Under Armour (UA) 30 Jul 192019 Q2 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the Under Armour Inc.

Second Quarter 2019 Earnings Webcast and Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference is being recorded. to Vice host and President like Lance today’s Corporate now Senior Allega, of would introduce for your conference, Development. I Investor Relations

begin. may You

Thank documents are on the today’s will us subject make Armour’s could These you, and everyone morning’s current our call quarter to uncertainties that these expectations statements be statements cause regularly are and uncertainties press second detailed certain Participants to can materially. discuss Under actual on and on SEC, results. to XXXX differ website forward-looking the this morning are in release based which all filed with good results call joining and at of underarmour.com. on found

currency-neutral use the are release. performance because terms, this results morning’s call, our amounts some more non-GAAP in accurately which represent true non-GAAP our During may adjusted reference defined We we the feel they discussions certain of of operational lead as we our in business. underlying including financial and information

You found all may GAAP management’s can identify press quantify us measures which accordance and in items this financial non-GAAP to Reconciliations investors. amounts be U.S. release, to GAAP. view to the included with of in of supplemental and tables is the also provide why information excluded in refer hear useful

Patrik Joining COO, Chief and Frisk; Bergman. will Kevin Under be today’s Officer, Plank; us Financial call on President Armour, Chairman and CEO, Dave and

for the And Kevin. turn up Following that, open over call questions. our remarks, prepared we’ll to it with I’ll

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remains direct-to-consumer key Turning fastest in The with sustained and Asia-Pacific. up here was among region, to as momentum Revenue continued growing wholesales expansion channel. balanced fairly story our business. in driven in by growth product partners, XX% our as well

progress. are So, with very overall, pleased region’s we this

now in XXs low the the strength grow continued the rate high-teen expect in overall, on the based at a expectation. previous business fact, up year, In revenue we to from full for

to Based our serviced want was the evolving on before to negatively Now second I an provide which licensee. impacted business Japanese a business, update to moving regions, is moment quarter. on our international factors on through other their in our take

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Excluding in second in quarter continued wholesale Latin the the by revenue and impact, growth was Brazilian both up America direct-to-consumer. driven

to So we repeatability of precision operate than drive that work focus efficiency, to to stability embed and and into and us before. close, processes so structures greater the hard and are how we enabling transform ever

shareholders. customers support and amplify our committed premium the brand performance and Armour better our and Under consumers, toward are protecting to moving of position We are power Dave? to a for

that the and the power our and us includes results our we on of takes, confidence our long-term a connection our are of our deliver Day. a few greater quarter product, strength strategically out XXXX. managing deliver delivering to on principles the these with operating have have that to continue laid Patrik. staying that Investor with squarely innovative at saying fostered and puts the discipline, beginning principles long-term which across I second we with keeping focused we track optionality on are The By business stability and progress to make is comments echo our on and our building against by we business to maintaining long-term strategy. consumers, objectives Thanks, execution, speak Kevin’s near strong we

$X.X by the Turning to revenue you to results, or exclude revenue up currency. billion X% channel. second foreign quarter up X% Clicking down, was of if start our impacts with let’s

X% Our Wholesale $XXX channel. business primarily million driven planned to the down by to off-price lower was sales

been America. million, sales reduced $XXX challenges, in up lower up have Direct-to-consumer primarily channel, the to expected which revenue revenue off-price the is due to X% North would than conversion was Excluding slightly. wholesale and to traffic

million, However, we with primarily settlement one up By shift to million, was business have revenue product was category, partners. $XXX our to price driven XX% American million, full Licensing X% fitness million, up remained toward selling. million. a apparel was revenue up XX% our $XXX unchanged disciplined X% to down was $XX $XX in of accessories our was by at footwear North to revenue and $XXX connected

second and a X% prior foreign restructuring we partially the from to gross gross regions. continued to supply you margin increased margins, saw of airfreight, improvement, out $XXX to chain basis XX initiatives capital related Asia-Pacific components related was Turning of regional quarter, better impacted the to outpacing the favorable points than basis in XXX expense of as XX point impacts from efforts, well to points walk and the XXX to primarily to gross other from by store improvement due positively efforts which of XX as higher margin marketing shift business product were our lower of approximately mix the year cost our in planned a with expenditures improvements, and lower through XX.X% basis the points basis million, quarter. than These offset basis coupled To approximately management of depreciation timing cost expected growth due headwinds. by was openings. SG&A continued currency spend points

equivalents our XX%. and Total we impact performance penny million. was balance we the are and million Interest for XX% of in included down quarter million licensee. are sheet, our Japanese $XX to to million Taking which effective million. diluted was million. was XX% per $X was of was loss bottom-line, $X.XX and loss net progress expense cash $XX or Second $XXX of XXX% operating up our due particularly expenditures the $XXX inventory to proud other to was second cash share, the down million. to where were negative loss $XXX quarter XX% down making, debt approximately to one the rate On tax Capital and $XX this were

and There respect slight Asia-Pacific revenue North with offset business. should earlier expectation approximately of XXXX by that growth change this in Based no to our mid-teen X% regions, business, to rate factors X% percentage a in discussed to outlook. on our decline to our our X% should our low a to America is America that North consist Patrik Turning X%. increase increase to international

improving range. with Additionally, wholesale America, generally by softer expectations, a in X% global grow offset DTC X% to DTC wholesale North and outlook the each in should

