Under Armour (UA) 31 Jul 202020 Q2 Earnings call transcript

Ladies and gentlemen, thank you for standing by, and welcome to the Under Armour Second Quarter Earnings Call. At this time, all participant lines are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference maybe recorded. [Operator Instructions] I’d now like to hand the conference over to your host today, Mr. President, and Vice Development. Senior Allega, Investor Corporate Relations Lance Please go ahead.

are made risks statement forward. that good and in about.underarmour.com. COVID-XX pandemic future earnings Under impact the impact at and joining found being view call and of morning the global of both documents regularly Under us for business XX, that continues you, These forward-looking SEC and be that are call. on significant business. business subject time material website uncertainties statements includes detailed our for information its XXXX this It’s release, everyone filed considerations Armour’s to important quarter XXXX, the may included to Thank press as events can reflect had a as our today’s with Armour’s statements that on safe has second have morning’s Under to The which moving as harbor current available note of July on to Armour’s this in well at

from under defined press reference financial are information, non-GAAP in or materially current materially on around call the the and On global duration level may discussed we terms, descriptions rules high environment, of historical the which continued release. any at the future near- results Accordingly, results differ practices and this uncertainty to of suggestions. content including and and virus’ could extent change call, long-term Given could time. impact and retail estimates of today’s today’s and SEC operations currency-neutral morning’s adjusted

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

CFO, and Patrik Armour be Dave President and on Frisk; us Under today’s call will Bergman. Joining CEO,

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

you call. morning, us everyone, Good today’s joining for and on Thanks, Lance. thank

to Before to and the business, demonstrating to mission have and result our we underscoring retail resilience values, partners. uncertain while in execute efficiently true incredible strategy, staying and and and costs teammates impact pandemic prioritizing and consumers our continues advancing coronavirus working for these I’ll are discuss and safety our faster By that start the second proactively our fortitude the by we’re smarter, quarter e-commerce on managing capabilities, our our more significant retail times.

the a and hyper-focused high will sentiment uncertainty navigate on and a leave originally I’ll line areas Dave, better top on conversions behaviors. to based of the in did we comp encouraged the shopping and seen, four business is initial Armour near level main center around we pandemic our we’re results There to comments right Under due currently the anticipated in than to we’re of details our actions taking little by the are come term dynamic significant anticipate of on impact environment. this we’ve to to now. quarter While for financial consumer quarter, some continue our my and the

performer. engagement rebuild working with increased target to we’re through the consumer, and consideration brand our First, the focus

speed. process including efficiency further model the accelerating and way and we’re the Second, work greater simplify of to collaborate, evolving drive our operating go-to-market we digitization to our

platform, value we’re these the with over Starting to on to and our our consumers. connection Third, we’ve at first fitness, long-term. been elevate through focused all digital drive content, profitability brand and This consumers. heightening the our deepen Together we’re a sustainable of Under and and on approach drive through events efforts, Armour’s prioritizing consideration brand And brand; connection running our to rebuilding influencer targeted reconstructing and discipline elevating migration our key to home social engagement dramatic the DXC workouts. able training, increases finally, with in ability our with a we’re experience Through amid shareholder and outdoor Utilizing

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operating Now moving is to our of focus, evolution model. our continued of second area which the

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it’s Turning having $XXX helping for the connected footwear had support as half cooler first UA unique of advance by in led further after cushioning and also also our only and with we’re Armour’s footwear footwear throughout offer Iso-Chill during trend Fly-By continues run Overall, most introduce running workout we And has be material basketball strength completing a to back our up I’d will the HOVR and channel which summer. But run momentum which This platform, not of platform. accelerated we the the customers utilizes e-commerce strength product the start then building pinnacle year-to-date and same to in to with and on than a shorts emerging including top it’s the in Machina, the XXX% of category. doubled our first and as quickly heat, activations, years encouraged that’s stay period, well very quarter, disperse remain move XXXX, short-sleeved the toward year to a their which our you look Launch highlight doing heat run Under over Spring/Summer technology nearly our yet. fourth period the launch run seller strategy more the helping to our we apparel, HOVR by is category XXXX, development, the over body connected well, shirt, footwear as that capitalizing prior COVID. expression of and we’ll overall

leveraging that from women’s to activations, marketing creation, inclusive what like category, simple to and language anthem deep We’re coupled our targeting positive through product athlete our stunning building do. with within also momentum successful and exactly consumers product trends our imagery, explains into insights train videos seeing products

are directly speaking to focused We performer. the

saw and be and of pant, which Meridian Mid to strong women’s Crossback demand result, strong the continues products, in for our bras the the short, including Play seller. a quarter As Up a we Infinity number sports a

delivered we’ve this date efforts make masks meeting for than the to gowns. more Maryland area result our hospitals, to a We Following athletes. for The expertise million for need leveraged X X PPE into million which designed is extremely strong. day UA and specific performance athletes. engineered including out high SPORTSMASK, Initial three-layer and has for a and in of The been features SPORTSMASK system Iso-Chill UA tested demand sports. all UA of fabric, by materials, comfort

