Good morning everyone and welcome to the Under Armour's Q4 2024 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions]. After today’s presentation there will be an opportunity to ask questions. [Operator Instructions]. Please note today’s event is being recorded.

At this time, I would like to turn the floor over to Lance Allega, Senior Vice President, Investor Relations, Treasury, and Corporate Development. Sir, please go ahead..

Good morning and welcome to Under Armour's fourth quarter and full year fiscal 2024 earnings conference call. Today's event is being recorded for replay. Joining us on today's call are be Under Armour President and CEO, Kevin Plank; and CFO, David Bergman.

Our remarks today will include certain forward-looking statements that reflect Under Armour management's current view of our business as of May 16, 2024. These statements may include projections for our business in the present and future quarters and fiscal years.

Forward-looking statements are not guarantees of future business performance and our actual results may differ materially from those expressed or implied in the views provided.

Statements made are subject to risks and other uncertainties detailed in this morning's press release and documents filed regularly with the SEC, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. Today's discussion may also include the use of non-GAAP references.

Under Armour believes these measures give investors a helpful perspective on underlying business trends. When applicable, these measures are reconciled to most appropriate U.S. GAAP measures, reconciliations along with other pertinent information can be found in this morning's press release and at about.underarmour.com.

With that, I'll turn the call over to Kevin..

digital, team sports, and our premium wholesale partners. Our e-commerce business has been overly dependent on promotions and is yet to be a flagship representation of a premium athletic brand.

That said, our fiscal 2025 outlook contemplates, among other actions, more than 50% fewer site-wide promotional days than last year and a reduction in the depth of discounts on the days that we do choose to promote. As consumers adjust to our new value proposition, these actions will weigh on our top line.

The digital goal is to transform our e-commerce business into a significantly more premium platform over the next 18 months, this includes improving our online merchandising, creating a more engaging brand-building environment that encourages our consumers through compelling products with a clear story of why it will make them better.

This means more DTC exclusive products and utilizing our new 6 or 12-month speed-to-market process to deliver limited volume products that drive brand heat and help create more brand demand moments. Further, we intend to reduce the number of made-for-outlet products on our website to drive a more premium assortment as well overall.

So these actions will benefit us in creating a more elevated product offering and shopping experience for athletes over the long term. It also means harnessing the growing power of our U.S. loyalty program, UA Rewards, where we continue to see strong enrollment trends.

With nearly 4 million members, we've engaged members with exclusive programs like a trip to the NBA All-Star game, an exclusive members-only product, including collabs, with Logic and Justin Jefferson, which sold out in just hours.

Our members also continue to show a higher premium purchase frequency and revenue per member, so we're encouraged about what this can mean over time.

As a companion piece of this, as we improve our operating model and supply chain, we'll increase the awareness and velocity when we release new products, ensuring that newness is consistently associated with the brand, underscoring this concept of becoming a brand of launches, products that you never expected but could only be built by UA, telling a better story with fewer, more impactful products.

Shifting to our own doors. Though a very small portion of North America's revenue today, our brand houses must become a premium showcase for the Under Armour brand. There is a significant opportunity to improve these stores, and we're working to create a more homogenous look and feel, curated with less product and more storytelling.

We're piloting a new store concept now that we expect to test and learn from throughout fiscal 2025. Our Factory House business must elevate the consumer experience by reducing unnecessary complexity. For example, in our 183 outlet doors in North America, we're over assorted across categories and have too many different floor sets.

This compromises the clarity of experience for consumers when they walk through the door and from an operational efficiency perspective, it's unacceptable, and we're correcting it with the right leadership now in place.

We will also enact greater discipline and balance between our promotional activities and inventory management needs in our outlet stores. Discounting can drive revenue in the short term, but it's not good for gross margin, balancing market price algorithms, and clearly can negatively impact brand perception.

In tandem with optimizing our operations and logistics, we believe these actions should lead to higher store profitability, which will have a meaningful impact on our nearly $1 billion Factory House business. Turning to North America wholesale.

In my first month on the job, while I still have a few to meet with, I've had top to tops with several of our largest U.S. accounts, including DICK’S Sporting Goods, Academy Shields and more. And as a note, I'll be meeting with key franchise, retail, and manufacturing partners when I travel to Europe and China before month’s end.

These interactions with our U.S. partners have been productive as to where we've been and where we are and encouraging as to where we expect to be once our product and marketing engines are re-optimized and firing on all cylinders.

Given product lead times, the critical mass of this renewed product vision will not be coming until fall/winter 2025 with a build into subsequent seasons from there. So it will take some time for our North American wholesale business to inflect positively. We will be making meaningful progress until then.

In the meantime, we're focusing on rebuilding high-quality relationships with our key retail partners. We are confident we'll represent Under Armour in a brand-right manner, especially in sporting goods and mall accounts.

