BALTIMORE , Oct. 30, 2018 /PRNewswire/ — Under Armour, Inc. (NYSE: UA, UAA) today announced financial results for the third quarter ended September 30, 2018. The company reports its financial performance in accordance with accounting principles generally accepted in the United States of America
Source: Under Armour Reports Third Quarter Results; Updates Full Year 2018 Outlook | Under Armour, Inc.
In my prediction for today’s Conference Call I stated that, “UA’s most recent hire at the executive level was in (drumroll) marketing. The conference call won’t inspire confidence and I can potentially see all of the work that UA has done to regain some momentum will be lost. I’ll be listening. You can listen when the call goes live by using the information below.”
I was wrong.
The Conference Call, in my opinion, established that UA finally has a hold on what the brand does and what they are. The most important aspects that I heard were the investment into DTC, which arrived in the Q & A and isn’t included in the report on the source link, and the focus on correcting the off priced channel due to inventory.
Here are my transcribed highlights and notes:
Kevin Plank:
Style, Performance and Fit (this is the motivation behind the creation of any UA product)
UA HOVR and Curry 5 attained strong sell through. Plank made sure to give an extended thanks to Steph Curry.
The brand will be shifting from a 21 month release schedule to 16 months. (This is standard, but in today’s market with adidas and their Speedfactory and Nike’s innovations with Express Lane, UA will have to find faster turnaround to avoid the pet peeve mentioned throughout the conference call, inventory issues.)
Product and Storytelling is firing and supporting the “Go To Market” stategy. (GTM was used consistently throughout and seems to be comparable to Nike’s CDO. I make this comparison because last year when Nike held their Investor’s Meeting CDO finally made sense. Plank announced UA’s Investor’s Meeting for December 12th.)
Patrik Frisk (celebrating his 1 year anniversary with UA)
Frisk’s primary objective was to highlight a Proactive Inventory Strategy.
- North America revenue decreased 2 percent to $1.1 billion (down 1 percent currency neutral) and the international business increased 15 percent to $351 million (up 17 percent currency neutral), representing 24 percent of total revenue. Within the international business, revenue was up 15 percent in EMEA (up 16 percent currency neutral), up 15 percent in Asia-Pacific (up 16 percent currency neutral) and up 16 percent in Latin America (up 23 percent currency neutral).
David Bergman delivered the most surprising information in my opinion. (The division that I’ve long blamed for many of the issues of UA was in Connected Fitness. The division was up 29 million. My surprise is in the fact that it was mentioned. If I were in the audience I would have asked during the Q&A how Connected Fitness was considered a bright spot when so many people were laid off in that division.)
David stated that Footwear was up 15%. (I actually anticipated this as last year I was very positive about Slingflex which was mentioned during Q&A and I knew that The Rock and Curry shoes were performing well. I also saw solid sell through on HOVR.)
The most important fact mentioned during David’s segment, DTC grew to 35% of total revenue at 414 Million!!!! (I’ve been explaining more and more that retailers in North America are in an interesting time. As brands begin to grab their consumers via their platforms and doors, retailers will have to find a way to offset the eventual loss there. UA will be opening 200 new stores in the next year!)
Highlights:
New slogan (unofficially, I just like Plank’s approach to product development) Every Product Does Something
UA owns the base layer of women’s apparel
Inventory overhand was priority this year. (Does this mean we will begin to see fewer products carried at Ross, Kohl’s and Marshalls? This is important as larger retailers like Dick’s have been extremely frustrated with the competition at those stores.)
UA is looking closely at licensing. The brand understands having product created outside of house reduces margins, but they also realize this is a positive and takes pressure off of the company. (All brands outsource, it helps with cost control.)
Curry 6 will release at the end of this year. (About freaking time. I’ve written on countless occasions about the poor timing of Curry 3, 4 and 5. The models all released at random times of the year which didn’t coincide with marketing opportunities for the brand. A December release allows for better storytelling and building brand awareness.)
Overall, I was impressed with the open discussion about the shortcomings, although they only discussed the layoffs as “Restructuring” without actually saying anything about the layoffs. The fact that the brand acknowledges their problems in marketing as one of the reasons for inventory and off price issues is good. What’s even better is I can actually see the improvement in digital storytelling so I believe the brand this time.
It was a solid conference call.