting in a broader sports industry with multiple competitors, both bigger and smaller we are fortunate to be bigger than the new trending brands, yet more agile than the VIX and aspect we plan to use to our advantage.
Kevin: This position provides us with an exceptional broad based platform to speak directly to and create amazing products for our athletes.
Speaker Change: Our product machine is working as the first place I focused on win re assuming the CEO role last April due to the 18 months lead times, we have in our industry to build products for the market.
Kevin: It was imperative to get our product trajectory in the right direction as it takes the longest.
Beginning with supporting leadership previous scene as Chief product officer, and the entire product organization from innovation through design, we've made significant progress in enhancing our athletic performance and new sportswear offerings blending those elements of innovation fabric and trim thought leadership with aggressive young and Fearless design.
Kevin: Highlight of the third quarter was the launch of the first signature shoe for Curry brand athlete, Dr and Fox the Fox one.
Kevin: Designed to complement is speed and Optimizes performance on the court hearing quickly showcase them, becoming only the third player in NBA history to score at least 109 points in two consecutive games for the Fox one debut.
Kevin: <unk> features some of the best innovations the Korea brand is known for including our patented flow sold technology is available exclusively through our DTC channels and at Dick's Sporting goods, a key retail partner, we plan to win with through this next chapter.
Kevin: More on the footwear front, the spring summer twenty-five season, which kicks off a floor sets. Later this month introduces echo footwear. The latest version of our slip speed platform the <unk>.
<unk> showcases new technology in an evolved design language from the original versions.
Kevin: She didn't get ahead of the upcoming NBA All star weekend, which will include a unique collaboration to be unveiled unlimited payers for launch. The initial buses started we're eager to release the slip speed echo more broadly in the coming months.
Kevin: Additionally, on the apparel side, new better and best products are coming to season, including elevated offerings from our unstoppable and meridian collections, putting to test the underlying pricing power, we intend to increasingly established in the coming seasons.
Kevin: It is encouraging that these more premium level products have continued to perform well over the past several quarters.
Kevin: So we're building confidence with these offerings will help us achieve a better balance in our good better best product segmentation.
Another solid proof point in our move toward a more meaningful sportswear presence and business is the success. We saw with one of our premium fleece offerings, the $120 UA icon heavyweight Hoodie, which has seen terrific sell through particularly traction with young athletes, we are actively reintroducing ourselves to.
Kevin: Our innovation capabilities consistently rank among the best in the industry. Recent examples include women's Health magazine naming the UA Infinity 2.0, hi, as the best high impact sports Bra in December.
Kevin: And then as Health magazine selected the UA project rock DSR for shoes as the most versatile cross training shoes for men.
Not to mention the new suspension backpack, we demonstrated our investor meeting, which will hit stores. This fall built with our patent pending auxetic strap and braking system I got to tell you. It makes you feel like youre carrying have to wait.
Kevin: Great metaphor for the problems, we hope to solve with every under armour product, we built for our athletes to make you better.
From an operational perspective, we continue to refine our focus through a streamlined creation process assortment and merchandising strategy to achieve a more intentional product presentation for athletes and especially our retail partners.
Kevin: Leading this effort our initiatives to reduce skus across all assortments by 25%.
Kevin: In addition to the components that make up our products like cutting footwear falling by about 50% to anchor around consistent underfoot cushioning across our charge hover inflow missiles.
Kevin: And narrowing our materials elaborate to those with volumes or multiple end uses that bring the best articulation of our fabric superiority and highest margins.
Kevin: All efforts to allow our designers to enhance efficiency and effectiveness in doing their work actively doing more with less.
Kevin: As we've previously discussed we were transitioning from an apparel footwear and accessories, let operating model to a consumer focused category managed model that emphasizes singular accountability leadership in team sports train golf basketball run sportswear outdoor and other key sports that serve as Authenticators instead.
Kevin: Regions.
Kevin: This change will enable us to better understand and meet athletes' needs by enhancing strategic alignment across our product marketing and commercial teams driven by more direct financial accountability and clear definitions of each categories role in our overall go to market strategy.
Kevin: The brand operationally has relied on the process in the U a machine that had been built and running for us the past several years, but without enough clear individual accountability I don't believe we've optimized our performance so our new category, let operating model addressing this head on.
Kevin: Beginning with our people this will mostly be a shift in what many of the roles of our teammates are already responsible for as we were primarily reassigning existing talent into the category of model with their refined responsibility and as a result, bringing absolute clarity to what is expected of them and their respective teams each and everyday.
Kevin: As well as a clear definition of success.
This I believe is the most fundamental key to unlocking the winning culture, we expect and are establishing at under armour.
Kevin: As we transition to a new operating model. This month led by recently named brand President Eric Litke, we have a seasoned team ready to hit the ground running as we improve and perfect our processes over the coming seasons.
Kevin: Key to the benefit of what it will deliver for US is in Eric's new role leading for the brand, which now integrates product and story within the same go to market leadership and accountability.
Kevin: At under armour, our currency is product and our voices the compelling story that we tell about those amazing products.
Kevin: With our team now in place and running the 18 month product go to market I am now turning our emphasis to layering excellent story into this machine, meaning exactly how we will market this brand.
Kevin: During our recent Investor meeting, Eric outlined our goal of improving all aspects of marketing and brand strategy to foster a stronger connection with young team sport athletes.
Kevin: Put simply we will stop asking them to buy our product through performance marketing, which has led to the promotions that have plagued our recent history. Instead, we will focus on showing them why they should love our individual products and our brand.
Kevin: And as we get that right. They will then love to buy our great products. This is in flight.
Kevin: So our mission.
Kevin: Capture the Hearts and minds of young team sport athletes, we are dedicated to refining our messaging to bring this narrative to life in ways only under armour, Ken as we remain fundamentally connected to the underdog mindset.
Kevin: The intense athlete who carries a chip on their shoulder underrated athlete eager to prove their worth and demonstrate their extraordinary potential to the world.
So as we strive to forge deeper more meaningful connections with consumers. Our UA next global grassroots program focused on enhancing the next generation of athletes is becoming a central platform for us.
Kevin: In November building on our fall soccer or football brand activation in EMEA, we held a Paris experience, which featured real Madrid defender Tony Ruediger, Sasha Bowie, a promising defender from Bayern Munich.
Kevin: That included a defensive master class highlighting our commitment to nurturing young football talent.
Kevin: As a crucial global authenticator, our athlete roster continues to grow including the recent added Brazilian player Douglas Costa who place for Sydney Football club and foreign tourists promising young Spanish talent from Barcelona FC.