But this will only occur for us as long as we stay committed to being authentic in the team sports arena, which is critical for our success. And so we'll continue this focus through team outfitting on the field, court and pitch. This is our differentiator and reason for having a relationship with our targeted 16 to 24-year-old varsity athlete.

Elevating our product offering from mostly good and distorting towards better and best level products are also critical enablers combined with inspirational storytelling and more joint marketing with our wholesale partners.

We have opportunity to do much more with key accounts but to do so we need to drive our aligned product and marketing engines to differentiate our business and convince athletes and our customers to covet Under Armour. Simply put, we haven't been as consistent in giving athletes or retail customers a reason to buy our brand as robustly as possible.

As we execute our Protect This House strategy over the next 18 months, I'm confident this will set us on a path towards returning to growth in our critical North American market. We have the right formula for success and are driving forward with clarity and continuity of purpose.

With our priority of reconstituting the brand in North America, it's important to explain the role that the international business plays in our go-forward strategy. The attention we are placing in the U.S. business is underscored by our 28 years of learning and understanding of brand management.

Then in order to be strong abroad, we must be our strongest at home. EMEA and APAC remain vital markets for Under Armour and our brand is better positioned in these regions than in the U.S. today due to a history of channel discipline across our DTC and wholesale businesses.

With consistently optimized brand activations, our expectation for a low single-digit revenue decline in our international business is partly due to more conservative consumer trends and ensuring that we don't erode brand equity by chasing lower-quality revenue.

In EMEA, there are signs of retail caution, particularly in the UK, which is our largest market there, including softer wholesale outlooks and increasingly cautious consumer sentiment and macroeconomic uncertainty.

Sensing that trend and maintaining discipline, we expect to grow faster in our DTC channels in the region and we'll invest in e-commerce processes and systems to support this growth. In wholesale, we'll continue to focus our business on the right partners, working to manage the environment appropriately.

There's even more significant long-term growth potential in APAC. Still in the near term, the environment remains materially promotional in China, Southeast Asia and Japan. So our focus is to grow carefully and productively while investing in key markets, balancing short-term performance with long-term brand affinity.

So we're not taking our eye off the ball in our international markets. We will focus on maintaining high-quality sales across all channels and protecting our premium brand positioning.

Significantly, once we start to see a positive inflection in our largest and most profitable region of North America, more resources will be available to invest outside our home market to drive sustainable growth and profitability over the long-term.

And with that, I'll hand it over to Dave to review our fourth quarter and fiscal 2024 results, provide more color on our fiscal 2025 outlook, and then I'm going to come back to close out our prepared remarks.

Dave?.

Thanks, Kevin. Starting with our fourth quarter fiscal 2024 results, which were in line with our outlook, revenue was down 5% to $1.3 billion with a 10% decline in North America due to softer wholesale demand and lower sales to the off-price channel.

Our DTC business was also down during the quarter with positive store growth, offset by softness in our e-commerce business. EMEA revenue was up 10% or 7% on a currency-neutral basis driven by strength in our wholesale and DTC businesses.

APAC revenue was up 1% in the quarter or 5% on a currency-neutral basis driven by positive DTC sales, while wholesale results remained flat. And in Latin America, revenue was up 20% or 12% on a currency-neutral basis.

From a channel perspective, fourth quarter wholesale revenue was down 7% driven by softer demand in our full price and distributor businesses and lower sales to the off-price channel. Our direct-to-consumer business was flat with 7% growth in our stores, offset by a 7% decline in our e-commerce business.

And licensing was up 11%, led by positive results in our North American business. By product type, apparel revenue was down 1% driven primarily by softness in our team sports, run and outdoor businesses, offset by strength in train and golf. Footwear was down 11% due to a tough comparison and softer demand, primarily in North America.

As a reminder, we had robust growth during the fourth quarter of fiscal 2023 as a significant volume of footwear products that were previously delayed due to COVID-related factory constraints meaningfully hit the market. And our accessories business was down 7%. Next is gross margin, which was up 170 basis points to 45% and aligned with our outlook.

This increase was driven by 260 basis points of supply chain benefits, including lower product and freight costs and 100 basis points of favorable channel mix primarily related to lower sales to the off-price channel.

These benefits were partially offset by 90 basis points of unfavorable pricing related to our proactive inventory management actions, including promotional activities in our DTC business and actions to reduce inventory through our factory houses. We also realized about 90 basis points of unfavorable foreign currency impacts.

Moving down the P&L, our SG&A expenses in the fourth quarter were up 5%. Excluding a $58 million litigation reserve expense, adjusted SG&A expenses were down 5% due to ongoing cost management actions, including reduced salary and non-salary compensation, and driving efficiencies and discretionary spending across our marketing and consulting budgets.