and to or evolve us to working the price to deployment, concepts even perspective, more our tested up as consumers. focus brick experiences, reset for With a as And are looking to in behavior When us formats, continues brand, increasingly employing strengthening And or remains our with long-term. finally, Armour consumer connect over cost a orders environment that harnessing and however, reconstitute scalable, and building and efforts through brand our chain, a own towards structure markets the to we normal profitable are better all concepts I’ll more a our with depth from key we’re of premium of and our the position efforts, from working we significant. managing our catch we mortar long-term it to over that demand an and to whether discerning Dave. stabilize, ability shifts in hand that, respect controlled expressions, ready doing opportunity either for we’re global believe forward these And benefit reengineered athletic we’re creation with being quickly Under helping engine, business, favorable these the the hard a wholesale full a inventory, the new be number So more be strategies with showcase to retail, breadth puts at to the consumer. to retail prudently And work of to in possible. supply a us. brand-right defined, our new is meaningfully into the store putting

start our and help midterm by the operational course while of that understatement, to right were door And financial trends closed unprecedented in the short the note I even of locations long-term. place openings, but results, would strategies combined brand Thank With more I America, sold over consumer focused globally believe that have that you, this respect company that considerably saying disciplined through mid-May, Patrik. it’s second about the Under to drove especially Armour Armour to in quarter a emerging to To important were North due accelerated we be we XX% was and anticipated. though say more quarter June with favorable navigate to strategic, pent-up would COVID-XX. we an in challenges, Under than believe demand

a had that expected primarily a quarter decline wholesale in both anticipated. quicker result XX% and favorable was was expected previously to XX% and was results. XX% DTC. let’s more impact had wholesale to online partner’s across in significant As we due America expected, From This down was right reopenings through a to than better which the than With in still the than North channel on sites. the our results million, stronger that demand to pandemics decline than in. a $XXX anticipated we that, Revenue due dive XX% store revenue, better perspective,

negative Our offset impacts e-commerce was XX%, direct-to-consumer strong the down business store by driven growth. of by closures,

down COVID-XX XX%, product licensing related was type, and in and down Our XX%. down to XX%, XX% Japan. America licensing by to coupled regional sales Footwear down with significantly wholesale revenue were down revenue challenges North a was was driven perspective, and owned was the our XX%. impacts with closures, demand accessories quarter driven lower year-over-year door off-price second business apparel by and From business channel. in By segment ongoing

e-commerce COVID-XX-related and of have most strength XX%, own partner reopened. of today, wholesale by offset also in store negative EMEA, doors impact the down closures, of business. by our As driven revenue In our was

two-thirds down As in of have open. In of XX%, in driven in was mortar XX%, and EMEA, most also in lower Latin America by of offset this doors are most was today, retail COVID-XX less by to than similar business of negative subscription partner estimate the reopened EMEA. region open down of America, this of And traffic doors driven X%, impacts the as as growth. about now finally, our by in up the And Revenue doors and of XX% strength reopened locations e-commerce. by today, June. have region. end owned in were Asia-Pacific was we brick locations by revenue North the that Fitness and driven of And Connected

expense including currency. compensation $XX non-cash COVID-XX, revenue. in we about revenue. cash-related related approximately impairment million second and addition sales expenses mix, variable marketing margin, Fitness points larger by top XXX basis discounting points cutting XX% cost DTC to and improvement in primarily the pricing to Connected including e-commerce and and offset increased driven XX lower of charges, of reduced basis basis and and approximately gross our points reduced charges. mitigate related APAC to basis business, XXX channel to Turning tied mix, foreign to XX.X% points related spend we in representing million, from to XXX impacts, quarter, the a in total In was including the $XX including mix COVID-XX-related and declined incentive XXX partially by This lower $XX million to a basis to channel impacts in line primarily in off-price other SG&A to million benefits related $XXX changes restructuring year-over-year significantly with recorded point to from and saw quarter, initiatives

to charges, million $XXX restructuring restructuring in charges covers non-cash recorded the plan have we $XX a related of $XXX and based. million million. Year-to-date, is which million estimated $XXX million cash range approximately of reminder, our of $XXX pretax As and is

$XXX Our second million. quarter was loss operating

Excluding loss realized per of loss of operating tax, diluted restructuring $XXX we million. share. impairment and net was After adjusted $X.XX charges, the $XXX or million loss

discount time. these providing year. provide impacts With are today’s this we full expect convertible $X.XX how we the at Patrik share. color mentioned, as we’re economic of outlook do loss conditions COVID-XX outlook, on on estimate will thinking said, to reasonably cannot and adjusted call. loss our some net operating on not level year $XXX a the full on was to ramifications, ongoing pandemic our high restructuring I our of XXXX to and million Therefore, and debt Excluding amortization to back on high of of the potential year respect financial our about given non-cash uncertainty however have the With detailed that related We continue or level adjusted diluted results. debt, our the per its half material impact

Although, to pent-up demand believe and there consumer especially trends June positive with the demand, have be believe We and anticipated, recent continue is than near-term will overall from challenges consumer what respect we marketplace. in July. more we and been during uncertainty the to