Kevin: In January we wrapped up the UA next all America gains in Orlando that were broadcast on ESPN.
Kevin: We're more than a 130 of the nation's top high school football and viable players.
Kevin: To garner social media Mindshare, we hadn't impactful time with these alpha athletes, introducing and getting reaction to the products as well as significantly improving our digital presence with better engagement and views compared to the previous year.
Kevin: The way, we communicate with our athletes begins with those at the tip of the spear will inform us as we continue to improve how we show up where our young athletes are already watching.
Kevin: Here are a few examples of just how we're doing that.
Kevin: And American football tunnel walks, our our catwalks and with that we had three great runway moments during the quarter, starting with the Naval Academy showcasing our beautifully designed Julia Rogers uniforms and the accompanying story video we made for the series as they beat Army in 125th Army Navy game.
Kevin: Followed by victory in the armed forces Bowl against Oklahoma, achieving 10 wins for just the sixth time in school history.
Kevin: We also renewed our partnership with the Naval Academy as the official outfitter of their 36 intercollegiate varsity teams and a multi year agreement extending our relationship since 2014.
Kevin: Another longtime UA school, Notre Dame had a remarkable journey to the college football playoff championship game proudly wearing the fantastic armour thirty-seven jerseys teaching our now iconic center neck logo or as we're calling this the balanced UA logo position.
Kevin: Amid all the excitement of the CFPB, we engage with athletes and fans through a range of electrifying social activations that generated considerable buzz, including teaming up with comedian and actor Shane Gillers spot called chains prayer for Notre Dame victory in the National Championship game, which went viral on a Saturday morning before the game on Monday.
Kevin: This ability and I should say agility for our team to quickly act within seven days finding the right collaboration for a unique brand expression a prayer for the underdogs and executing this creative and clever lane for UA to play from.
Kevin: Getting to this moment required a lot of ingredients that needed to go right like signing Notre Dame and even there making it to this game.
Kevin: It is the type of energy and hype, we expect to bring to the content, we make with our $500 million marketing budget.
Kevin: And what you should expect from us moving forward.
Kevin: This example of thoughtful culturally relevant collaboration will be our bar for marketing excellence.
Kevin: Also at the professional level some of our NFL athletes like Justin Jefferson's eight flowers, Kyle Hamilton had terrific Pro bowl level seasons, and we expect to build on our NFL roster going forward.
Kevin: This past quarter.
Kevin: We also emphasize our commitment to the growing women's basketball seen by partnering with the new Unrivaled League as their official and exclusive uniform performance outfitter.
Kevin: Coupled with the strong starts to the women's college basketball season for many of our teams, including the University of South Carolina, and Notre Dame currently ranked second and third in the AP top 25, respectively.
Kevin: Plenty to be excited about for the upcoming season.
Kevin: This brings us to a discussion at the Investor meeting that a pivotal new chapter in our marketing strategy.
Kevin: Later this year, we plan to redeploy and centralize a significant amount of our existing marketing budget to fuel our most ambitious brand activation.
Kevin: This dynamic multi year initiative represents a significant step forward in our marketing approach specifically designed to resonate with athletes in their environments.
Kevin: Through this program, we will establish a robust and engaging content platform that highlights our commitment to specialized media showcases the incredible talents of athletes and teams collaborates with influential creators and exploring new verticals.
Kevin: This is not just an investment it's our promise to connect authentically and elevate our brand like never before.
Kevin: And while underdog has been or amused to inspire our marketing message. It is not literal but instead the spirit and grit DNA that makes you a unique amongst the other we call them podium brands.
Speaker Change: Next turning to service our strategy for reconstituting, the under armour brand and strengthening our position has primarily focused on North America, our largest and most influential market.
Speaker Change: While this effort impacts the region's top line, we're confident that our more disciplined approach to marketplace management, including optimizing our promotional levels refining our segmentation and enhancing our premium brand presentation will help restore brand strength in the long run.
Speaker Change: As such we're now nine months into restoring health to our North American E Commerce business with another quarter of fewer promotional days in shallower discount depth that reinforce our brand's value.
Speaker Change: Although this has impacted our topline as athletes embrace our evolving value proposition and as you've heard me say pricing power. We're encouraged encouraged by the early signs of progress.
Speaker Change: Notably we saw another quarter of average unit retail and average order value growth and continued improvement in our full price sales mix.
Speaker Change: In North American owned retail, we've only just started refining and optimizing our promotional strategies of our factory houses focusing on higher contribution margins from our stores our strategy that will take even greater shape in fiscal year 'twenty six.
Speaker Change: Here, we're focused on changing this business's complexion and profitability balancing our discounting inventory clearance strategies and adopting a tiered approach to define each store's role within a specific market.
Speaker Change: We've also reduced SKU assortments to clarify our offerings and increased depth in key products.
Speaker Change: In our full price brand houses, we've also reduced skus and are making changes to create a more seamless shopping experience and a more premium connection with our athletes.
Speaker Change: In December we moved into our impressive new sustainable headquarters and opened our flagship campus store here in Baltimore, and we are gaining valuable insights that will apply across our network of 200 stores here in North America, and the nearly 2000 stores that under armour has around the world.
Speaker Change: Additionally, loyalty is and will continue to be an even more significant driver of our DTC business and we're excited to see ongoing growth in this area.
Speaker Change: During the quarter, we gained 4 million new members raising the North American total to 17 million, who consistently demonstrate higher repurchase rates and revenue per consumer than non members.
Speaker Change: We believe this sector has immense untapped potential so we will keep investing in enhancing our loyalty program in every market around the world ultimately shifting the reason that athletes joined our program from being primarily about price too.
Speaker Change: Are you a loyalty community that offers exclusivity and membership privileges amongst other things.
Speaker Change: In North American wholesale we continue to navigate the effects of several years of elevated promotions and inconsistent execution have had on our order books.
Speaker Change: Nevertheless, our strategy is to reduce promotional activity in our e-commerce business are encouragingly, reducing allowances of markdowns.
Speaker Change: While it's clear that's getting shelf space back takes time.
Speaker Change: We're optimistic that as our product and marketing efforts gained momentum in the coming seasons. This channel will experience a really positive shift.
Speaker Change: As we move into EMEA, our best performing region. This year, we remain committed to maintaining the strength that we built through disciplined decisions and product marketing and distribution.
Speaker Change: The environment in the region is somewhat tenuous and we're focusing on working with the right partners preserve our premium positioning.