XX GAAP XXX with air of restructuring points chain up from XX Therefore, our more $XXX results reach sales expect favorable business. of to ongoing income points, to see operating in points be to as coupled should impact to to to that now to $XXX $XXX be to freight, gross million to channel. compared to continue gross XXXX XXXX, cost due lower compared on basis We million the our to had basis our off-price benefits to margin operational the million approximately basis, to including efforts. in channel continue approximately million supply transformation $XXX a negative greater gross expectation the of throughout adjusted margin up XX XXXX. margin previous productivity expect yielding and margin XXX we initiatives, lower product we We approximately Recall gross basis mix due

takes and of previous expected rate $XX million approximately is some tax expect in country-by-country agility we operating be XX% in now in disciplined margin and while investments now are forward, laser-focused due Interest other enabling key Moving net driving our planned us approximately our million, our improvement. we and better and rate to cost effective greater commitment remain at expense areas, in strategic to on puts creating $XX profitability. our efficiency to prioritize to compared to structure expectation

our additional we are the which diluted the as underlying of Japan, change expected expectation $X.XX efficiencies to see are from impact $X.XX we business in mentioned earlier, to cost the to our performance the of there assess. that As negative seeing in EPS is continue no currently to earnings we offsetting licensee

we given mid-single-digit of expecting end experiencing supply year within continuing are Finally, and improvements down the to our are a chain, rate. we efficiencies be inventory at

with to Before quarter. year the the want balance shifting of provide color third to starting some I Q&A, on the

of our lower to quarter impacts We channel, expect distributor expectations be by are to in meaningfully sales X% fourth business, to in weighted. the off-price tempered more driven and DTC our which X% the timing revenue down sales international regions from

efficiently along we meet to than new to improved and positions distribution for benefit compared to America, up last should year openings, with quarter. percentage up income our including In to chain third air $XXX sets. levels in approximately with lower gross million be cost incremental gross business, should to to down In basis be revenue fourth Third ship cleaner an points the sales adjusted little XXX international XXX mid-teen approximately XXX and Thus year. wholesale last quarter demand Operating quarter a improvements. channel the expect store we benefits products begin This benefit levels mix service product earlier be $X.XX. on margin And the to meaningfully off-price up margin basis. million XXXX a per $XXX basis points as expanded $X.XX including supply primarily North or diluted and reach GAAP due should and enable break in lower service increase rate. is inventory versus low to to fourth quarter, more to to prior us year’s initiatives more, a freight that at the share earnings XXX should

change business quarter. the the within Latin region, Brazilian the in in As impacts America a reminder, normalizes fourth the model

in note lower be should that there we year XXXX. on quarter rate track it’s higher our based growth revenue off-price remain Regardless, full to expected fourth sales. accelerate well. the as the sales to against considerably Globally, of of off-price timing should on So important plan compared

questions. it on America against door and supported is conversion back growth I’ll by is operator Operator? quarter assumptions conclude the fourth turn comparison to the your for and new our traffic DTC prepared to measured deliver North period that, an Finally, for and remarks, XXXX. expected easier based our With largest

from KeyBanc Instructions] And Yruma question from our Edward [Operator first is Capital.

Your is now line open.

get guys. as of morning, Thanks pull know, know be? doing brand first was guess, the deliberately back deliberate good kind you kind that And of said and full the on much taking to is back do maybe to marketing, marketplace how I Hey, intend long it right guess, you questions. price it? to for talk you. Thank Kevin, I about you pulled the I second, you to promos, time of but improve business, are of conversion, then, when the I the on of on you’ve the message some things back DTC kind

question. is hi, Patrik. and the Yes, direct-to-consumer morning. This I’ll take good start

our brand think, I e-com whether stores e-com. promotional that example frequent doing focusing our on in more are in doing full of business, for activity, business, the general, some – improved on that across towards are sales newness, to price in of course it’s price do driving full less more is we the we or and things drops the that

are here mobile effect in back optimizing coming year. the We that’s site half also the into and of especially our

our We driving some with also customization initiatives Icon. our are of

direct-to-consumer. that North lot part One to seeing specific our our so e-com we is traffic is thing are in of outlet. also remember there driving on of about store still important XX% is especially in that’s And business we are more freshness, and America that higher a that,

softer Now, pattern, a conversion is a higher are but higher believe outlet which what there bit in seeing we are we traffic time, little interesting that AURs. same at of business, seeing is is, the yes, and we