Bringing this together, we had an operating loss of $4 million or excluding the litigation reserve expense, adjusted operating income of $54 million. Taking this to the bottom line, we realized a diluted earnings per share of $0.02 or adjusted diluted earnings per share of $0.11.

From a balance sheet perspective, inventory was down 19% to $958 million, approaching our pre-pandemic levels. And we closed the year with a strong cash position of $859 million and no borrowings under our $1.1 billion revolving credit facility.

For the full year, fiscal 2024 revenue declined 3% to $5.7 billion primarily due to challenges in our North American business, partially offset by international growth. Despite the revenue contraction, our full year gross margin increased 130 basis points to 46.1% driven primarily by supply chain benefits related to lower freight and product costs.

This was partially offset by proactive inventory management actions, including increased promotional activities in our direct-to-consumer business. Full year SG&A expenses were up 1% to $2.4 billion. Excluding an $80 million litigation reserve expense, adjusted SG&A expenses were down 2% to $2.3 billion.

Operating income was $230 million or $310 million on an adjusted basis if you exclude our litigation reserve. This aligns with the outlook we provided one year ago.

Full year diluted earnings per share was $0.52 and our adjusted diluted earnings per share was $0.54, a beat versus our previous outlook of $0.50 to $0.52 mainly due to a better-than-anticipated tax rate and lower net interest expense. Shifting next to our fiscal 2025 outlook.

Given the magnitude of a low double-digit revenue decline, including a large step back in our wholesale volume and proactive actions we are taking to reset our North American e-commerce business, we are encouraged by our expectation for gross margin improvement and what that will mean as we retune the base over the next 18 months.

Additionally, we will continue to prioritize investments and manage costs aggressively. As part of this effort, our fiscal 2025 restructuring plan amplifies our focus on driving higher returns to deliver more consistent, long-term shareholder value.

Within this plan, we expect to incur total estimated pretax restructuring and other related transformational charges of approximately $70 million to $90 million, including up to $50 million in cash-related charges, consisting of approximately $15 million in employee severance and benefit costs and $35 million related to various transformational initiatives.

And up to $40 million in noncash charges comprised of approximately $7 million in employee severance and benefit costs and $33 million in facility, software, and other asset-related charges and impairments. That said, we continue to dig in and may uncover additional opportunities.

Concerning anticipated savings and what that means for run rates moving forward, because we've only recently begun the work executing against this plan, it is too early to share those expectations. We anticipate providing additional details on our Q1 call in August. Next, I'd like to provide some color on the first quarter of fiscal 2025.

From a revenue perspective, we expect our first quarter to be down at a low teen rate, marking the most pronounced decline of the year due to continued wholesale softness and DTC contraction with growth in our retail stores more than offset by a decline in our e-commerce business reflecting our actions to reduce promotions.

Next, we expect our first quarter gross margin to be down about 20 to 30 basis points due to a tough comp related to the timing of prior year supply chain benefits and negative foreign currency impacts. These challenges more than offset the benefits we expect to see with less discounting in our DTC business.

After that, we expect our gross margin will expand for the rest of fiscal 2025 as our product costing initiatives and material reductions to our promotional activities should drive more meaningful improvement as we progress through the year.

From an SG&A perspective, we expect to realize close to half of our restructuring charges during the first quarter of fiscal 2025. Bringing this to the bottom line, we expect a first quarter operating loss of approximately $75 million to $80 million.

Excluding planned restructuring and other related impacts, we expect an adjusted operating loss of $35 million to $40 million, translating to an adjusted diluted loss per share of $0.08 to $0.10. Given our expected revenue decline, inventory management is top of mind.

And having planned for this impact, our initial expectation is that inventory will be down at a high single-digit rate in the first quarter followed by slight declines after that and then bringing fiscal 2025 to a close at essentially the same level as fiscal 2024.

And relative to CAPEX, we anticipate spending approximately $200 million to $220 million. Finally, our Board of Directors approved a new three-year, $500 million share buyback program.

With confidence in our ability to generate cash, we believe this program provides an excellent opportunity to enhance shareholder value without compromising the financial flexibility necessary to reconstitute our brand as we target our return to top line growth.

With that, I'll turn it back to Kevin for closing remarks before we open it up for questions..

Yes. Thank you, Dave.

As we wrap up today's prepared remarks, and thank you for your patience in allowing us a chance to lay out our strategy and the actions we're already taking at UA, I'll touch on one final question, so what's different this time and what are reasons to believe in Under Armour? From my vantage point, we've got a lot going for us as an authentic on-field performance brand with more than $5 billion in revenue.

Millions of athletes worldwide believe Under Armour products make them better. To be sure, there is much more work to be done and while there may be 50 things to fix at Under Armour, there are also 500 things that are working really well. We are a sports house, centered on athletic performance and a heritage authenticated in competition.

Our refined Protect This House strategy is engineered to cut through the noise and complexity we've allowed to dilute the clear mission that once gave us our core focus and energy.