Speaker Change: While keeping stability front and center, including protecting our market share and positioning in the U K also carefully sequence or investments to encourage growth in places like Spain and lay the groundwork for future growth in France, and Germany through channel and sports marketing investments, particularly in football.
Speaker Change: And our APAC business, we are addressing demand related challenges arising from a competitive market high.
Speaker Change: High inventory levels inconsistent execution, and macroeconomic factors, resulting in increased discounting and returns and lower revenue.
However, these challenges are similar to those that we faced in EMEA and are currently managing in North America. So we will draw from these playbooks accordingly.
Speaker Change: The good news is that athletes think very highly of under armour throughout the region. We expect to maintain this premium perception.
Speaker Change: Last month during our trip to Silkier, Tokyo, Seoul, and Shanghai, Dave Eric and myself worked with our teams to analyze business dynamics and challenges as a result, we're working to stabilize our trajectory there strengthen our brand and restore our pricing power.
Speaker Change: In addition, we recently appointed a new head of APAC marketing and are focusing on brand investments, reducing promotional activities and enhancing our local for local approach.
Speaker Change: All of this product story and service leads us to the realization that a well coordinated team is essential at every level of the organization.
Speaker Change: With our transition to a centralized campus and the energy of our new sports House buildings harnessing the strength collaboration and cultural benefits of 1500, plus teammates working closely together is an energy that is missing for several years I truly believe this move will be crucial and revitalizing our culture, enabling us to achieve better execution as we.
Speaker Change: And our strategies.
Speaker Change: Overall, it's wonderful to be in this new house.
Speaker Change: In closing, we feel optimistic about our progress on our ambitious journey to elevate the under armour brand. This transformation is not just about immediate gains it's about creating lasting value for our shareholders and all stakeholders involved we're dedicated to strengthening our brand with the understanding that this journey is not a sprint, but a marathon that requires resilience and thoughtful.
Speaker Change: <unk>.
Speaker Change: We practice patience and careful planning with every step ensuring every action is focused and intentional.
Speaker Change: Our unwavering commitment to our strategic playbook remains strong as we stay agile and opportunistic and as someone who has led brand building before I am excited about the similarities and the journey and equally as curious with that which requires new thinking we.
Speaker Change: We are walking the floors talking to our teams and our partners assessing the environment drawing up immediate action plans with the definitions of success.
Speaker Change: The required resources of time people and money.
Speaker Change: And then moving onto the next one opportunity of time, turning each obstacle into a stepping stone towards greater success.
Speaker Change: Putting this simply and just like our logo, we are targeting strength stability and balance in every aspect of our great brand more to come and with that I'll turn it over to Dave for details on the results and our outlook.
Thanks, Kevin moving.
Dave Eric: Moving straight into our results our third quarter of fiscal 'twenty five surpassed the outlook. We provided in November making this is the third time, we've exceeded expectations. This year.
Dave Eric: Revenue decline of 6% to $1 4 billion was better than our outlook of down approximately 10%.
Dave Eric: By region, North America experienced an 8% decline mainly due to a decrease in our DTC business. This was affected by lower e-commerce sales due to our proactive efforts to limit promotional activities.
Dave Eric: In wholesale we faced reduced sales to the off price channel counterbalanced by a slight increase in full price sales.
Dave Eric: Revenue in EMEA increased by 5%.
Dave Eric: Or 3% on a currency neutral basis with growth in our DTC and full price wholesale business.
Dave Eric: The offset by a decline in third party off price sales.
Dave Eric: APAC revenue fell by 5%.
Dave Eric: Four 6% on a currency neutral basis.
Dave Eric: As discussed the region's highly competitive and promotional landscape contributed to the mounting pressure.
Dave Eric: In Latin America revenue declined by 16% or 9% on a currency neutral basis, mainly due to lower distributor sales.
Dave Eric: From a channel perspective wholesale revenue was down 1% and lower sales in the off price channel, partially offset by growth in our distributor businesses and flat full price results during the quarter.
Dave Eric: Direct to consumer revenue declined by 9%, mainly due to a 20% decrease in E Commerce, which was primarily driven by reduced promotions and discounts as we expanded our premium online presence.
Dave Eric: Sales at our owned and operated retail stores fell by 1% this quarter.
Dave Eric: And licensing was down 18%, primarily due to the decision to bring our socks business in house last March.
Dave Eric: By product type.
Dave Eric: Payroll revenue was down 5% softness across most categories in the quarter, partially offset by strength in outdoor and golf.
Dave Eric: Footwear declined by 9% with most categories decreasing.
Dave Eric: And our accessories business was up 6% in the quarter with.
Dave Eric: With strength and train and run partially driven by bringing our socks business in house.
Dave Eric: Our third quarter gross margin was up 240 basis points year over year to 47, 5%.
Dave Eric: This increase was driven by 100 basis points of supply chain benefits, mainly driven by lower freight and product cost.
Dave Eric: 100 basis points of pricing benefits from lower discounting and promotions in our DTC business reduced markdowns in the wholesale channel and slightly more favorable pricing in the off price channel.
Dave Eric: 35 basis points gain from favorable foreign currency impacts.
Dave Eric: And about 10 basis points of benefits from a favorable product mix.
Dave Eric: Three main factors drove our gross margin beat relative to the outlook, we gave back in November.
Dave Eric: The first and most significant is related to supply chain benefits led by additional product cost savings compared to our plans and lower freight costs.
Dave Eric: Primarily freight to our customers.
Dave Eric: Second we experienced some unplanned benefits from changes in foreign currency.
Dave Eric: Third lower than planned sales to the off price channel gave them some mixed benefit.
Dave Eric: Next SG&A expenses rose, 6% to $638 million in the third quarter.
Dave Eric: After the complete exit from our previous headquarters campus and the related valuation review, we recorded a $28 million impairment to adjust our carrying value.
Dave Eric: This amount is not included in our fiscal 2025 restructuring plan.
Dave Eric: Excluding this $28 million impairment and around $4 million and net transformation expenses from our fiscal 2025 restructuring plan.
Dave Eric: Adjusted SG&A expenses increased 5% to $606 million consistent with the outlook we provided in November.
Dave Eric: Higher marketing expenses, mainly drove the increase.
Dave Eric: <unk> investments are predominantly focused in the second half of our fiscal year.
Dave Eric: Along with higher incentive compensation.
Dave Eric: And information technology expenses.
Dave Eric: These increases were partially offset by savings from ongoing cost management efforts, including the effects of earlier head count reductions.