So, the that optimization yielding together of results. markdown with in also is stabilizing channel promotional our better cadence

of is trending for feel working onward. really than is price half how back thought. the our hold So, that about going strategy about business we All-in-all, in into actually good think better in we this is and general, that you take taking if to also consideration year wholesale the fact full the and and

of that back the in believe year we coming business. that that on is of bit in direct-to-consumer business, mix of a a the initiatives to have half stabilize but the it’s some we bag going So, now our

want you bit do So, brand? color on of there, little Kevin the

me come thinking brand how we and that brand to Yes, for from what in us means are just let strength the standpoint. back about investing

for been the growth I our like mode. see able it’s And transformation what company and paying has to been sheet a XX balance our months, little last especially the think gross in immediate. margin in highlights, things roughly it’s is So, more this real you’ve through that, off

Now and really little things sure brand belief processes in longer that’s for in looking a like our we and take kick product we bit builds are what the make inspires that to and to everything do do consumer. and

at well just model some company, you operating this could The things inside As difficult a growth from is XXXX. to as of effectively a Rocker and a of rewiring regions. two has who looking our bringing we’ve as of go-to-market the doing I process see been in really not look the reset HR then new Patrik have U.S. been And doing some up as his Shell of the things towards we’ve upgraded been if Head Spring global to from anniversary celebrating and the other four places the with we’ve complete onboard. internal new company been the focus the doing like that of we building new are systems in we new things with leadership SAP, people the Tchernavia until of going implementing that

the We beginning to putting run that we going are It’s that together. ad And holistic really feel campaign. are kick more this we to so, a in. of process next about when isn’t

able call to just orchestrate it get. So, run this and is it now been execution. we are matter The we everyone our we able been and it’s that’s repeatedly it. We’ve what to haven’t play a and yet understands we’ve to good of going able been news to know

really talk think and a being two something or position. our last been loud I feel brand. we’ve about really used taking in Again, we the quiet So, good We we’ve that. the over years company about steps us just put feel three a to

up us. future. is we way stabilization we are Again, nobody great the and is that so, declaring for a the But this set And look victory. quarter we like for

his we So, and run. hungry are ready company to is

little I on direct-to-consumer. if bit add the and Yes, more could a

I being in see are our now levels, more encouraging. our really with it’s right think, channels cleansing of when we wholesale our with channel on products that have that, you pay-off inventory to the really starting fact and working actually the seeing what for know we you floor is and new the us, that

So, are Kevin said, good like about right moving we are now, stabilized where and at, we forward.

so guys. Thanks, Great. much

Thank you, Edward.

our Thank is from question Matthew you. Boss from And next JPMorgan.

Your line is now open.

On guess, the what’s down overall that’s the XQ the visibility Thanks. embedded North the And today? today? I back level Great. what’s your in as break landscape and athletic your fraction we view half, America, of on into forecasted forecast

to back in a Matthew, things I’ll the different of us. comes little half to for way year begin Hi, want the in maybe Dave bit end. back this Patrik. lot is you a there, at the What of see we

the see better drive stabilizing our hangover service right, cleansing I the we’ve business, newness, now. a innovation, really of First And right that as happening to channels some you years, to are as ability to in think business we than product, progressively add I on we a this Dave, of of the to you with that’s what weighting And all, really slightly the the bit going our wholesale had of had to to of help half in really the I off-price bit the starting relates little starting more that business, believe it there want the more that that’s of know, the financials? are little don’t think you performance better see the a do already terms anticipated. extra our in in back year. previous

the are really rest think DTC a wholesale mean, improving in it you there. is of great. put the running And out little a North and bit and about as levels I mean, of I is America, Yes, take between the of which kind service lot a year,

that rate. and are then, look think bit So timing a we you when of at growth that to in year. North company we down we able in half the And then, in or expecting we think the going be are we QX. have in is And America, QX. you again, QX X% well. price be just be change by more largely be you easiest then, sales for DTC, biggest QX break of a is quarter for expect by When mid-teen QX we that sales year, driven our region, which are X%. international driver working sales. different are be and range. model back you expecting about And total And on those wholesale it also no kind year, with expecting off-price full mix are to which that but to flow down to for comp business just through and similar very again, is that up up But as QX of the off ship earlier that a distributor in significantly Brazil growth. to then very QX A for order They been will QX you year comp international mid-single-digit be get in change higher us when to down story. the off price impact the lower large the overall are range, has are to on America, large of probably as channel, kind in down. step North expecting that beneficial then of of which of the to to expectation this we and And is off-price this weighted we the QX QX XXXX, our international see you channel the QX is significantly mid-single-digit by our give sales QX, within QX to is much for color lower QX. into going will are It is there, little the and QX back and about obviously low QX. in of launches being front, to QX up