As such, we are urgently working to regain our front foot, put wins on the board that can continue to build over time, and optimize our business across the dimensions that matter.

I cannot guarantee perfection as we undertake this journey, but I promise 100% team commitment to get Under Armour on a winning front foot, leading from the top, along with our energized executive team, we will bring a clear unified vision and power the organization by providing stability and alignment to drive consistent execution with a clear articulation for all stakeholders of what success looks like.

I'll say to investors today that when you buy Under Armour, you're buying a brand, a brand with a formidable heritage that is not easily replicated and one that is more valuable than even the company is at this point.

Our job, my job is to close that gap with a strong balance sheet, global presence and awareness, ample resources, and a talented team to take the necessary actions to evolve our company. We'll lead from the front foot, I will lead from the front foot knowing the name on the front of our UA jersey matters more than the name on the back.

And as a team, we'll take care of the Under Armour brand. We are fully committed to shifting our trajectory and for that to happen, we must change rhetoric into results. And with that, we'll open it up for questions.

Operator?.

[Operator Instructions]. Our first question today comes from Simeon Siegel from BMO Capital Corp. Please go ahead with your questions..

Thanks and good morning. Kevin, so recognizing the tone shift, it makes me think of the last time you successfully focused, I think your words have been building a healthier rather than a lateral company or something to the effect.

So how do you think about this go around of the brand elevation versus revenue contraction versus the last time you successfully reelevated the brand and the gross margins? Maybe could you speak to how you'd expect the timeline of that improvement to look, obviously, the focus on brand health feels like the right move but understandably, it's not an overnight fix, so would love to hear how you think that timeline and goal post to hurdles we should be watching for? And I guess, is your expectation in North America would return to growth in 2026 or later? And then just if I can, Dave, can you just remind us what percentage of the OPEX or fixed versus variable costs, the gross margin gains are going to be powerful, and they feel key but just also trying to think through what the right longer-term OPEX should be on the lower revenues? Thanks guys..

Yes. Thank you, Simeon. And I think that really gets to the heart. I'm not sure if there's a, as I said, a repeat that's available to us, but there's certainly a lot of lessons of what brand building looks like.

This is going to be a little different, so we're approaching that way and frankly, just using all the reasoning and thoughtfulness that -- and experience and hopefully some wisdom that we've gained over the years and being able to apply that to this chapter is what's most important.

Let me just start because I think this really just nails into what's happening in North America. Not winning here, it hits me and our incredible team. It hits at our core. We are truly an authentically American brand that is something we know how to do, and it's something that we can fix.

I think it's not going to happen overnight, and that's why we continue to use this 18-month sort of outlook that we've been providing. And frankly, we've seen this in the face of the same cautionary consumer sentiment that you guys are hearing out in the market right now as well.

The shifting consumer destocking cycle among retailers, bloated industry inventories, so they've been pretty conservative. And we're reacting and we're dealing with that. But as it relates to UA specifically, it's time for us to firm our brand up and we want to make sure that we're transparent with this messaging as well.

It is that what we're seeing with the call down, about two thirds of it is happening to us here in North America and about a third of it is proactive, where we actually were making sure that we cut anything out and we give ourselves room to really start building the base of the brand.

Now if there's any positive to be taken from sort of where we are right now beyond the macro environment softness, the majority of our difficulties, as I think I laid out pretty well in the script, have been, for lack of a better phrase, pretty much self-inflicted. And the good news is that we can control that.

More importantly, we can address and we can fix that. At the simplest level, we find ourselves for the most part, when we show up at retail, we're trading on price with more than should be good level product. That's just not who we are representative of the opportunity that this brand has.

And we're not falling on a sword saying we just have to be premium. Our eyes are wide open. That consumer is there for us. They're not mad at us.

When we do it right, and we get the product and the brand and the story right, and we've seen it with SlipSpeed, unstoppable, this -- I'm really excited about it, it's a brilliant definition of what our team does.

And when our team gets together, that is our team that built that, brought that together and so many other products in the pipeline that we have like that. But contextualizing them and getting them to market, commercialize them, that's where we can be just much better in telling their stories.

In the script, I consistently referred to this idea of reconstituting the brand. And that runs across product, supply chain, distribution, segmentation. So we must be better, of course, across the board, but it's probably best articulated at the simplest level in our lack of consistent story with our great product.

So I'm taking a brand lens to this approach and where I can be the most helpful. And that's really attacking from the product and story and making sure that those two functions are truly married.

Now of course, there's an entire organization that supports beneath that, but that's where I think we've been most inconsistent and where we can just get better really quickly.

We need to ensure that only the amazing products that we make are the ones that make it to market, which is why just taking that 25% off the top, it's just forcing the teams to say, let's make a harder, better decision and make sure that we really, really love it, that we're excited about it and then we can articulate a story about it.