Dave Eric: Next we recognized $14 million in restructuring charges during the third quarter.
Dave Eric: Along with the $4 million and transformation expenses recorded in SG&A. This brings the total to $18 million of restructuring charges and related expenses for the quarter.
Dave Eric: Year to date, we have recorded $57 million in charges and expenses under our fiscal 2025 restructuring plan.
Dave Eric: $40 million were cash related was $17 million were noncash related.
Dave Eric: We still expect total restructuring charges and related expenses to reach $140 million to $160 million.
Dave Eric: It was slightly more than half anticipated to occur in fiscal 'twenty, five and the remainder in fiscal 'twenty six.
Dave Eric: Regarding profitability, our operating income for the third quarter was $14 million.
Dave Eric: Excluding the impairment charge transformation expenses and restructuring charges, our adjusted operating income reached $60 million.
Dave Eric: Taking this to the bottom line our reported diluted earnings per share broke even.
Dave Eric: Our adjusted diluted earnings per share was eight <unk> for the quarter.
Dave Eric: On our balance sheet inventory was flat at $1 1 billion compared to last year and our expectation that the March 31 balance will be roughly in line with the end of fiscal 'twenty four remains unchanged.
Dave Eric: Our cash balance at the end of the third quarter was $727 million and we did not utilize our $1 1 billion revolving credit facility.
Dave Eric: Lastly, we repurchased $25 million of our class C stock during the quarter retiring $2 8 million shares.
Dave Eric: Turning next to our fiscal 'twenty five outlook.
Dave Eric: Where we are raising expectations for most line items.
Dave Eric: Given our slightly better topline performance in our plan, we now expect full year revenue to decline at a.
Dave Eric: <unk>, 10% instead of the previously expected low double digit contraction.
Dave Eric: In addition, our outlook for North American revenue has also improved slightly as we now foresee a decline of 12% to 13% versus the previous expectation of down 14% to 16%.
Dave Eric: Our expectations for flat revenue in EMEA remained unchanged. However.
Dave Eric: However, due to tougher conditions in APAC, we now expect revenue in the region to decrease a low teen percentage rate compared to our prior expectation of a high single digit decline.
Dave Eric: Regarding gross margin.
Dave Eric: <unk> seen the most significant outperformance this year, we have updated our outlook to now reflect an improvement of approximately 160 basis points, an increase from our previous improvement range of 125 to 150 basis points.
Dave Eric: The key factors contributing to this raise for the full year include supply chain tailwind, such as lower freight and product cost and reduced promotional and discounting activities in our DTC business.
Dave Eric: For SG&A, excluding this year's litigation reserve expense litigation related insurance recoveries impairment charges and estimated transformational expenses associated with our restructuring plan.
Dave Eric: Adjusted SG&A is expected to decrease at a low single digit rate.
Dave Eric: This reflects a modest increase over our previous estimate as we are reinvesting part of our revenue and gross margin overdrive into brand building initiatives and operational improvements.
Dave Eric: These updates increase our adjusted operating income outlook for the year by approximately $15 million at the midpoint, bringing our improved outlook to 185 $195 million.
Dave Eric: When factoring this into the bottom line, we expect adjusted diluted earnings per share to be in the range of 28 to 30.
Dave Eric: Reflecting an increase of three <unk> at the midpoint compared to our previous outlook.
Dave Eric: Now keep in mind that when we presented our outlook back in November we mentioned that our fourth quarter would encounter the most headwinds of the year.
Dave Eric: The primary factors behind the pressure in the fourth quarter include our spring summer twenty-five order book.
Dave Eric: Softness in our APAC business as we detailed earlier.
Dave Eric: More challenging North American factory House Com due to high promotions in last year's fourth quarter.
Dave Eric: And this additional foreign currency headwinds.
Dave Eric: Before concluding I wanted to address the potential increase in U S tariffs on imported goods from China, Mexico, and Canada proposed earlier this week.
Dave Eric: It's important to note that under armour sources, approximately 3% of its goods imported into the U S from China, and even less for Mexico, and we have no manufacturing relationships in Canada.
Dave Eric: Given these facts the current tariffs proposals are not expected to impact our business significantly. However, we will stay vigilant and if these parameters change or additional countries are included in this tariff program we will.
Dave Eric: Promptly reassess accordingly.
Dave Eric: But that said in closing as we enter the final quarter of fiscal 'twenty five transformative year for our business and our brand. We're pleased to realize some signs of improvement in our P&L, including meaningful gross margin expansion.
Dave Eric: And while still not quite a year into this journey with a strong alignment and commitment from our global team.
Dave Eric: Increased prioritization and accountability in our evolving operating model and a focused approach to marketplace management.
Dave Eric: See tremendous potential in the strategies, we have in place to strengthen under Armours brand positioning and.
And ultimately affords an improved growth trajectory in the long term.
Speaker Change: Now, we'll open the call for questions operator.
Speaker Change: We will now begin the question and answer session.
Speaker Change: To ask a question you have many press Star then one on your telephone keypad. If you were using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: Our first question comes from Simeon Siegel with BMO capital markets. Please go ahead.
Simeon Siegel: Thanks, Good morning, everyone and congrats on the ongoing progress.
Speaker Change: Thank you.
Speaker Change: So Kevin as you enter this new chapter of exciting marketing and product could you just elaborate a little bit on how you're going to approach balancing telling the powerful powerful story, while still holding onto the intention to achieve more by doing less and then not sure. If this one's for you or for Dave great to see the deep sea promotional discipline I guess at this point any way to help contextualize just frame for us what percent of E. Commerce is still.
Speaker Change: On the discounts that you might like to pull back any thoughts on timeline order of magnitude of the remaining D to C reset that you're aiming for it thanks guys.
Speaker Change: Thanks Simeon.
Speaker Change: Yeah.
Speaker Change: Achieving more by doing less it's sort of become a broader metric at the company where this growth by constraint model is something where we've found opportunities. We've mentioned in our materials library as I just mentioned on the call about our footwear films, but it's really everything it's it's a greater alliance as well as empowering the team, which I think speaks to the new operating model that we're putting.
Speaker Change: In place of creating greater individual accountability and what that means is we're looking for the hands that we can high five so we have the ability to be agile and react to you know like what.
I think the way that we reacted in the National Championship with one of our games.
Speaker Change: With with Notre Dame So I feel like we've done a good job being able to utilize the resources that we have to figure out how we can.
Speaker Change: Do better so this idea of selling a whole lot a whole lot more of a whole lot less product means just being a lot more intentional as a brand I feel like.