For there the Under are likely believe of are back we our main Armour, half impact year. to areas three

to which return demand pandemic of course the as be there First, within shopping the difficult at as and retrenchment and marketplace. might a to parts to to well is other relating it whether could is as in behaviors and conversion. of the It place, stores, rate consumers the the world, also forecast predict difficult U.S. the take normalization

for the year. back our All of impacted business half this means significantly that we to the to of be are planning continue during

to Second, evolving amid acted significantly purchases half in planned mentioned, quickly the as and quickly inventory we proactively first the this year Patrik of reduce landscape.

percentage higher XXXX, down digit timing much be could of half related the impacts a in XX% All the we’re finally, a flow to and we and And contribute a marketing second given impacts year. to to With business. represent are quarters in, in As highly the inability window, a deliveries a are reduce is planning result not to to SG&A important higher to of XXXX said, as half year-end and it demand, due higher This XXXX. retail recovers back more combined margin continuing chain for to associated third adequate in a DTC strategy channel we early we in exposure the versus our late expenses for investments may which of to should should off-price decline currently the result, expected dollars, to will rate to step-down. the as of closures that it fast anticipating customer That that than as order channel being variable with and we half. the half, due promotional aspect first mid-single a in overall in meaningful fourth pressure landscape mass we’re critical revenue that XX% shifts to gross the planning sales global and year-over-year to this year for, our planning to to COVID-XX anticipate have the bit this supply planned with the store the we’re as to timing, demand. in across at sales second year. supply from off-price another the Within balance second of the of be in note materialize QX in larger respect due meet if spring environment supply the product of the are channel meaningful XXXX our compared half reducing dramatic planning higher

facility, negotiated $X.X and the on and our amendment generated Two to opening were short- I’d note With capital transaction greater this and great the bond even is our facility issuance and balance to work mid-term the offering, provides quickly flow cash on the of second liquidity We to cash the team accomplished that liquidity able amendment an cash period. was prioritize bonds. navigate convertible strengthen revolving and of the our credit our outstanding and X.X equivalents to during this preserve important $XXX some of like May in outstanding billion and we from provide items to pay successfully used down million Related was cash up in with ability briefly of raise to additional facility. access touch on; Before quarter cash billion our part revolver. challenges to further for we improved liquidity. were convertible the amended needs. our to credit executed It to credit Q&A, ended to to

XX looking March and our flat. net when from June able we essentially XX, at to cash hold position debt were So to

in Our our quarter ability to times. manage level business actions point same revenue, operator to turn decline ability questions. through for with our in With maintain your strategic of we and back uncertain of cash the to confidence our during these the the the have purpose to and a a speaks that, I’ll it XX%

question Instructions] comes Our KeyBanc. with first Yruma [Operator from Edward

Your line is now open.

and guess the we innovation as product morning, in thanks pipeline. obviously, forward, good look I Hey, some for the taking question.

you given off-price, product to it to back some of Thank partners? guess, some on then, kind from receptiveness the start take meet your having inventory coming? you as with what’s that relates the to existing of I to you’ve wholesale their current of partners, got As chance your situation, are you. wholesale a inventory newer taking And

Hi, Ed.

Dave. to think back start plan to could if said, in we’re in the layer categories also space. and And had footwear as offering, spring of another us I it happy products numerous through very out what subsequently, next in want for help an we my to launch And perhaps, with that’s of going going And general, the partners of our the working innovation I thinking happy run our here half our we’re across our XXXX. how continue there this we’re through as innovation to I how gives, on training and in be and pipeline. we’re our about run we’ve as product to gone said, that year. Because, this now us with platform spring. journey I add too, really into well continued have you year In some we’ve I I’ll And as and said color off. script, indication think

think, our our gives to I probably the about confidence think color think a ability we as going there, you overall, to abilities wanted bit – better and go if don’t would partners right think, know main little be now, to I happy landscape execute market, you… with Dave? think if the that, I in I I our add And So is our thing of very it that forward.

Yes. Ed, relative asked it’s of I liquidation we to our region retail a account wholesale right different by our But now. region partners really were the that reasonable perspective, about returns expectations, and account. very think, – sell-in From you weeks is by because and in strategic, returns. and and sell-in have very our stock

returns So current how although before, in in a we’re environment there could we sold and we’re think planning strategic that is. the be regions, not larger of and coordinated some very because were obviously we I expecting and in returns, massively amount for certain what than

So reasonable we in spot feel we’re a like there.

third-party returns We do channel, year-over-year. that move got down business having also without outlets of on get the our off-price feel our that enough which be to we’re able we to a any overly to the step as mix we’ve of to within availability rely continuing

you. Great. Thank

with Our from Randy Jefferies. comes next Konik question

Your line is now open.