So as I said, story is just central to what we're doing. Retail, in-store, online, especially with better and best and so we're going to focus and drive there.

But I do want to emphasize, I spoke about the opening we have in the CMO function, but building out marketing with just, frankly, we're so proud I think that the engine that's built on the product side.

When you look at it from John Varvatos is joining close to a year ago and Yassine now on board to lead the CPO effort and the ability to attract talent like Yuron White, giving a voice to that team is my highest priority.

And it's going to take some time for us to see the goods that are coming from John and Yassine and Yuron and again, complemented with the incredible experts that we already still have here at UA. There's like a worldwide team that isn't -- they're not disappointed by this leadership coming in.

They're really inspired by it because they see that this is about a bigger team winning. And everyone, I think, is really excited about our opportunity to do that. I think as you talk about the marketing side, but none of this happens because the three heads that we really need, it's product, story and it's the regional expertise.

I mentioned Kara on the call, and she's just been a terrific leader who dove right in and helping us reestablish the relationships with our critical wholesale partners as well as taking a real firm hand on what we're doing with our own DTC. But we're putting the pieces in place for this to happen.

I don't have a crystal ball beyond -- as we're talking through fiscal 2025 right now. But we do know that this brand deserves to establish our go-forward voice. I think we have a really clear point of view of how to do that and what success looks like. Now it's up to execution.

And if we're looking for some kind of a bellwether to measure our success, I think gross margin is going to be a great indicator for us throughout fiscal 2025..

And Simeon, this is Dave. Relative to variable and fixed, I think if you kind of remove the compensation cost, which isn't necessarily fixed and just get back to what's kind of locked in, that isn't going to change with revenue, that's probably a little bit less than a third of our SG&A base, something that we've been working on over the years..

Great, thanks a lot guys. Best of luck..

Thank you..

Our next question comes from Jay Sole from UBS. Please go ahead with your questions..

Great, thank you so much. Kevin, I'm really interested in something you said at the top of the prepared remarks. You mentioned you have a renewed view on leadership. Can you just kind of take a step back and think about all of UA, tell us what's renewed.

Tell us how you think about leadership today maybe versus how you thought about it before and how it is going to help drive Under Armour forward, I mean it's clear that you have a clear vision about what needs to be done and where Under Armour needs to go, connect for us how the leadership is going to play into that?.

Yes. Well, thanks, Jay. I think from the top of the script to the end of my prepared remarks, number one, I love the 80 hockey reference, which is about the name of the jersey on the front versus the name on the back. It's building a team.

And we've done a really good job, I think, of understanding what that means to set a vision and power that team and let them run. And we've got capability. And being in sort of the roles that I've been around the company, I've always had the ability, I think, to plug in different areas, but really been able to focus, I think, on building a team.

Probably the thing I'm most proud of in the last 10 months is, as I described about our product team with the ability to attract John Varvatos to get John here, to be able to attract Yassine here, the ability to get Yuron here as well.

And most importantly, it was the ability to complement and keep those existing team members, our 15-year innovation head, our 21-year design head now gets to work with John. You're watching our team sports and working with Yuron and his experience.

So that meld of old and new is something that we're just going to utilize agility that we're going to play the best hand that we have. I think at the SCP and above level, we brought in nine executives in the last 8 or 10 months. And I've been directly involved in recruiting virtually eight of the nine.

So touching this team, it really feels like it's ours. But I think not having to press too much and hopefully that an energy of finding that wisdom where you can tip your glasses to the end of your nose and sort of answer or say much more just through the way that you respond and the energy that you have.

And so I'm really looking forward to that and looking forward to watching this leadership team really explode with the likes of the Yassines, the what we've done with supply chain and Shawn Curran coming here from 30-year experience at Gap. And now it's a matter of just combining them together and melding that.

So it's going to be a little -- as we're pulling everybody together, this team likes each other, and it's just a matter of us running..

Got it. And maybe, Kevin, if I could follow up on that in the spirit of leadership.

Are there other potential changes in the management team in the future and how will you work to retain this fairly new team?.

Well, I think we're all incentivized by seeing where we are right now is that we believe that we've got a brand that is not trading at the value that it is. And so everyone is incredibly inspired by that. No, I think most importantly, I'm looking for the additions.

We are in the market, and we're looking for a CMO and we'll have that position posted and leaving it open for the best candidates that come. But I tell you, our phone has been ringing. There is this buzz, I keep describing that product organization that we built and you walk into that product, you can just feel something.

And so I feel that obligation to make sure that we get a team to complement and round them out. And I know that we've got the regional leaders between Jason in APAC and Kevin Ross and other former UA veteran in EMEA and Kara Trent here. So we're pretty much stabilized, but there'll always be some limited amount of movement there.

But the next one we're looking for is the addition of our new CMO..