Speaker Change: We've we've had those points, where the merchandising strategy. We've taken has allowed us to proliferate, maybe more than we should but.
Speaker Change: But I believe that bringing great items are products that will blow consumers' minds like the new slip speed Echo will be launching at all star weekend, and a couple of weeks and some.
Speaker Change: Some of the other innovations that you've seen from us So I believe that where it's it's a mindset as much as anything else. So the team's really embracing and leaning into this new operating model moving into this new building it feels like the ability for us to start with a really really clean canvas or the way that we're approaching the business going forward and Simeon. This is Dave on the E Commerce discounting.
Speaker Change: I would say that we took some big steps forward with North America in fiscal 'twenty, five and we're really excited about the progress there I would say that that play isn't completely finished you know we don't really disclose the percentage change in mix, but.
Speaker Change: We still have a little farther to go so we still have more work to do but we made a really good step forward there.
Speaker Change: The Mayo you know we've already in a pretty good spot there, but were even leaning in a little bit further there and then coming off our trip to APAC. There's some work we want to do there as well kind of on the same front. So.
Speaker Change: Big strides forward, but we still have a little bit more work to do on that front and we're going to keep chipping away at it.
Speaker Change: Great. Thanks, guys best of luck for the rest of the year.
Jamie: Thanks, Jamie.
Speaker Change: Okay.
The next question is from Jay sole with UBS. Please go ahead.
Jay: Great. Thanks, so much two questions from me first Kevin you mentioned the brand will inflect before the business does.
Are you beginning to see results from your brand strengthening strategy does not when do you anticipate this change will start and then secondly, what are you seeing in APAC, what's changed and how much is due to macro factors and how much is specific to under armour. Thank you.
Jay: Yeah. Thanks Jay.
Jay: I think as I mentioned at the Investor meeting that we had the first proof point to the brand and selecting before the business does.
Jay: Note that our phone is ringing.
Jay: Number one the team that we're able to attract that you see with the talent that we're being able to bring on board and also the talent that is choosing and saying I see the future and I believe in what we're doing.
Jay: But there's this this energy that is building.
Within our within our walls right now and there's a sense of what's happening in Baltimore and Thats just of course, our own retail partners and they've been with us for a long time, but frankly some of the new boutiques that are calling us and some of the specialized product that we're now having the ability to.
Jay: To build on.
Jay: I referenced this term pricing power a few times because I think it's one of the things that we're really ambitious of building toward and it basically means the consumer stopped looking at buying us based off strictly price there are those commodity like items that maybe become.
Jay: More mainstream for people that it just needs to have that under armour edge into it that there is something special there or something different there's a superpower inside that makes it UA and so we want to be able to drive that to the consumer is not looking at it it'll help us on our margin side as we target continue to grow as we said in this period of time gross margins are great great indicator for.
Jay: And we're proud of some of the other work we've been able to do there, but theres a lot more a lot more for us to do and a lot more opportunity for us in that in that respect.
Speaker Change: Regarding APAC I think we've we had a really solid trip over there with with Dave and myself.
Speaker Change: You know being on the ground and in a day or two day a couple of days in Tokyo, a couple of days in Korea. Several days in Shanghai you know.
Speaker Change: The one thing about this business as we look at it right now it's it's not that large of a business, meaning it's only about $800 million of what we're doing and frankly, we've been able to run. This play before of what we have I wouldn't say completed but were towards the later stages of it in EMEA and frankly, what we've been implementing here, particularly through.
Speaker Change: Some of the E Commerce deliverables that we've had here in North America that had been really one of the best indicators, that's driving gross margin for us at this time, but you.
Speaker Change: You know there there's macro issues are things that lead to traffic and all other things, but there's people that are winning in this market and we should be winning in that market as well and maybe I can just lay out the infrastructure of the offices. The people that we have in place like it's all there. The pipes are laid we just have to put great product and great story through those pipes, we need to make sure we get relief.
Speaker Change: Firm with our direction and I think again driving that pricing power. There is something that will really help us. So leadership horsepower is one thing where to make sure. We're putting the right resources around that time people and money, but it's all within the budgets that we have now and just running this play that we've been fortunate to have run before and seen some success and so that's not a guarantee.
But we feel pretty good about it but APAC has or has our full attention at this moment.
Speaker Change: Sounds great. Thank you so much.
Speaker Change: Thank you Jay.
Speaker Change: The next question is from Bob <unk> with Guggenheim. Please go ahead.
Speaker Change: Hi, Good morning, Kevin just on North America.
Bob: In your view how is the North America reset working and do you expect North America to grow in FY 'twenty six.
Bob: Thank you Bob.
Bob: We're in a better position now than we've been in years.
Bob: As the turn the turn has begun to start for us with reality like reducing promotions have you seen us do in the channels that we can control.
Bob: But there's plenty of opportunity for us to be able to get after you know where we're not going to unlock the bottomline opportunity.
Bob: Really with this company until we begin to grow and so that's where we're.
Bob: Ourselves and getting ourselves aligned around that and we're doing the work to make the turn but it's going to take time the brand new product engine that will begin to pay off as we circled you know even when I started last April.
Bob: In fall 'twenty five as we've said, it's it's it's perfect, but it'll be a continuous work in process and will get better and better each season and as we lay in the category management, let approach that's something that will help us and I just want to be clear is that you know what.
Bob: I know there's been dialogue about what we should be doing with the brand and being smaller and being more profitable is that double digit operating margins are on our mind and thats probably the definition of success that we would circle and say that's what we're beginning to win them, but I believe that that needs to happen from a growth position.
Bob: Putting ourselves in that position so taking some of this pain right now of reducing revenues and some of that top line.
That we've taken down I think it'll prove prudent to us and really pay off in the long run because the tests that we've had and again just controlling that ecommerce channel has been really helpful for us and so as this turned begins to happen.
Bob: To start with our team believes we believe and we'll have much more detail on that on the May call as we start thinking about driving one day, one quarter one year at a time.
Bob: Great and Kevin you talked about the sports marketing you know some of your your successes Notre Dame football South Carolina Women's basketball.
Bob: I have one Soto and now that he's you know with the real team do you have any plans to focus on him a bit more in the coming months and quarters.
Bob: Oh, My God I Love. These softballs. Thank you.
Bob: I think when you take the ones, that's where we're just looking at this like.
Our own wine cellar of these beautiful.
Bob: That's that we have down there and I feel like we haven't done a good job telling those stories and that's why being more intentional and I touched on the the Notre Dame thing in my notes in an earlier in an earlier question.