I lot. seen you’re Patrik, some out thinking trying for consumer and there, back. that to press in give pull different the talks contracts those guess, a a to I you how – seen terms have balancing or we’ve look its on marketing marketing the company at on continuing items different of to that impact lot us about you’ve can – brand of the Thanks Yes. guess, perspective you

little talk bit the back upping marketing You a little did bit about the a half. in

have to That would going you’re past? think curious marketing of dollars you Just super the be dollars. how long-term you on marketing buckets, placing forward those as in level also different it marketing about the how perhaps, Thanks. relates than in helpful. But

you in to to really right don’t really Randy. with on incredibly on contractual difficult we to out the going They brand do. one is the empathizing the grounded it’s is And sports. and when But Under know the brands in do us of pitch, Thank them to we’re of for Armour first, say as time are have, assets where is the one the our that to It’s that best support I, we’re field. now. the relates do to unique we actually our the a question. things for this It’s that difficult they’re the Hi, It’s where we’re can three, back in agreements time. we like be we four that for of we field. at continue an have It’s world it the there athletes presence team going the make born. have trying to that And permission what felt. were core to would them. on we be

to the So holistic we in athletes support call performers to field, what on the and to and focus pitch, to much that are the journey. out committed staying compete we very recover on but also our there journey their to train,

brand. now we how decisions to And that have with committed smarter of and have restructuring, of is contractual our And asset, for we’re that as accordingly. we to might smarter are agreements And in want going got really your you the you we’re The of to how of important evolve going us what to continue us. our talked the the then the also that, strengthen to marketing about out want consumer to there. activate have with not seeing investments look the at our things But majority might own get available that achieve making you part and impact what we about the So an be we forward, equation the think will fact activate you to and that, right? terms able The sense part to as we’re delivers that is in forward. if that you tools it. then potential reality that is that of it, it journey make make you’ve sense we’ve

it. spend how how As used frankly, our a that’s to to making different, ability enable investments that. about the impacts it to our brand, And shifts strengthen little we’re understanding appropriate we looking our relates think the to quite terms to of in

more informed. much We’re

informed now. better We’re

we And you larger We forward what should continue going if longer that’s before. extent for guide every dollar to a do how to test than we to us, go and really us going understand what’s like. and make help

continue marketing. on to And that to bit going We’re before. here spend a Dave mentioned little

the to We’re we’re smarter to by, forward. spending. engagement. half what going year, the see be encouraged results we’re going of that of in first to And really continue going to in the terms we is continue spend And

that. was I’d bit but answer, on little I thought that a you So color long-winded more a give

Yes, very helpful. Thank you.

with next Our question comes James. Matt from Raymond McClintock

is now line open. Your

Good a conversion? more sells plans brand sell just more that the kind increased are brand Connected Is morning. theme opposed your about terms more everyone. and of that outlined of or shoes? and that as as Fitness? thoughts Patrik, number Or you that about of yes, marketing Thanks. and how evolving? you’ve increasingly awareness engagement talk still, conversion to driver shorts around if one Fitness for Can to being brand engagement. you’re Connected – strategy sell of Hi, viewed talk in shirts will And intending through you can and something more that something to maybe the ultimately channel on staying your shoes

sure, Hi, Yes, absolutely. Matt.

especially on – our spring. the our that that had this so We’re connectivity the about going initiative done on excited we’ve we’ve MapMyRun work of

engagement digital campaign became is only in the Together, as as of that Together my connectivity our big this to platform there double to relates were from able platform through was in prepared one world. with the shifted for we This way whole – I we which the sorry, activate coaching initiatives the This to initiative able app a with As year really brand and that were And run started footwear. Through Through us, it specifically last our the level quarter. the we And into the remarks, or the the we said around

So what is just going not we’re seeing but engagement also workouts going actually up. up, the the

and So up, run activating in encouraging them connectivity the to engagement seeing people and going very that that’s footwear against of to seeing the app the longer us. we’re further, actually are help better, we’re terms faster,

consumer, able the more if doing to focus our ecosystem, CRM and into and as that what then performer going to you then and it future longer how interesting with that the engaged relates is about for a we’re us to like. think If tie very you around keeping us often, loyalty we’re be digital

all understanding with just understanding consumer about engaged, the consumer moments also deliver the to product the train, journey content, against when make but can connect and with more not in all keeping better. for them recover. of it’s time deeply, right, also – us, compete the So consumer we that the engage about consumer, the It’s expectation and of the consumer,

like seems mask on to Thanks as quickly. your out you just the about for business? they chain quick It business. And mask for that. get replenish supply Can sold that a talk Thanks. and to pretty follow-up the capacity ability

exciting of here’s that’s the think really areas Yes, I And absolutely. one to us.

athlete idea, it lot sparked we that we well, with teams X when area up X Kevin had great all, have enormous difficulties of million comment masks the hospital because million of a this, in was on world work in to Maryland, here, jumped for fun Johns responder of first to an and out – this in was saw and here the to of kind with because terms protective same a the course. First realized made and I’d our athlete help help is effort. about continue did you and face That of we about them as just We’ve like, Maryland. make year-to-date, to the gowns to especially like need gear. with in of going where Because University and the the this step Hopkins in we world, that to to if

construction So of the work quickly a used that mask, very developed there this we is lot did our the center we and sophisticated in it’s three-layer is around a which innovation do having of was terms and to course. ideas wear, we of did to wear what done mask importantly, also sports in. a that to more very specifically comfortable safe But and

chain it. part it out with of that you So use can was was and the in supply interesting sports. of also What

actually we the simple really lot for also we did knowledge technology to deep masks. take not that of we in us and So for women, to it, a example, have went making make used help actually these and a bras, approach

and is mask. but running, week we chain. demand is up now world. So for a across we’re the have week, the been strong supply up it’s our Demand the chain incredibly and ability very we’ve complete And strong, demand, actually supply by meet increasing ramping and seeing strong to