lot levels on us you and the QX the of both the a for of year Latin Brazil of have also I a also with well. And service America think owned. normalization we and But for are negative new front, the business as international the X% levels big impact a opening improving partnered impact larger the change. last door service quarter. helping And then have in at are the end the internationally then

bit but helps QX, there, flow takes you. with QX a hopefully and puts little that different for the So,

larger months? looked the go-forward Yes, maybe out a lot. next how what’s the just Kevin, the helps to your past. if XX campaigns best strategy Maybe of maybe pipeline, that to marketing, innovation, And over, XX on way we product compare to picture, the you rank on brand’s the marketing would

incredibly it’s stronger. is I to right everyone understands make now. where and sober want we getting the that think we clearheaded thinking the business sure are about are way We about

to great what us think and we that driving I that means brand. proud become we have And really able brands a is what big of stroke on has company. been that giving we’ve Armour is frankly are Under didn’t are though great We that, demonstrated, do understanding One excellence it operational from to capacity before a know has clear thing it the indoor. and we

as We brand in creative this us to to our also I deliver a stroke that will real also operational the it operational our much we our unlock in for company. truly once mode, we better this time consumer is said, superpower, what And of that they moving expect been and and them. product know but resonates to are Under that. process that an towards job believe years three last we’ve strength comes every want is translates, they Armour In that the put on

I through in to brand. the anchor to pipeline And and have brand is Super Bowl that seventh be as great brand and as great final we strong. expect really fifth forward. his move Cup moments begin to The process we that and one it's a that’s we and Brady brand see so, things at enables putting the to winning through of his boots. Armour Under always Kelley us because O'Hara Tom NBA moments of in as wiring wins said play and what the and new that, a Stephen like for things us products, the this of we will World see to go-to-market products we And is great But going winning happen another as that’s that position not we probably think out you been Curry as innovation loud that

editing and and going from we center – actually right the number issue choosing have now innovation and we are of to stage what billing. actually coming places as more of beauty in are that’s a the is is it’s top we are the We get have picking and position we that of biggest different of

isn’t is that that’s creating segmentation you the of that in good, innovation brand. best, better, and up and Under creating in place the channel, throughout distribution every included product combine our one something every so, Armour just superpower showing show you but And where

what a been so, in ability and we we in importantly, the team, the in more on confident the and the repeatable story. the process, see structure, brand most And the have never do frankly basis

those of in in a been the is and all process brand And the what have magic great concert, that’s you things what so, together building. when that here think we’ve come makes we

feel about our So, going on going do consistent best we a incredibly we too That’s probably and basis are news. to ability positive forward. where the

Best of luck.

you Thank

Thank our from you. question Sachs. from Alex is next Walvis And Goldman

now Your is open. line

by been the Q. the how also patterns about morning. color very the the thinking seems for some are question. And that Good clear backdrop the low to of U.S. the change there comment low spending wonder consumer? America changes on are North going Thanks of the I has some online. taking business America the of much far in you traffic there could for the so North you some you stores Very business Thanks been driven forward? conversion it seeing the and on state have that in in whether any

Patrik. Alex, Hi, is this

think for QX, patterns know I pretty so. honest, of bit Armour. I for us, retail, think, we slower on impact big little A kind the There now, really that business us, in to in right specifically be are it’s no seeing you stable. is terms for the general in Under aha we for American think in moments North of which that’s where in is you That’s just – are after say It’s us. slowdown a outlet point we specifically a our the drop, us of percentage when the to happened in QX. our stronger traffic a said business, it seeing little as we just traffic were or We in it’s Easter. drop. bit And actually

a very, very of a course, have it’s minimal, So, large there. we business but

impact are simply better part then messaging of We do. big what how really of for every think across ability no our an it about really So for I service the marrying we better half think, it’s our and coordination said, we consumer, terms a driving because around next turn focus of we callouts with the overall. strong has for in better in execution. And our no getting think business which Like translates together that about improving at are Kevin the big back compete. callouts all it with we of But think thinking across either terms lot go-to-market as frequent into the is us. a exceptional into drops, We we have have the an where I this more right, newness, we channels we go-to-market fall year. year corner

consumer we that a with be being think on to back are of I bullish half kind for fairly of in picture of honest the American the North stable terms So, you year. the

actually America And in on the terms customers of those of are strong? why commentary talk And upside from types full surprised to in the about price of wholesale on much. channel. about so a trends you Thanks talked it are about those with stronger? been little North bit your that customers some particularly then you piece ordering which the perhaps Can then, share Great. side, conversations

