Under Armour(UAA) - 2019 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue increased by 1% to $1.2 billion, or up 3% excluding foreign currency impacts [41] - Gross margin improved by 170 basis points to 46.5%, positively impacted by supply chain initiatives and lower airfreight costs [44] - Net loss was $17 million, or $0.04 per diluted share, including a negative impact from the performance of the Japanese licensee [46] Business Line Data and Key Metrics Changes - Wholesale revenue decreased by 1% to $707 million, primarily due to planned lower sales to the off-price channel [41] - Direct-to-consumer revenue increased by 2% to $423 million, lower than expected due to traffic and conversion challenges [42] - Licensing revenue rose by 20% to $25 million, driven by a settlement with a North American partner [43] Market Data and Key Metrics Changes - North America revenue declined by 3%, reflecting decreases in both wholesale and direct-to-consumer businesses [28] - Asia-Pacific revenue grew by 23%, with strong performance in both wholesale and direct-to-consumer channels [34] - EMEA revenue increased by 6%, while Latin America revenue decreased by 3% due to changes in the Brazilian business model [37] Company Strategy and Development Direction - The company is focused on a strategic transformation aimed at delivering consistent profitable results and operational improvements [10][20] - Key strategic elements include a consumer-centric approach, optimized go-to-market processes, and inventory management [24][26] - The company aims to protect its premium brand positioning while driving shareholder value through margin expansion and cost efficiencies [28][50] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the stability and repeatability of processes, enabling greater efficiency and focus [38] - The company expects revenue growth of 3% to 4% for 2019, with a slight decline anticipated in North America [48] - Management highlighted the importance of product innovation and brand strength in driving future growth [86][92] Other Important Information - Inventory management showed a significant improvement with a 26% decline year-over-year [17] - Cash and cash equivalents increased by 131% to $456 million, while total debt decreased by 24% to $591 million [47] Q&A Session Summary Question: Direct-to-consumer business and full-price conversion - Management discussed efforts to reduce promotional activity and improve full-price sales through better product offerings and e-commerce optimization [62][64] Question: North America athletic landscape and visibility into Q4 - Management noted a stable retail environment with expectations for improved product offerings and service levels in the back half of the year [78][102] Question: Impact of lower off-price sales on revenue - Management indicated significant year-over-year declines in off-price sales for Q3, with expectations for a rebound in Q4 [115] Question: SG&A expenses and efficiency - Management attributed better-than-expected SG&A expenses to disciplined cost management and timing shifts in marketing spend [123]