Thanks of luck. for the color. Best

I long a sorry. was I’m But answer, That you more bit color. thought I’d a give

Our next question comes from Paul Lejuez with Citi.

line Your is now open.

they you going not half just your them them in second there’s to half it can relative quarter. use much sell to about inventory? last clear their channel? off-price was use back guys. channel are curious that have and Then Or the And goods it Thanks. I’m if thanks, any to if online was new you quantify been the brand closed, to product inventory. to How through year? if you finding of I’m stores clear curious to the the you taking way to had second I’m because wanting the curious their customers via plan talk in not Hey, could

hand this and I’ll a Dave I’ll financials. Hi, the little to depth for bit is Yes. start, on over Patrik. Paul, more then

the all, see out that back back in we environment three I’d And availability, in the call saw demand down the of to is about ahead. promotional second of inventory year, go in right? inventory And the We the talked actions of we half, when in the about half, First how some variability. think which one of third buys. going then terms our to, part to terms of like see we the we Dave think is things we took action that first demand

our to off-price something know, well. consequence, how you that think drive we all a in for continuously make well guys on to a as us, liquidation the continue sure we’ve and in And is about manage we inventories that channel. as So channel, of journey that been terms down

doing to to little through sense? thought the for better half them the give more there So you the been color availability a year. maybe we’ve back And inventory we a give bit that want of as Dave, have

things I Yes. keep mind. excellent mean, relative on of to to the made in One, progress liquidation, last a we year. inventory couple

did this were And old we into been coming than excess. a was long that year, cleaner or it of lot have, we’ve in a time. So not inventory the we

quarter that, them off-price partners, for but means it basically QX of this not third-party Then liquidation, shut those huge of lot a year, inbound we that off-price most deliveries. did So wasn’t third-party and were had us. of QX, doors, have partners, accepting a down their

see third-party margin we our in QX, you as essentially So and QX. benefit a gross little for in had to off-price no big that sales

essentially the it weighted we’re that even as mix great year this a front off-price journey, year, down a than though stepping means half significantly that what which continuing last So mean of does is is liquidation is, third-party that of business more back-half as channel, versus we’re the our year. and

And seeing momentum mask overall, and few we’re a and that [inaudible] about will and we new we and lot in new in inventory coming that, trying year-over-year to the and pressure responders of quite promotional companies going business a then of absolutely then around it’s question our that that bit the be margin, through come they’re is price-pressured it some expecting customers of of are lot little and in clearly out new well. QX. whether has very customers, going we environment. a But the and then on we’re see a be for QX lot a general. that excess QX, pressure also QX expectations margin take lot around excited there the just gross to have a QX through, in also to a environment. impact – on have believe a and We And going And make so be very mentioned our in as add unload there’s gross And QX margin of e-commerce. e-commerce gross it that within planning and on dramatic further, to you to a there

So customer we’re new attraction excited about there. the

quantities but part of are excited the us. customers of disclosing not a fair new to we in online We’re actual and momentum about with there, brand rates coming amount the or be that

you. luck. Thank Good

question comes next with Siegel BMO from Markets. Simeon Our Capital

open. line Your now is

nice Good guy. a in morning, this performance Thanks, environment.

follow-up the on So longer margin, just but a term. gross

where you where talk about And Just As business, help opportunity? you about you Patrik, you. can there. underperformed you may – you work as it the the historically? brand, from DTC about that you can think help have why you think frame as goes Armour’s to Under thinking see to elaborate, can re-elevate then, maybe DTC the Thank just springboard,

consumer of to little going different not be it – I’ll I’m a and It’s too centricity. try to general, In not terms answer of in in about the direct-to-consumer, bit winded. a way,

for on we’re of to who the last journey as on the and understanding our around result has those that where years a been and So been hone have compete, three brand positioning. we’re two, truly for,

forward by as of also it the what build tools more we to enable engages how which we’re consequence So that, a is the us would And of drive us. be abilities capabilities would how to ultimately, ultimately, in premium are a the decisions do. best of or or to business And how and to do is, ultimately tuning quiver in have in execute what we think, make with going of decided and our invest all we our different terms business will like that to I to chooses consumer against that. brand, the

ability what platforms. that’s actually you’re doing. been through on I see to to we’ve think to what So that go And and now better to execute us for do an starting the is market

Armour. just coming that hope better that’s have the is now that Our site. new on great Everything e-commerce chance product site at descriptions. to a that And for see you much content, you better, look had example, of It’s I from much things faster, Under one launched, wonderful, guys it. better

to Our cohort all that to in that on CRM to market, out, in it’s have store and go new all of about that, we’re the playing the that building centricity. that our concepts pipeline support we to support based roll are consumer

the really, about think So it. to way that’s

the repeat heard question before I’m you you. we the sure had can you And DTC first not question?