what channel the are seeing a is, dealing seeing by the would we products, all messaging distribution, are starting you mean the over is so now more finally we’ve better are excess you is, with across servicing last like and what to is messaging, brand from and been happening Under brand think the floor wholesale are lot ultimately up consistent show on a right Armour I I up we better elevated seeing XX up. situation actually us we channels – with products, to show the like more in execute or starting brand of sure, business that to expression to as coherent of What Yes, the that months the showing a better better. dissipate

well, gives right the we you that’s that the seeing. is fact time at So, the arrives us place and the that, responds the in other right to words, we and consumer that what everything that know confidence do are when

an are had And also we sell-throughs encouraging terms us. of elevated fuller retail more signs elevating it’s less So compared we sign seeing we slightly what what in business we that’s going encouraging And price for are about to actually approach a approach in are and think same doing as seeing that we to our expected. the forward. a promotional

we I strategy believe plan So, are simply a into year, the see day, five plan and starting right, plan, of said all delivering is to on the two the working it are is, about takes in time, what you at end the the and the working, year strategy quarters what the we is still we think all, where but right. I would

moving that XX in are and are starting for two there to still, a of the years But us take got kind through, and to into that – hold that to we month of You month in to us. we and it’s XX calendar. to coming see living it’s calendar factor month you out work calendar starting for time are ago a XX went wash

All very Thanks best. the Great. much.

Thank you, Alex.

Thank you.

Lejuez next from Paul from Our is Citi. question

now line open. is Your

down the just similarly, more guess, quarter of came you guess, bigger expecting we I impact about higher the as ongoing they as price a versus as Hey, of as the to And am to much of talking sales little inventories just bump could a why than I can revenue. I we you off are and higher how lower or in off price am that all. of quarter are And are, if of in price if efficiency just guys. curious secondly, with think result timing-related better off sales a in I much guided, Thanks. what was third sort better savings. shifting quantify thanks picture, of fourth curious bit trying XQ understand then, SG&A at just sales

off this is will the in quantify is don’t tell QX liquidation year-over-year points to I is QX. impacts. and price the it relative significantly Paul, that up that, But We down year-over-year Yes, in Dave. actual significantly you

dramatic does impact it bit of on to have little flow. appreciated QX a QX. we fairly So, interesting growth And an the rates,

inventory, to to do the has go to with that out want with as would a availability, of close on to the we never as something put availability floor be obviously full that getting we what’s Some already price we because is sure the with to the make door, out cleaner our of lot excess able well, are right our partners.

we we clean to So, and have are there. that monitor very sure that make well

what did it’s And so, can expecting we’ve before really sometimes of what’s the drive our overdrive means you out you bit any you little target little continuing total general, in bit QX wait our are inventory XX. that we about a of towards And that’s when liquidation flow And of not to June and happening ship year. plan a the year-over-year. But inventory for QX to down off all think part to price. versus relative different have that company being been price than off with we

better tightly order of timing process to and to And amount with improvement manage process, that continued with some inventory and production of we versus receipts lining up demand addition do just that how in from timing of perspective. had the a

of going lot there different improvements a at on So, once.

than hats future. to the us something year it’s – improvement task just more really up well in for is a is think off general $XXX even of just It a it massive coming our million team, sets and down a to I the in

been years that I have as last So, the think two us speaks well. for with

XXXX march the getting future. house and really ready in getting into shift just We in ready ourselves our and and and forward are clean order,

to there Are you And that of net lower just circle also back you pockets inventory? missing like through you’d to like expenses question. any a result come then sales where feel the see as want on just are

balanced right I Paul, are is this we Yes, No, Patrik. now. evenly would hi, that say

region are every channel we think every absolutely I able to the in business world. of the and service

which Kevin into a process Some much that improve talked of in XXXX and we definitely is planning what going about forward. due that to better see further XXXX is going

at this we time, well So, balanced. are I point in think

marketing on Paul, little we a appreciation well. in largely management, better the the planned the moved SG&A, did that the bit then And for it’s than expected come based as spend due to more out we CapEx a QX. which I on timing make to cost clearly mentioned more XXXX and come seeing of some other But, to beyond. and small-scale, through continue on openings are we progress do as store And lower have the earlier. in structure, work although also efficiencies and QX, shifts then, we cost disciplined of And on

to is delivering key sure so, and all growth balanced operating there our make about margin investments in long-term And support and expansion. still areas balancing it’s

we’ve and way we drive that. amount expecting are through So, to continuing leverage are a long beyond to go got we But year. this a of slight

you. Thank luck. Good

Okay. Thank Paul. you

Thank you.

next Jonathan from is question Baird. Our from Komp

is line Your open. now

boring a playing a the predictable of you’ve ask just maybe of and want I out you Yes, I against more a up question backdrop how stabilizing lot maybe things that while? cadence that about second to had and and start. has that kind mirror picture half kind just hi, changed or to bigger to a of if in if becoming you anything pointed saw this maybe just is for the business company. know discussion to