Got it, thank you so much..

Thank you Jay..

Our next question comes from Bob Drbul from Guggenheim Securities. Please go ahead with your questions..

Hi, good morning. I have a couple, if that's okay. The first one is on the international outlook.

How much of the macro is driving the low single-digit percent decline in international or is there something -- is there a weakness that you're seeing specific to Under Armour and do you feel like you're being conservative in that international outlook? And I have a second one..

Yes, thanks, Bob. I think that we're cautiously approaching this. Now we've got the benefit of 20 years having done and driven the UA brand and frankly, the lessons over the last five or six years here in North America. So we're incredibly bullish on the opportunity that we have, especially mid and long term.

I think we're being cautious in the short term because we don't want to get caught up in a situation where we feel like we're trying to flood big logo hoodies. Like we've run that play. We've seen how that works. So I think we're bringing a bit of cautiousness and frankly, a bit of experience or wisdom to the way that we're approaching that.

But in EMEA specifically it is that it's definitely -- it's soft. There is the same sort of inventory issue that we're seeing with some of our wholesalers here.

And so we're just -- we're representing a bit of caution there and also that we don't need to push the sales, meaning that we don't need to do anything other than what is in the absolute best interest of making sure that the 16 to 24-year-old just loves and covets the Under Armour brand.

And what we've done in Europe, too, it's probably its own little sound byte. We brought Kara here from Europe from the success that she had from going back to 2019, a $600 million-ish brand that ended in 2000 -- or this past year, crossing over $1 billion.

And the one thing that's really compelling is that we actually grew contribution margin from 8% to 16%, so doubling that contribution. So we've really been leveraging that hard. So we want to make sure that we can invest there as well. And as I said, I think we have the right leader to take us to the next level there.

But what we're seeing are the signs of success. Our largest market there is the UK. We're the number 1 training brand, for instance, the JD Sports. We're within an arm's length at SDI, if we're not number 1, depending on the week. So we've got a great base to build from.

And I think it's us just making sure that we do this smartly, and we build this as a brand together..

Great. And just if I can ask a second question.

Can you talk about the progress, your view on the progress that you've made in e-commerce and the e-commerce channel and how long will it take you to get your website to where you want it to be?.

Yes. I think that's a work in process that we'll never be done with that, but it's something that we've got a tremendous team. And so Jim coming on board has brought a lot of expertise that really parallels into our loyalty program as well that we have in a place that's been really good and really positive for us.

So I think we've made great progress when it comes to what we can do in the web. But frankly, I don't think that's probably the best place where I think our product and our story are just not lining up well enough.

I mentioned us just finding some of the simplistic things to apply brand management, like identifying what are the three aspects that make this product desirable for the consumer.

So I don't feel like we've played our best game online yet, and that's why we're focused by beginning with eliminating the -- or significantly reducing the amount of promotion so we can have a much cleaner story that comes through on the website..

Great, thank you very much. Good luck..

Thank you..

Our next question comes from Brian Nagel from Oppenheimer. Please go ahead with your questions..

Hi, good morning. A couple of questions. A couple of questions, Kevin, and I'll merge them together to make it simple. But I mean, first off, with regard to -- you talked about this in your script, the product innovation, the new products coming.

I guess just to make sure I want to understand the timing of that, when we should start to see these products? And then with that, the team you've assembled, the team -- a senior leadership before you, there was already product innovation. There's already been discussion about product innovation.

Are you picking up on that or is there really more of a revamping overall with the product innovation in Under Armour?.

Let's be clear. We haven't been standing still. Thanks, Brian, for that question. But no, I mean, we've been moving forward the whole time. So it's not like we're waiting for Fall 2025. We're still going to move $5 billion plus of product this year. So there are athletes out there that have us.

And I think the base that we have from team sports across the board is something we're really excited about. And we have -- I think it's just more of a focus. This goes back to the trimming the number of SKUs that we have and being really clear with our outlook there.

But Unstoppable for us is working in an incredible way and something which is our basically our jogger pants line that we have in five or six different expressions. We've really made a commitment to driving and really getting back to the fundamentals of what makes UA, UA. Our base layer compression, as we call it here, heat gear and cold gear.

We've tested that, for instance, in DSGs, houses of sport, and it's something that's done really well for us, and that's an area that we'll continue to expand. But it's really just re-anchoring and resetting ourselves. We talked about how that -- men's apparel is going to be a priority for us.

It's just because it's the lowest hanging fruit where we can win the easiest for us. It doesn't mean we're going to neglect what we're doing on the women's front, the opportunity we have there. It doesn't mean we're going to neglect footwear, and that's why we're bringing these footwear experts across the industry.

And I think that's what's so exciting. We, first and foremost, need to make sure that we're authenticating ourselves and that's why I talk about the front porch team sports. Revenue-wise, that aligns up through the five key categories that I mentioned in the script, but we know where we need to be better.