Sure. Yes.

– you where the gross margin brand looking is So past the just you the so in opportunity as re-elevate this long-term, as year?

made then SKU which as chain about our see from opportunity supply in we’ve vendor well. term. before done, great perspective, helps supply do we continued And margin chain all work gross and rationalization has also consolidating the the strides our margin our base. just We’ve mean I GTM gross talked longer a Yes.

as faster growing as be, on margin channel, again, of And a us. well the the that gross still for margin rest then we that for that of little continued APAC expect heavily a on little we’re is So whether we whether we’re past, goes costing commercial by it continue we see, very work third-party pursuit, will it environment general, that’s down. our the gross thing the regions, too, there’s mix tailwind a we mentioned that to also be then continue. going around believe But the than And world, those margin a that And this and to will of be full our year, journey that down promotional tailwind off-price brand concepts that experiencing with then in business continuing unfortunately, fair improvements here. DTC. a is the a are have to region. in to that better e-com, And other that our bit focusing to be year our to more continues a houses benefits as as relative we’ve from of of basis, amount be mix offset gross highest bit than

the still we we us. to of bit that will move we’ve bit gross forward, mentioned as little that margin a a as forward. Longer we will see help a higher us for rate than that be one a is at multiple increase tailwinds continue going that lower little So footwear apparel item a has of term, headwind

a this work a been we’ve at and is base, But as phenomenal supply apparel chain with scale our gross Now doing still job gap and our up point, that. that and margin. we there as we vendor is with improving footwear between

will but faster in little apparel, little future. bit a be a of a that grow about forward than to the continues footwear as driving So we’re excited headwind,

Great. Thanks Best of year. for the a of lot, luck rest the guys.

Thanks.

Kernan question Cowen. with next comes from John Our

Kernan, open. your Mr. phone mute. Your line on is maybe now

Good morning. guys. Hey,

Congrats environment. through that. the – about tough a see progress. Good Sorry on to

the channel revenue assumptions, embedded walk you the the could geographical year then the North So wholesale between and the Dave, and assumptions, back outlook for international? through also and half in of America, DTC in maybe even

at trying fluid like or is this really drive pandemic kind said understand is by be very not to mean easy region, outbreaks our still, there’s it prepared how is of by channel to if increased region I not we to going in this through. channel, point, Yes, be remarks, to impact going to able

we Again, e-com. give front, DTC not So to from have to perspective. especially momentum that continue detailed going the on we’re the that be excited outlook we very about

little probably half you So it’s of a be DTC run drive to would able through bit – safe we we’ll than the as probably to we cautious. year. back better anticipate being wholesale that the are But

the we as with as the we as what And then of at reminder, half. have if to the that cut on back means as things region-by-region constraints point, But half anticipate. year, saw back production possible. we the currently guidance could that inventory back on go We’re that we’re trying and for we demand, would more be be actually or not in estimating early channel-by-channel of of just giving impacts to detailed supply amount COVID prudent favorable a that this the than

was fit the of will international line And Obviously, Day Investor a follow Got it. up looks back standpoint half than America? North in and international’s if to face more on the of top like this do headwinds difficult in the go to more much international. into Thank continue faced year And half we the XXXX, margin year? you. maybe then outlook that from in margin to than profile just profitability back a overall your opportunity we international North expect It opportunity. to How a margin late big first America.

how in XXXX drive base, are beyond, regions we’re an you to each I dealing same. and which think that to And further relative long-term those XXXX in amount continue I’d off as that years opportunity and the move a abnormal with is our is ability much anything focusing our the the to help remain future to on us I year to year with probably forward of how internationally a say we’re think strategy But ways. more we account perspective, is base would be a beliefs all impacts, into I continue international DTC. how our all COVID as can opportunities and working expect from lot we the easiest summarize an at the much that, increased there. to internationally, a and lot into so drive profitable profitable looking our to international more with in that such plans of going much that growth massive become way cautious of. to in It still of have

I indicator. the in So the We I still minds, plan, the and would our in believe – half look at opportunities sticking plan. wouldn’t as to are still that we’re first any there.

best of great. and luck. That’s guys, Thanks,

Our next question with Sole Jay comes from UBS.

Your line is now open.

is piece on in saying can pressure you or promotional sort Dave, offsetting margin views gross effect very margins Or that Thank that could down overall secondly, the to pandemic the feel to opportunity number channel maybe some about increase Great. about the impact see your Thanks your back, happy where America? an take have time? you that? to evolve much. you just margin? it like maybe the other happen a you half we that how your houses so of on in Or overall you for year? Would just Patrik, distribution. gross does view gross currently over just pretty being of whatever, company’s from do are that an Are brand the I for result is? wholesale the want of clarify North like then, you. wholesale margin you you And with the mix picture or have of year-over-year? If ask see could will a step how the environment how components, second channel you And distribution gross of

Hi, I’ll it Jay, kick off.