- the is Jonathan, plan. Patrik. the still this Thank Well, know I you plan think your question. Yes, you hi, is for

has outlook if a still February the of different optimization little we think about same of the that in been XX. you how provided a channels. terms are bit on There we on We like

think we good a about are us, think. no surprises for – So, That’s are I not to there here way it.

this to better, have the orchestrate is Under plans Armour right. Now in incredibly, this exciting is will. what I the to back, we think of not don’t believe I’ve ever actually in going But show back boring I year never do for advantage play we got of we we half about are think, going able now up And as we going heard we’ve to brand forward. being before. terms brand, going the that are And

because the they they today, that’s those and able We and the the to actually decision Kevin have, innovations marketing to to as their no are talked And to the where putting package be we able and in products time are expects it able regions, moments great across journey. that to purchasing right, do different with marketing about are or what to journey consumer together be where matter think four together really that the that, in a you delivering you different into about, or servicing, able need do all great channels, that different world.

more years three play So, play, we happened play become belief both really you able with from that’s move to work we have brand that all coordinated brand play here coordinated of with will a see that consumer the more innovation and that exciting the out and an as into the louder perspective. in the more the proposition is, effective a terms being to last and future, over and

So, very we confident. are

to the into We forward in we are five two reiterate, plan quarters we quietly confident that year are marching plan. plan with be and really we that are have again, this and has I going nothing that changed

question answers. think I Jonathan, And that two deserves

to of factional. that a But going happening always song, changing more much with of for a brand, it’s powerful to from do with be to the globe and Patrik with understanding brand. sort clear what focus that the I it the growth stabilization is than and America and quieter begins America business t company to while and company us ends on because of be has towards that of North around if is continues rewiring for of drink straw has see able the world to perspective to been much what’s sound his a that this that to to eye Patrik be still ability We with hyper getting louder forward. that, here. with the why North intent driving begins been are are we all and expect think us tires and the ends be is don’t close going to So serves how happens underplayed an of understand the that course, anything product you’ll And a and is so like while, it’s the and sing we we And demonstrate that the do the you have. literally stabilize with which

driving are are foot. feel we are a yet, front We a on with this while our in place we But Full that better to would we feel more don’t about certainly or place better say XX be have we and like have so, And a that the Period. we we a perfect able that with one are in the like months and we it. ago. that excited brand year we and much we couldn’t in ago think been team future stop.

talked does in out fourth the quarter, drivers Understood. maybe, you you And I of about view like the you next talk just you of see that or think broadly, and entering in projection entering called XXXX know beyond? XXXX? And could earlier growth the how phase to today the as of about more that any impact service anything some which I about the transitioning

have for allow windows Hey, XXXX the been in only us Jonathan, we North are wholesale, to improved the levels, expecting in it’s to slight ship The Dave. mean, sets. America service earlier is going change. really I we a deliver change this

little that anticipating. than seeing we more expecting along. improvement But bit been been we’ve we’ve So all a actually have been

bit in Day with and good laid will at With Protect coming relative Perform but little helping to wholesale we to Relative and that the QX, helping out is we plan little XXXX be future. side as to Investor early too excited House tempered the and expectation. phase more XXXX, to feel this DTC offset that a in to about that moving So This we speak talk think to about the XXXX, out into on really of it’s Balance bit a we of

Thank Understood. you. Okay.

you. Thank

from Our Jim next from Duffy is Stifel. question

line open. Your now is

you. Thank morning. Good

Hey, Jim.

the color the and Can about ask business. to has traffic the challenge. outlets been outlet a I speak strategies to in I helpful, recognize North the American am merchandizing the are there door perhaps be wanted is comps? in into Do you guys per inventories curious thanks. have I you to excess, feel outlets you enough in that for that the down would meaningfully all getting offset made reduction and the

Yes, Patrik. and hi, Jim. is Yes, this Hi, Jim.

our traffic. and having our terms affecting improve believe in the AURs just good higher our of fact I in what thing slight conversion we us is it’s right outlets, our in slight, view outlets that’s higher makes we are back a I that be and actually half of executing the decline point that only think, actually now right think to merchandizing how To have execute ability of think we is we in that, as the to going the year. very continue in in honest, to now are really outlets

shipment feel products the it outlets we right back lack we we from the terms good planned perspective. on what way. our merchandizing going our no in a inventory be pretty are about for right and is there So, doing the And inventory levels floor of or in now of half

So, in our are way think same offering. the we full that for that we price also improving products

that started We believe the improve are that we slightly we we last sure years for the the have to and right actually that over of course two, two-and-a-half providing also well. outlets making as product are

confident. are we So,

Okay.