Bob: But I've got the the way that we've looked at marketing because we have a lineup and assets.
On the sports marketing side that are really unmatched and whether it's it's attracting high school football. It's IMG Academy, whether it's just you know collegiate.
Bob: Just Notre Dame those two schools alone could authenticate us in both collegiate and in high school, but I feel like as a brand we've been guilty of having a $500 million budget that sure doesn't feel like we're spending that much money. So we're gonna change that perspective perspective.
Bob: It's already started and I think that what we did with Notre Dame without collaboration involving so many aspects, including the Catholic Church.
Bob: Number one the right asset and Notre Dame we had the right sports moment and college football's National Championship, if theyre getting getting to that game that culturally relevant talent by bringing and Shane jealous and frankly pulling this off in seven days of knowing that they were gonna be there and really kudos to our team with having the agility to create such a clever activation force it says.
Bob: The only money that we effectively spent in this thing was was the production time is something we posted on Youtube you know a couple of days before the game and allowed the internet buzz to take over and it went viral forth. So you know that today's marketing, it's about culturally relevant content, which is where we're focused and then making sure that there's a bar and a level to the content that we're creating and art.
Bob: And talking about the one sotos the Bryce Harper is that Bobby with Juniors that we have.
Bob: Our baseball Ralph your shoe you know I'd say that the Zee flowers, the Justin Jefferson's the Jordan speech.
We just have we have assets I think at every level and so doing a better job of more articulated job of telling stories about them and taking credit for it.
Bob: It's really really important and the.
Bob: The last thing I'd say about it is making sure that when we are talking about them, we're showing up where they where they present I think we've gotten caught up in some of what traditional marketing has been and we'd rather go start telling our stories are places where our young kid is already watching like Youtube and Tic Toc and Snapchat et cetera. So we're in the process. We're excited about the ability that ericsson.
Bob: A really good job of carving a substantial portion of our marketing budget and we can really begin to tell our story and tell the story about this incredible athletes, we have as well.
Bob: Thank you.
Speaker Change: You haven't mentioned curry with that so.
Bob: Okay.
Bob: Thank you Paul.
Speaker Change: The next question is from Sam Poser with Williams trading.
Sam Poser: Please go ahead good morning, and thank you for taking my questions I have a couple of you mentioned that the in the <unk> Guide.
Sam Poser: Part of the headwind was the order book can you just go into a little more detail. There and then maybe you can discuss what youre seeing.
Sam Poser: You also talked about the phone ringing a little more can you talk a little bit about that and then I've got something else as well.
Sam Poser: Yes, Sam this is Dave you know relative to Q4 and kind of what we're what we're talking about there as we had mentioned previously you know on the last call or two around a little bit softer order book as we as we thought about finishing out the year and that's again, what we're still seeing I think some of the you know the.
Sam Poser: New or pressure for Q4 as foreign currency is going to be what we see is going to be a little bit tougher on us in Q4 than we originally expected and then also coming off our trip to APAC. There are some building pressures there that we need to address and that's gonna pressure Q4, a little bit more. So you know we're excited about the.
Sam Poser: The progress, we're making in North America, and being able to improve that outlook a little bit you know them.
Sam Poser: May is holding strong and in a great spot from a brand perspective, APAC needs a little bit more of our attention to Kevin's point and part of that is kind of factored into that Q4 outlook.
Sam Poser: And let me add.
Sam Poser: Sam you want to pile on there.
Sam Poser: All the way.
Sam Poser: Got it so you're seeing just celebrated his one year anniversary of the brand in Barbados not much farther in front of that.
Speaker Change: You're on less than a year, but I've got to tell you we've been out with the fall 25, I'm just showing what we have out there and there's a there's a general sense of excitement the first season and I just want to emphasize it's gonna be the first season of many that we'll continue to get better and better and as we'd be able to roll in the new category management, which is rolling out. This this.
Speaker Change: Month and into March we don't think it's a really sort of high risk operational a push for the company. We think that this is people doing job that they've done before where we're going to build off of fall winter of 'twenty, five 'twenty, six and beyond and start getting some momentum but.
Speaker Change: We've been getting some of the calls from the boutique players and no. We're not gonna he can't handout names there just yet.
Speaker Change: But theres a lot of general excitement about what we're doing of under armour truly getting at there is a clear difference in the design language style and more and it takes a little time to get back shelf space, but I think people are now looking at us in that light is that we're heading in the right direction for that to be the case and we want to be thoughtful about where we are selling as I said, we're gonna be opening counts and twenty-five but.
Speaker Change: Primarily boutique accounts in the.
Speaker Change: The one thing else I'd I'd emphasize with this is yeah. We've got some great new sportswear and collaborations that you'll hear about and see from us, but also our inline products, especially our largest volume products I think it's one of the most important messages of what we've done with things like our assert which is our are our highest volume of one of our highest volume shoes that we have and we've taken our best.
Speaker Change: Designers and put them on some of our our R.
Speaker Change: Our lower pricing products and so we can get that consumer because just because it's not a $150. She doesn't mean it doesn't deserve to look right and so we're really excited about some of the updates that will come across there, but more to come and I'm excited to show you is that the fall order book start to take shape.
Speaker Change: Okay. So then I mean, there's two other things one you sound like compared to 2000.
Speaker Change: Well before you took your.
Speaker Change: You leave.
Speaker Change: The last since you started a lot more.
Speaker Change: Just as energized we can sell a lot more patient now than you did then.
Speaker Change: You know that this is going to take time, you just didn't seem to have that kind of patience in the past.
Speaker Change: Secondly.
Speaker Change: One of your large more moderate declines.
Speaker Change: They appear to be teetering a bit.
Speaker Change: In the less is more category could that end up being a good thing for you overtime.
Speaker Change: Yeah, I think well thank you first on the.
Speaker Change: And two where hopefully we can apply a little bit of wisdom to this chapter because we do have the benefits of.
Speaker Change: We will celebrate 30 years in this industry and.
Speaker Change: In the coming months and we've just been doing this a long time. So we hope to apply all those lessons learned and in battle scars and everything else for the better of this company, but we.
Speaker Change: We've got a good shot I as I said I believe that we want to show up where the consumer wants us there's a there's an opportunity in the the elasticity I believe that we have in this industry is great and it doesn't mean that you, but you have to be imbalance and so that's why as we've said, we're not looking to compromise the good better best level of product.