the the we’re looks distribution. brand we think again, In on makes how sense and to think to again, that’s about to we’re playing. That’s of engage approach in And that brand for prefers the more with we’re always around to where about our a a I going look here right? how how what terms consumer-centricity of consumer the That’s how at back that, And we that’s how the rebuild us. idea consumer, so at come ultimately, general. consumer guide we trajectory premium the ourselves, for focused

our our distribution will of losers be we there’s general? sure going distribution So in this going how Yes, think wholesale terms forward progress in guide that the contraction in marketplace. to that we believe continuing some And said do there make in winners how brand decisions. forward. Having going for be make to we we ultimately, that, sure some on adjustments see will will and for based about

liquidation So we’ve today. bit a the channel already talked here about little

at, I tightening our going forward. us other areas think more up looking are we’re that distribution there for sense that makes

doors. a full-priced We through be world. absolutely, As different that around it opportunity. still think for us that an of to small relates that. the an to I And new to of fairly for own full-priced believe is have actually amount to that doing And concepts, initiative our opportunity us, yes, retail concepts, address direct-to-consumer, store we’re we store more open able there’s

going fulfillment an engage meet to that the end-consumer it’s model omnichannel expectation. to So we’re that ultimately, towards, building enable better and us is

the of do you want margin? gross add to So around bit a color Dave, little

margin, relative I gross mean, definitely lot there’s of Yes. a uncertainty to there.

half, to try is But think lot as QX, there inventory. and to there think going and of is best promotional we pretty a at our the the out kind brands doing what a environment and see do we tea a of read the for leaves we coming. lot QX with look We’re be back moving through of yes,

And channel negative a well, all we a though QX is QX, business impact, continuing back-half addition a that So in weighted, be all big which pretty expecting we and again, that gross our that bit the off-price, year-over-year are be lower the as to that even could pricing being to getting of back-half fact the our they year, this and QX. pressure margin QX from for third-party mix and little anticipate that And the then that also journey, liquidation be other creates off-price we’re is piece, might on on various in inbound based lower brands. weighted. again,

be And perspective a believe margin. full two QX point drive pressures So and down that the year-over-year from year that, do the gross basis see those are we biggest margin QX yes, for we us. in to could gross

Got it.

so you Thank Okay. much.

Our Deutsche next question Paul from with comes Bank. Trussell

Your now open. line is

some to I the of can and wanted Maybe top of line. give circle there you. from saw you response July? saw morning. North that the back you Good on momentum and e-commerce versus to the exited into how you additional you growth any Thank color Is the Chinese discuss America European or consumer XQ consumer. overall that the

what’s the inconsistent. there the going there closing sense but What of developing. there variability Hi, of the future. interesting, to on current – continue kick to off hand here then you a the is conservative it’s encouragement, view to at world right see to in actually and, at means more a we right at in is Paul, we that the now year, foreseeable things it a is that think are environment think, hard when I that really is, happen, and up, same Patrik. demand the this that very least because What is now, and I of really I’ll I us and in Dave. by general down, believe, the in mean pockets It’s predict where what’s off driving because look from is, going opening time, back half

back where world. two which is not world, again, what’s before. do shop, for rest China is consumers but the the that The convert when think they in when levels about back still generally the of So but curve us, shopping and they to come is traffic they the or see the across we were of really happening are the is we better, hesitant, months ahead consumer what certainly,

but are we our returned to open in most continues levels our the yet. now, in as hasn’t stores, pre-COVID script, of world it So anywhere traffic inconsistent. be the said to And

appropriate read that going it the right us, So to now. tea view conservative I take means a believe anybody can in forward, is because don’t leaves for

how we’re we’re managing and thinking how business, that’s do want you Dave, that’s to… So about it. our

Okay, understood.

question comes Our Morgan from with next Kimberly Greenberger Stanley.

now is line open. Your

inventory. look on here list, When management reduced follow you then wholesale up the receipts And half much so much. follow back the thank up to had U.S. on you reducing the maybe so back if just compared for of year possible partner your your Patrik, to in Thanks the of year, back at wanted half Dave Great, XXXX? the of just it refining half how as I you of is you’re to in this much. or particularly XXXX I’m marketplace quantify commentary. wondering a thinking

questions. I’ll Well, start Thank marketplace. with the Kimberly, Okay. your you, for

is make to decisions the what out see think, you said – think now winners and right that before, I is considering are stronger, is, the that. are as I playing as – we there brand losers. I our build And job,

win done approach the got it’s right. to we for taking way winners. to brand-right with us, That’s the but So try will a be we’re in that

to help is that be. will think So grow seeing. on. strategy I we’re to brand, forward. our And where we’ve we part wherever kind that of decisions traffic able ultimately of that’s stronger feel consumer currently And the place going growth being you right the And we’ll the And on and of our it you’re the presence, our going got distributed. is the to inconsistency be make also what self-regulation market, because based appropriate see now,

to this by reflects and ultimately, do we’ll the of understanding of brand the But aim, half terms and in the So have distribution opportunity. that out that is we’ll winners our better. the losers. our to a consumer in back year ultimately, And continue we play believe, see,

So Dave, want you up do to that? on pick

Yes. Kimberly, to versus But given the that, be production in little this back-half in place year relative better in probably also going for we XX% to did were the us DTC mentioned plan. a inventory changes production, bit is than of levels. for haven’t that our production again, And out we’d we April and and original pulling May, we year-over-year wholesale. mention

COVID-XX there’s think our is we’re We’re the that we inventory meet lot cautiously. demand. have just what adjusted making to sure planning levels think But inbound very We we business right uncertainty. the a – again, of there’s

wanted that make for adjusting to that sure vendors leaving we to things themselves. of really that to production time We that But reasonably to inventory hanging. very there. lined weren’t also were difficult call quickly it. make the our to we demand, and and it’s think ball get So up very, we’ve with sure that the ahead well make we they of could ahead that adjust we And well sure did try

been So a it’s collaboration vendors. with our

thank Great, you.