business, and size, the interest Next the drag in to question, a guys prospects like return and exploring state speak you sounds from in that you improvement future Can on surprise. the minority about was talk potential maybe it drag mentioned the of profitability? exposure the Japan opportunities, the to business,

this Jim, Yes, Dave. is

two market, earnings I this penny obviously. is impact it’s that in Again morning. allocable on And negative for to in in we balance an our outlook important the XX.X% what it partnership record based that really the EPS. a we this very QX, penny portion for or be reminder, about think our first, factored ownership now, year could did which think a as gave know and note, have we through of us. had an additional And requires to Japan us into updated a it’s one important increased that’s a I we to their longstanding of

work and provide them. later it’s to able that. too little be for with their now, in We should But are right early continuing more to year. the color monitor business We a

Thank you.

you. Thank

is question next Our from Murphy Piper Erinn from Jaffray.

is Your line now open.

second very you even focus that in against comparison last the that of then, just how quarter the in you Thanks. morning. little about the a different if speak footwear thinking strong business on rollout And year, Great. your I are your of to some of the back was toughest the the drivers half? bit franchises? year. wanted many Can continued business Good to Hover just across footwear

with go-to-market. and additional Yes, And of lot with happy had new to actually is world. the could of our And are the that have models very Hover footwear has developing. year how hi, is very Erinn, expansion very we traction done that see Yes, are well for do across Patrik. and proud this with we we a continued this the that franchise

we that approach remember, platform year and a you If had that through was digital success a the launched time last or degree a last XXX model and great launched that we with first year. a

the the Under would with to is What recommended to have view our launched don’t a it on for continues this the we we shoe going the products, of game World. building we traction encouraging is that and into $XXX strong for example on build from on as learnings are that’s new what’s Runner's us just layering such market point for year anybody we have got think year you came continue of Armour are in get front are the already us with very style malls thought running that is, February, I we’ve Infinite well that We a from the cover last on seeing the and is all that doing elevated and last a couple products. in we that a years we actually Infinite ago. of and right saw market now. and in became

the that Armour footwear the distribution, do Armour. is the and Under a we willing there the running it’s side talk if in to consumer Style, Fit for absolutely we the us the giving in confidence they product is that it’s the that and right So as the when Under have right right with messaging, SPF messaging and right right Performance with about, timing, the consumer and at right same

So, we innovations for are half styles. in new what’s very the year, the we have is, encouraged by of in us exciting that footwear new back coming and

strong also as line-up have a alluding the to bit to a innovation. We future. into that it little Kevin going was relates

launch believe on now company a of especially from we we platforms and to build as growth, how penetration, and also is think global perspective. our critical channel we not then understand a as in to but really course to So, and very just segmentation that future learn are footwear rapidly starting about which them

So, it’s much and that calling thank for us. a real it’s very encouraging out you for highlight and really been really,

got a industry of shelling up position are the or on footstep a a for the driving of where it walks good, important me of strategy. just we historical how brand having to the through we’ve of context better, give the for best some And our door. looking competing do where over standpoint that means But to in really the in finally let what AURs, we is history getting from footwear color each

platform, Midsole that for then ability Midsole as to when from take wearing ability Hover The Our another, us from go into category that. they segment people to Micro cleated, from platform, the for from one our and from are G our Charged then what to us platform, field on encore, well.

isn’t like but So, an the opportunity of in confident with where the another world. something a I in market biggest pair as mentioned App in as Connected that’s running Patrik largest feel connected global that it’s comes actually doing world's the that our system unique, shoes, the Fitness like just shoe being running, ties things really introduction that with that health

unique gives giving in And player them and us gives reason us very with. our happening, begin coaching and future real-time be people and secures unique business that what’s so, understanding Armour the makes a to to it position giving believe just of we Under that that special this the

superpowers our and we every And march so feel so, our and ability product is to our forward certainly delivering we goal with is good about and in no job footwear next that steps too. those build exception that to

my a the of then And the Great. here think doing you smaller recent in talked have about question America I second past, store is back in test this just, half North in guys year.

about strategy? DTC. been what on thinking any rolling Thanks. stores? that out seeing Just list Has Just test in you’ve some your these that of update changed

America going going our I know, around you at long-term majority the DTC world, parts that direct-to-consumer either is out and think believe us international, here it of strategy Investor happens changed. Day We through, to hasn’t in laid terms both North the it forward our the the in in in expansion for mono stores. e-com or of many branded as business of be world, we

at America, we a to the as guys starts North direct-to-consumer. carefully. that Investor So, to of spoke in Day. we how continue have will into here about plan we invest And do to you It

