Under Armour(UA) - 2026 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue declined 5% to $1.3 billion, slightly better than the outlook shared in November, with a timing shift of some wholesale deliveries contributing approximately 1 percentage point of growth [27] - Third quarter gross margin declined 310 basis points year-over-year to 44.4%, primarily due to supply chain headwinds and higher U.S. tariffs [30] - Reported diluted loss per share was $1.01, influenced by a non-cash valuation allowance against certain U.S. federal deferred tax assets [33] Business Line Data and Key Metrics Changes - Apparel revenue decreased 3%, largely due to softness in training, golf, and running categories, while sportswear remained flat [29] - Footwear revenue decreased 12%, reflecting declines across most categories, partially offset by growth in outdoor [29] - Accessories revenue decreased 3%, driven largely by declines in golf, outdoor, and team sports [29] Market Data and Key Metrics Changes - North America revenue declined 10%, primarily due to a decrease in wholesale [28] - EMEA revenue increased 6% on a reported basis and 2% on a currency-neutral basis, with growth in both wholesale and direct-to-consumer [28] - APAC revenue decreased 5% on both reported and currency-neutral bases, marking a sequential improvement from earlier declines [28] Company Strategy and Development Direction - The company is focused on execution and has made leadership changes to enhance speed and accountability [9][10] - A disciplined strategy is being implemented to simplify operations, reduce SKUs, and improve product mix and pricing [11][12] - The company aims to stabilize its footwear business by exiting low productivity styles and concentrating on fewer, higher-impact franchises [14][15] Management's Comments on Operating Environment and Future Outlook - Management believes the most disruptive phase of the reset is behind, with a focus on execution and stabilization [25] - There is growing confidence in the North American market, with expectations for stabilization in FY 2027 [45][49] - The company anticipates a decline in full-year revenue of approximately 4%, with expectations for improvement in fourth-quarter revenue trends [37] Other Important Information - The company recorded $75 million in restructuring charges and $3 million in transformation-related expenses during the third quarter [31] - Inventory was down 2% year-over-year to just over $1 billion, indicating improved inventory management [36] - The company is prioritizing balance sheet strength, ending the quarter with no amounts outstanding under its revolving credit facility [36] Q&A Session Questions and Answers Question: Can you speak to what makes you confident about stabilization in North America? - Management expressed confidence in the leadership team and the clarity of the operational model, indicating that they are addressing the right issues and seeing positive order book trends [45][46][49] Question: Are you seeing progress in Europe and APAC as well? - Management noted that EMEA has been a strong performer with 9% growth, while APAC is viewed as a critical long-term growth opportunity [61][64] Question: How are you thinking about segmentation in footwear? - The company is focusing on clear segmentation of good, better, and best products, aiming to concentrate growth at the better and best levels [68][70]