Speaker Change: Or distribution of what we're doing we think it's important to maintain presence in all three we just haven't maintained anywhere near enough presence in the better best categories and so we'll be looking for accounts that serve that Michigan will be delivering products that serve that Michigan will be telling stories that serve that mission on our terrific athletes and so it needs to be comprehensive and cohesive and we feel like we've got a pretty.
Speaker Change: Good plan, so I just wish everything could go faster its the hardest thing about this industry is that 18 months to build products or making sure shirt and she just happened faster. So we're working on our agility there as well we talked about are our faster speed to market programs, we have but just require a little bit of patients. So we're in the fight.
Speaker Change: Thank you and keep taking deep breaths, Kevin Thank you.
Speaker Change: I think that thing with the yoga instructor puts the fingers on the back of your neck and tells you to relax. So we're working on it we're working on it.
Speaker Change: Please standby.
Speaker Change: The next question is from Jim Duffy with Stifel. Please go ahead.
Kevin: Thank you I, Kevin I did yes.
Speaker Change: Hum.
Speaker Change: Dave I wanted to start on.
Speaker Change: <unk> inventory clearance levels versus your expectation. So we interpret to lift your gross margin guidance is an indication youre better positioned here than you might have anticipated coming into the fourth quarter.
Speaker Change: Yeah, I would say that you know our third party off price is obviously a channel that we use to clear out older inventory, we've always done that.
Speaker Change: We've really done a great job of managing that down into that kind of 3%, 4% range of revenue over the last few years were probably running on the lower end of that right now.
Speaker Change: So you know we are a fairly clean with our inventory, which we're excited about.
Speaker Change: Q3, we literally just didn't have the ability to get some of that out the door. You know some of that will go out in Q4, so it's a little bit of a timing, but in general we're continuing to really watch that and manage that well and the combined efforts of our outlet stores and also the.
Speaker Change: The off price channel and then you know going forward, we're putting a lot of investment into.
Speaker Change: Improving our end to end planning, which should get our inventory buying even tighter so hoping that it continues to improve as we step forward.
Speaker Change: Okay. Thanks.
Kevin: And then Kevin.
Speaker Change: Oh I was in the investment community are on site lines of revenue inflection and it sounds like you're not really prepared to talk about the order book into next year.
Speaker Change: I'm curious what can you say about timing of marketing spend across fiscal 'twenty six should we expect it to be linear with the prior year or do you see the marketing spend more back half weighted as some of the newness begins to flow in and do you expect.
Speaker Change: To emphasize the marketing coincidental with that newness flowing into the marketplace.
Speaker Change: Yeah, I think Jim we're gonna be opportunistic you know the best thing about you know.
Speaker Change: Like what happened the Notre Dame example, I keep pointing to that metaphor because I think it's just a great example of.
Speaker Change: The amount of time it takes to you know we have been.
Speaker Change: And that partnership 11 years of getting them in this game, but then being have the ability to be agile when it comes so we're going to we're going to lay down we've got a big go to market. We're just going to make sure that the go to market has improved.
Speaker Change: And it's doing a better job articulating like what makes our product different what makes US special I think that's something about UA that I I don't believe that we've got enough.
Speaker Change: Think people sort of see us or lumpiness with a different group of people, which is why we tried articulating the sports house measures, which is why we talk about the podium brands and it's you know resigning a naval Academy that is 36 intercollegiate sports. There's just not a lot of brands that could do that and I think what makes us really different is this from a product standpoint is that we have the best thought leaders of fabric innovation and future view like we've just been doing it.
Speaker Change: A really long time, and I think that where the.
Speaker Change: Head and shoulders above others, the understanding of athletes problems, how we apply them the expertise at the high school collegiate and professional level and then the ability to authenticate that by testing our products out on the best athletes in the world from the curries and speed.
Speaker Change: The IMG is Notre Dame South Carolina Women's basketball et cetera, We've just got this great variety, including our European football players that we have like there's just.
Speaker Change: Something that makes this brand different the way that we'll spend money, though we will have a big will have a go to market, we'll have our plans, but we're going to make sure that agility.
Speaker Change: And how we can actually touched I think that the vein of a.
Speaker Change: A viral in social media and non linear media and always I think it'll be a part of the plan, but then the ability for us to react to when we get when we get a chance and Jim. This is Dave I'll, just add in that Eric not being here too long. He's obviously digging in deep and looking to re prioritize on marketing in a in a different way, but also.
Speaker Change: So you know we've hired incredible new talent. In addition, Eric we've got a new head of marketing in APAC. Now. We also have a new lead of marketing here in Americas, So Eric working with them and the rest of our marketing team. There's still work to be done on exactly how we want to run some of these new plays and so we will get into more of that detail and also more of that kind of <unk>.
Speaker Change: <unk> aspects of it when we get into our May call, but we're excited about what that team is working on and useful I. Let me just leave that last thing Thats just useful I think is really important in.
Speaker Change: Being an expert at being the father of a 21 year old son, an 18 year old daughter, They don't work under armour because that works there and so we get this great line of sight and we use every bit of insights into smart, but I'm also bringing some of that useful talent here. So you know.
Dave Eric: Dave mentioned, our new head of SVP of of brand marketing here on the Americans working with care trend. So we've got talent, that's close to the market that knows how this kid is working and shopping and you're going to see us be a lot more on point in the future.
Speaker Change: Thank you guys.
Jimmy: Thank you Jimmy.
Speaker Change: The next question is from Paul Ms. Wang. Please go ahead.
Jimmy: Hi, This is Kelly on for Paul Thanks for taking my question.
Speaker Change: So you can see that the top line beat North America seems to have come from our full price wholesale channel could you elaborate there I'll, let drove the upside.
Speaker Change: Stronger reorder as solid new product and then just wanted to clarify an earlier comment on North America wholesale.
Speaker Change: Do you still see areas of lower quality distribution, where he may be right relying too much on promotions do you plan.
Speaker Change: 26.
Speaker Change: How do you view your yourself.
Speaker Change: Can get you to that being another source of pressure in F. 'twenty.
Speaker Change: I just have one follow up thanks.
Okay. Yeah. Kelly. This is Dave I would say you know relative to the North America Overdrive, that's really related to a couple of things most of it is within our DTC business and if you think about it going into Q3, our fiscal Q3, which is holiday it's a.
Speaker Change: Big E Comm Big DTC quarter, and quite frankly, we were running a very different play than we ran a year ago, you know stepping off a lot of the deeper promotions et cetera. So we were a little bit more cautious in our planning as we stepped into Q3 in North America, just knowing that we were running a different play and we were testing a little bit we wanted to make sure that we could stay in.