Nagel question next Oppenheimer. Brian from Our comes with

is Your open. line now

Thanks Hi, good taking my questions. for morning.

Good morning.

XXXX. But fluid about a maybe question seeing a that thinking in couple But have, Is Thanks. factor with questions of Is Are something merge anticipating very the channel? price you the now? that I’ll how within are together half a dealing for promotions I second just of now? more back-to-school? And clearly, here. lot you environment. the a very, price promotions, then So of the talk promotions you’re price back potential of

thanks Yes, really a question, question. Brian. for that good That’s

this really all we’re to that trying one that’s understand at think point. I

of, the a playing And frame. this. I into think question some things North now, We’re back-to-school time here, in different America states in right couple kind in of

open. First is schools going be to are

uncertainty relates for it some Armour? Under I And sports – about of a specifically to And of the will those. extent this is there’s both of going to Second think are we shopping affect played to be behaviors that back-to-school. us, as lot think

unknown can Sometimes, you it is around could marketplace I it sometimes little color sport, now. in A to you be that, a right could able the category. a that, be early tell to give an but that be

that be terms that instead of in shopping could potentially. happens more it people is what So become weather inclined

thing going really but Dave? to That’s it’s tell. certain. So still on It’s don’t the be different. reads to we one in season have any that’s it’s hard yet, so early good that it

my to price as prior in relative of Yes. Brian, think in gross experienced we walk And year. I we already, mentioned that QX margin so promotions some versus far,

that we pressure saw that the to expect doors trying we push as to people QX, more QX, go from from of see as we in and through are more QX inventories. already some are through and more open So and pressure

of more So it seeing expect we’re further that, QX. and increase some QX to into again, go as and we we

the it, Thank color. Got appreciate you.

You’re welcome.

Svezia will question Wedbush. come last with Our from Chris

open. now line is Your

hi. in to more the moment. my back. I’m for relative I Or are SG&A curious, Thanks it to those specifically expected you’re just to going back all quarter? dollars actually are for trend hope in to you year-over-year increase for you, increase I specifically, Yes, expecting taking on you guess, well. go second just that to one Dave, questions. the just dollars? the lines half? SG&A where Or into maybe saw you more just it

mean, again, there’s Yes. manage year-over-year. expecting lot that’s But to are going there. I we down SG&A on a

of approach our from around We we depreciation we and about strategic compensation, are how we reductions incentive marketing, that was in in that. lot been different go and very how that a through work to that QX. in the capital and through continue the working expenditures lower started how QX, we’ve approach we we Obviously, definitely

the So behind there’s lot a of work scenes.

that could to we all that and better sure restructuring that road the well. leverage we’re the from dig expertise excited period And about efforts the during and make fact structure January get as in driving momentum this into we were also that again, through cost restructuring already to the We’re really continue place. deep COVID with a down the plan to our

a do. to So still work lot of

those SG&A the the variable that of brand most on closed ramping having continued doors are, half, a along not We on honest. most there’s We’re expected having now in of and good in SG&A to a many investments, the Patrik digital. for with which QX, up, really happy feeling focused those of the I a and lot with mentioned. open marketing lot investments do back the front that so half also return during and that the ride lot But those back than focused to of being about on mentioned of investments the with we half be see be are open yet DTC is and lot for a time which Again, where back of the comes stores year. higher prioritization and

continuing higher be half, back are it. So in we to than definitely expecting front at the the SG&A half to work

continuing We’re to identify opportunities.

costs into profitability. efficient overall be to We’re and to more continuing continue year in on next to restructuring able address a within way run focus the our to fixed

it, just treatment been the thoughts subleasing special any I accounting on And any just done? that just progress for Fifth getting that on you. on Got housekeeping, Thank curious, there’s But know okay. store. horizon the I’m if just that. And on there’s curious some Avenue facility. time

that. through working Yes, we are

pretty we’re assumptions quarter that the the going to the we’re and out sure that there, in We to charge market. in not we took really reasonable have some prior make surprised get

time big We’re working environment report on Nothing is line staying we optimistic point feel and little COVID tough time. at to a yet it. it. for that. of The a this at in bit But we’re

that. I to Okay. All you. you. Thank appreciate the best

you. Thank

Thanks Chris.

today’s This have and concludes conference. disconnect. program, in for a participating concludes session. Everyone, now That you day. gentlemen, thank the Ladies question-and-answer and you may today’s great