And this isn't like we're just going to go turn on the faucet, and all of a sudden, sportswear is going to be the answer to that. We have to drive and grind this thing the right way with making sure that every product that we put to the consumer is something that has him say, wow.

It's making sure that we're approaching all these things, as I say, is that any product that we build, number one, there's three functions that I've asked for our product teams to do. Number one is to edit and innovate, and that speaks to the 25% decline. It means being faster with the way that we are looking at product.

Number two is ensuring that every product that we build begins with the athlete story of the problem that it's solving for. I just don't think we've done a good enough job there. But we've got places that are winning right now, our Advantage collection, our Meridian collection.

On the footwear side, Curry is something that still, we think, has a massive upside and opportunity for us. And then we'll keep driving innovation with explanations like we did in accessories with the new StealthForm Uncrushable Hat.

And so as we start to replicate that and become more famous for less things, I'd like to say, companies are built because they made one product famous. Brands are built because they do it over and over again.

So we need to focus on doing that through our product engine and making sure that that's not going to happen unless we have an amazing story to be told. And getting those two things up to speed, I think, almost go hand in hand..

That's very helpful. I appreciate that. And then as a follow-up, and I guess bigger picture as well, you're talking about and others have talked about the more promotional environment within the space broadly.

So I guess the questions I have there; I mean, one, do you view that as more shorter term in nature? And then secondly, this is a bigger picture part. I mean for those of us who have followed Under Armour for a while, we remember very clearly when the brand was very successful.

As you look at the competitive landscape now, you're putting aside some of these promotions, do you still see that clear lane for the Under Armour brand when Under Armour was performing well or has competition changed that lane?.

Yes, thank you. I can't speak to the -- I'm not a prognosticator on what the market has in front of us or what happens on a broad basis. But we know that we're -- I think we're just playing the hand that's right in front of us today.

We're giving information, which is why we've really just -- when I say it's almost like running the company by constraints. It's like let's just -- let's take a smaller bite. We've got 100 miles in front of us. We're going to work the three feet that is right in front of us right now.

And I think this is what it's telling us, so that's what we're going to respond to. What I want to say about UA, it's interesting because I think about this deeply. Our authentication of being in team sports as I described it in the remarks as a podium brand, it's such a unique position.

And you look at anyone else that's out there, I think where Under Armour stands alone is that there's a big companies that you can call them old money. There's the cool kids. They're sort of the Sunday leisure league crowd, but there's no one that stands up for the little guy, for the athlete that was not picked first, for the long shot, the underdog.

I think that representation for UA, it probably has a story that speaks to virtually everyone on the planet. And it's a position I feel that we own completely uniquely. I don't approach this as saying that's something that's God given for us for the rest of time. So we better act on it soon.

And that's where we're playing that humble and hungry mentality, that Under Armour long shot overcoming and it's probably a really good metaphor for where we are right now. So I'm excited about what the future holds for us. I'm excited about this unique position that we hold in the marketplace.

Now we just need to make sure that we deliver the product and the story together at once. It's the way it relates and goes and shows up at retail..

Appreciate all the color. Good luck here. Thank you..

Our next question comes from Sam Poser from Williams Trading. Please go ahead with your questions..

Thank you for taking my question. Kevin, I just -- a couple of things. You talked about Europe as it relates to the United States. And I'm wondering in the U.S.

trying to elevate the brand, does this mean that you're going to cut off some of the more moderate distribution in order to elevate it to get away from -- over time to get to elevate the brand and make for force better and best to have more prevalence? And I have a follow-up..

Yes. I don't think that we like our distribution today. I don't -- that will be part of the exercise as it always is, is constantly culling our retail partners. But it's also -- it's walking into some partners. And some of this, Sam, it's been as much on us.

We do walk into one of our premium or close to premium sporting goods stores even here in the States. And the only thing that's leading or explaining what the product is, is the price that's in the upper left-hand corner.

And it's hard to explain the difference between a $20 graphic T-shirt and a $45 vantage t-shirt that has Rush technology, and it's just not clearly articulated. So I think we're probably in a pretty good space. We may contract some of the doors and make sure that we're only coming through and some of those retailers.

It's on the table always for us as well. But that's something six weeks in the job, we'll continue to evaluate. But for the most part, I just want to -- my main priority is focusing on the product that goes to anyone and ensuring that, that product and story show up hand in hand..

Thank you. And then what made you -- I mean this is a combined question.

You said -- I want to know what led the decision for you to step back into this role and to follow up on Jay's question, over the last few years, what have you learned and how are you going to approach it -- what have you learned over the last few years that made you step back in and believe that it was time? And then secondly, you said earlier that everybody should be focusing on selling shirts and shoes.

But I get -- I've had the issue with brand first, product first.