Speaker Change: Nimble.
Speaker Change: And positively we were able to hold and exceed that topline while still running the decreased promotional play. So that was really what drove a lot of the favorability in North America for Q3, and then you know when we think about distribution and going forward as Kevin mentioned earlier, you know similar to our product.
Speaker Change: Well, we're gonna have good better best we also have account structures that are somewhat that way as well and we're going to continue to lean in heavily on the bedroom bashed and trying to identify new accounts and bringing those to the table that are right for the brand just as we're trying to lean in more on the better and best product, but as Kevin also mentioned the good level, we have a lot of <unk>.
Speaker Change: Great accounts, and we got to be able to be there where the consumers are and there's a lot of consumers there as well. So we're not necessarily looking to decrease where our distribution is but we're definitely looking for opportunities in that better and best area and more boutiques and premium touch points with the consumer.
Speaker Change: And then just secondly on SG&A is telling me it sounds like marketing investments are going to ramp up to support future growth how should we view that the G&A bucket are there still more savings to be realized that to offset some of these consumer or thinking about that.
Speaker Change: Yeah, I mean, obviously, there's been a lot of focus on our SG&A and our cost structure and we've kind of worked it down to a pretty reasonable operating level.
Speaker Change: And as we're working through the restructuring there is still more of that work to do.
Speaker Change: And some of those actions like if you think about consolidating our distribution facilities in the U S and we've.
Speaker Change: We've announced that before that is it takes time to work through so the benefit of that is going to be more you know kind of tail end of fiscal 'twenty six and then in fiscal 'twenty, seven and full year and beyond so some of those examples will take little bit longer to kind of see that SG&A leverage from those but we're continuing to re prioritize as well to make.
Speaker Change: Sure that we're fueling the brand you know in this kind of reset period that we're working through will keep working at that.
Speaker Change: Thank you best of luck.
Speaker Change: Thank you all.
Lorraine: The next question is from Lorraine, that's the last SKU. Please go ahead.
Lorraine: Oh good morning. Thank you very much for taking my question I wanted to ask Kevin.
Lorraine: Investor Day, you still keeps a lot of great footwear product I know, you're not prepared to comment about order books per se, but can you maybe share what you're hearing from your retailers' reception. There and then following up on Sam's question talking about teetering.
Speaker Change: A retailer.
Speaker Change: Is it fair to assume that Kohl's is maybe a mid to high single digit percentage of sales just so we can kind of pencil that in.
Speaker Change: That would that would be very helpful for us and then I've got a follow up question. Thank you.
Speaker Change: Yeah. Thank you.
Speaker Change: Hum.
Speaker Change: I believe on the product side, we've we've.
Speaker Change: We've really taken some significant strides.
Speaker Change: Seen in your own showcase some terrific product at the.
Speaker Change: Investor meeting so for those that have a chance to see.
Speaker Change: I think that's something which is tremendously exciting for us I'm getting some feedback.
Speaker Change: You might have to go on mute body.
Speaker Change: Yeah.
Speaker Change: I'm sorry about that.
Speaker Change: Persevere here.
Speaker Change: Right.
Speaker Change: Well the first thing the launch for us that we pulled forward as this is our slip speed echo will be they're viewing this at all star weekend, It's got a collaboration tied about around it it's Steph Curry hosting all star weekend in San Francisco. So it's it'll be a terrific event for us and again, it's a platform that we believe it's something we can build into.
Speaker Change: <unk> and around I mentioned and with that we've got some the curry well continues to perform for us, but looking at steps business differently. You know, we had a chance to spend some time with Stefan and San Francisco and just talking about this really isn't underserved business, meaning that we can just do a lot more with it especially in Asia and then we did it right on the on our way out of.
Asia, we stop there and had the ability to just to think about it and see it through that lens, but he's a he's a cultural icon that has transcended being just an athlete that's something I don't believe that we have leverages as hard as we can so there's a lot of opportunity within the core brand.
Speaker Change: And then just need the under armour brand itself is that you took a look at some of the product that you've seen and team have coming up.
Speaker Change: And it's incredibly exciting so beginning with echo, but those will hit this fall I think our retailers we've been excited about the receptions from J.
Speaker Change: J D as in from DSG in some of our traditional retail and they want us to bring you know that the market has changed in the world is not looking to replace 150 or $160 shoes with under 10 or $20 shoes, so that pushes us as well, which really leads into our pricing power. So I believe at that price to value ratio of that relationship is something that we think is as is.
Speaker Change: Continues to get stronger and stronger for the brand to give the consumer the reason to buy it again to be young with that which is why I spoke about things like that heavyweight iconic hoodie that we've been selling at $120 and just watching them for the reaction of the demographic that comes from it so more to come and we're excited to show you that new product shortly and then Ron I know you had the question on the coal business.
Speaker Change: As well and again you know we.
Speaker Change: Enjoy working with kohls, it's a lot of great touch points for female consumers and also from a youth consumer perspective, So we're continuing to work well with that business as a percentage of revenues, we don't really disclose individual accounts, but what I can tell you is none of our accounts get anywhere close to 10% of our revenue mix.
Speaker Change: So in general you know, we're not not anywhere close to that in any of our account sizes just to give you a little bit of a feel that's opportunity.
Speaker Change: Thank you. Thank you Kevin Thank you.
Speaker Change: And then on gross margins any limitations to get to 50% over time since you're predominantly an apparel company. Thank you very much.
Speaker Change: Yeah, I think that you know we've talked about this a good bit there's certainly nothing that we see stopping us from a road map to a 50% gross margin.
Speaker Change: To your point, there there will be a little bit of a headwind relative to our expectations to grow our footwear business over the coming years faster than our apparel business as we as we lean into that mix a little bit, but as we continue to work on the product costing as we continue to work.
Speaker Change: Work through removing more of the discounts and driving towards more premium and as we.
Speaker Change: Look towards some of our more profitable regions from a gross margin perspective to start accelerating again, you know all of those things should should help us pave that road.
Speaker Change: You know as far as when you know that's something that we're not really getting into yet, but obviously, it's in our long term planning and something that we're very focused on.
Speaker Change: Thank you very much and best of luck.
Speaker Change: Thanks, a lot. Thank you.
Speaker Change: This concludes the question and answer session as well as this concludes the third quarter fiscal 2025 earnings call for under armour.
Thank you all for attending today's presentation you may now disconnect.
Speaker Change: Okay.
Speaker Change: Yeah.
Speaker Change: [music].
Speaker Change: [music].