Below you’ll find a few transcribed notes from the Q&A of the conference call and a link to my earlier prediction on what would take place during today’s call.
Piper Jaffray: Strong second quarter on footwear, how are you thinking about footwear in the second half?
Patrick answers: The new go to market through 360 degree approach through digital with HOVR. Infinite is 120 and doing very well in running. Style, Performance and Fit works and UA has new innovation for late 2019. UA is learning to launch and build footwear releases.
Kevin: MicroG, Charge, HOVR, shifting tech from one category to another is important. Connected Fitness gives us a unique position.
Piper Jaffray: Smaller Store Testing?
UA: DTC is going to be the majority of our business long term. Expansion happens via ecom or branded stores. In North America we are building out a new way of retail with a handful of stores. It’s an adjustment to move towards a full price model. Over 40,000 consumer interviews and in-store exploration helps us understand what the consumer wants. Focused Performer is working and DTC will be a thoughtful and strategic way.
Brian from Oppenheimer: DTC, e-com, do you see a need for further investment in ecom to connect with consumers?
UA: Digital is a big component, so yes. Digital requires a freshness so we are accelerating and migrating to a new platform for ecom in 2020.Trying to connect the dots from
Brian: Gross margin has been good, what’s the longterm strategy to continue.
Dave from UA: Gross margin has recurring themes: supply chain improvements (Sku reduction, go to market, vendor relationships, and more analytical in pricing). Off price channel was used to move excess inventory and that has worked and now we are moving away from that. Asia Pacific is our highest gross region.
My Prediction prior to the conference call:
It seems that while I have had very few sales in the last year on Under Armour, by paying attention to the market and adjustments my predictions were spot on including my statement years ago that UA would benefit from a small store concept. Here is a quote from the post below:
UA is small enough to adapt a strategy I’ve been touting for almost every brand. I’m writing a post today on a product that I think would translate well to a boutique concept for UA.
If I had to make a guess I would say that UA has continued to see growth in the international market. The brand’s focus on China is smart especially considering the love of basketball in the region and an openness to try brands based on the talent associated with the brands.
Take a moment to review the Q&A and it almost matches what I wrote in my prediction. Results from Q2 are below the link.
Under Armour Announces Second Quarter Earnings And Conference Call Date
- Revenue was up 1 percent to $1.2 billion (up 3 percent currency neutral).
- Wholesale revenue decreased 1 percent to $707 million and direct-to-consumer revenue was up 2 percent to $423 million, representing 35 percent of total revenue.
- North America revenue decreased 3 percent to $816 million and the international business increased 12 percent to $339 million (up 17 percent currency neutral) representing 28 percent of total revenue. Within the international business, revenue was up 6 percent in EMEA (up 11 percent currency neutral), up 23 percent in Asia-Pacific (up 29 percent currency neutral) and down 3 percent in Latin America (up 2 percent currency neutral).
- Apparel revenue decreased 1 percent to $740 million; footwear revenue increased 5 percent to $284 million; and accessories revenue was unchanged at $106 million.
- Gross margin increased 170 basis points to 46.5 percent compared to the prior year driven by supply chain initiatives, regional mix and restructuring charges in the prior period offset by foreign currency impacts.
- Selling, general & administrative expenses increased 2 percent to $566 million, or 47.5 percent of revenue.
- Operating loss was $11 million.
- Net loss was $17 million or $0.04 loss per share, inclusive of a negative $0.01 impact from the company’s minority interest in its Japanese licensee.
- Inventory decreased 26 percent to $966 million.
- Total debt was down 24 percent to $591 million.
- Cash and cash equivalents increased 131 percent to $456 million.
For a copy of the Q2 Script contact:
CARRIE GILLARD
DIRECTOR, INVESTOR RELATIONS
UNDER ARMOUR
e: Cgillard@underarmour.com