And I'm wondering, is it sell shirts and shoes to the right people at the right time at the right price versus just selling shirts and shoes?.

Yes. Well, first of all, I think the ability to step away, it allowed me to get a lot of reflection of, number one, taking a breath after 24 years of running hard with the company since beginning in 1996 to 25 years doing that. I got to watch my kid -- my son and my daughter play high school sports. I got to watch graduations.

And I got to take a bit of a beat. That's not to say that I haven't been close or near the business at the same time. I've been watching the business, just from a different chair. And there's a very different outlook that you can have as coming from being the Chairman to being the active CEO and being able to actually affect day-to-day decisions.

So I view this, honestly, Sam, I've been pinching myself for the last six weeks. I've done different things, but I realized that what I do love doing is selling shirts and shoes. And in doing that, let me just be really clear, this isn't just selling any shirts and shoes. It's selling the best shirts and shoes.

In the product spectrum of good, better, best I think Under Armour makes a lot of good, some better and nowhere near enough best. We're going to focus on that. And again, this isn't just with an eye on we should do it because we see ourselves as a premium brand.

It's because I do believe that Under Armour has that upside, and we're also going to make sure that we pay the rent. And so we'd like to secure and solidify this good level of business. And we want to emphasize and focus on our better and best level business.

And I can tell you confidently that we have the product engine and team now in place, both legacy as well as the new additions that have come on to lead this with Yassine at the top of that engine. I owe them and I owe this organization, this organization owes itself a great storytelling function.

And we have some great people on our marketing teams, but we need to put all those pieces together and get product and story to be one functioning engine for us to sell only and mostly focusing on more better and best as we look to grow from where we are today..

Thank you..

Our next question comes from Laurent Vasilescu from BNB Paribas. Please go ahead with your questions..

Hello, good morning. Thank you very much for taking my questions. I wanted to ask about the guide for international being down low single digits. Is that on a reported basis or a constant currency basis? And then, Kevin, I think you mentioned that the environment in China is very promotional.

Can you provide a little bit more color on what you're seeing in that marketplace overall and how you're thinking about that business, that geography for fiscal year 2025?.

Hey Laurent, this is Dave. I'll jump in on this one. I don't want Kevin to lose his voice. So I think that a couple of different things. When we think about the high-level lead-in, I think Kevin gave a lot of color around that relative to how we're kind of smartly approaching our international and our growth and being prudent about that.

I think within APAC, and this is actually consistent with EMEA as well, the DTC growth, we do see it being offset by some of the wholesale and distributor slowdown and caution that we see. So where we can directly control and drive the brand within DTC, we see that growing well.

But it is some challenges in the markets with the wholesale and distributors. Within APAC more specifically, I would say that it's a little bit around the retail and e-Comm traffic, but we're driving against that very well. We've also got a little bit of pressures with a partner in South Korea that we're working through.

There are some financial pressures there. But we are planning to increase our APAC store fleet by more than 80 doors this year, and that's more back half weighted. And we're excited about the upcoming Curry tour in Asia as well, which is really going to help from a brand voice and energy perspective.

Within EMEA, Kevin alluded to this, but we have seen some higher inventory levels within some of our retail partners as we finished out fiscal 2024. And that does impact the fiscal 2025 orders a little bit. And so we planned for that appropriately. We do believe that, that's more of a temporary situation.

And as those inventory levels clean up, you would expect better order flow coming through because the brand is very strong in EMEA. And we have great relationships with our partners there.

So a little bit of caution maybe, a little bit of prudence, making sure that we're fueling the brand, making sure we're not chasing any revenue that's not the most premium revenue that we want to get after and just playing smart game going forward..

That's very helpful..

In the spirit of supporting the team, Dave did a great job on that answer. I have nothing to add..

Okay, thank you. And then, Dave, maybe in order to spare Kevin's voice, you mentioned the adjusted SG&A was down 5% in 4Q.

Maybe for the audience, can you just parse out where did marketing go as a percentage of sales for 4Q? And as we think about the SG&A guide for the year of down 2 to 4 to your point, Kevin, you mentioned how you were able to manage that for fiscal year 2024.

Where does marketing as a percentage of sales go for fiscal year 2025?.

Yes. So when we think about marketing throughout all of fiscal 2024, we ran pretty close to kind of the 10% of revenue mark. So little fluctuations up and down. I think Q4 is probably high 9%, really close to 10%, finishing out the year at about 10%. And that play for fiscal 2025 isn't significantly different.

We've rebalanced some of that and really making sure that we're prioritizing the marketing investments. And Jim has done an excellent job working with the teams on that. But you're not going to see a noticeable difference in that percentage of revenue as we go through fiscal 2025..

Very helpful. Thank you very much..

You are welcome, thank you..

And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session as well as today's conference call and presentation. We thank everyone for joining this morning. You may disconnect. Have a great day..