North out accelerate building with back believe slightly we way brand of to brand. year we the have is are a of will It year retail next the a new handful in the what But into America. in We year for and stores the belief in this five half continued think plan. and about

in bit ourselves We a just I it our price as are adjusting perhaps happen just us now this we our quarter. into it think outlets of to you again. weren’t expecting retail what little in premium necessarily then right are seeing a is this model tempering in for expected. was And full

seeing are think a long-term right So, I a what necessarily think quarterly are we we not now thing, what seeing is thing. right we now,

store. one We’ve new retail is, that it’s with we here Armour over thinking understand to our Under over build to the sitting formats done a confident we XX,XXX are and interviews doing entire the last are consumer at how years the retail and girls too world. guys So of two across about in what a not that’s thing bunch important about

better from we what an consumer performer done today much exploration is this brand a that from perspective the focus amount through our allowance have enormous core is consumer target. in-store insights of consumer of the We we expecting and understand believe this

are through work launch it able is strategic going in so, this done, be very play. a we’ve And to to believe we and we that, way a long-term

So, out build going we North America. in stores and of are rush not hundreds to

it thoughtful, I And we in direct January going way we strategic much still year. going very in We and am consumer. – per brand a the last are in methodical, laid win plan and for December our as sorry, long-term out do that direct-to-consumer in forward of believe

Great. Good to hear. you guys. Thank best. the All

Thanks.

you. Thank

Our Brian Nagel Oppenheimer. last from is question from

open. line Your now is

you taking my questions. thank and morning for good Hi,

morning, Brian. Good

prior it little just the you that follow-up a that. be and direct-to-consumer that about question, bit will of of But e-commerce first question. piece a My the to talked

at So as market up see taking you’ve the question consumers? stepped is, connect you need the least to of doing, to your you're the are with in athletic the e-commerce for I in your or have do a brand, investment others began consideration stabilization regrowing you experience further what

we this just is of Digital Hi, do. in Patrik. general, a happens. everything Yes, component bigger is that

what the digital And freshness still the the merchandizing the platform. What relates and happen are is, we today, so doing functionality that to our by traffic that the today. aspect are see we encouraged we healthy newness in it e-commerce our and is to e-commerce not to right we though as needs platform, fact standing are in and

see you Under what an So, going from those forward Armour areas. is acceleration will in

platform in better merchandize, service is story. ability our and consumer are XXXX migrating also the to better going to in we ability believe us new We that e-commerce give to a tell to

us better our believe our work perspective. is Armour happening into e-commerce And we and the that and Under to we we advantage so and there are business from and our getting believe connect what’s business brand more we going into that’s connected become interesting well. as what’s as more is ability a in the of also move between dots fitness future more And more to to putting an lot digital an of

a spot question, Thank to the continue gross continues, turns nice you. we healthier. the margin? maybe product follow-up margin maybe the another could, structural - a improve? for for Armour the I bright potential way, we term business overall here the a structure term been distribution Or about of longer as How gross but, as should And business Under the the clearly gross continued margin channel shorter think said a conditions the of has mix, if then Thanks. for business runrate type

Yes, Brian, this is Dave.

improved are in price margin We in have QX considerable a perspective, the way. those that reductions excited a beyond a lot actively recurring things driving we’ve now, that are the we through chain gross cost work themes of we in costing through, our SKU of channel volume are And about freight. and XXXX the again, from have analytical really to costing, the things and more that get our we gone to this and supply better year going vendor transparency, continuing more we’ve be lot which lower pricing. air been that benefits And the initiatives mix product we which and continued drive expansion QX the overhang better into and done, the there our all processes, in go-to-market the a consolidation product is that also getting are channel, And deeper off XXXX to used inventory how that do to are then talked the from improved heavily we drive into coming had. we play about

back step And off planned we year and get so, we what are as think doing XXXX that and to more we now optimal for looking have that. that of an each mix in are we to is

XXXX in the to the be a is should We should And forward us very then also, for helpful region. gross future continue Asia-Pacific look In forward. to tailwind be going that excited we that and will Asia-Pacific there going go for our us at growth are well beyond. continue highest continue as improvements as to And we forward. profit cost about and

XXXX color of lot continue not specifically. to and XXXX in to forward in year going beyond. are point, this drive are be and But going direction going we to we this to things giving at a these So, are the right

Great. Thank you.

this quarter confident a Thank second the plan that you are. a December. for in about five for all our has work more of your been moving we question, And to And There is back to in lot Brian. and we year this out do. again, able feel where position just impact laid We a again, actually business and very in more is forward. prepared team never to be more certainly committee

greatest meant the because the you And the in understanding those crazy, got Under that that's in we work to we us deliver with we’ve and team see on will that so, you like to every that continue brand be, with greatest the but world product brand world the this in superpowers do Armour. count from build

So, much, thank you very operator.

day. great a have all You

gentlemen, thank the and today’s program. participation Ladies you for your in This conference. concludes

now disconnect. You may