Stephanie C. Linnartz
President and Chief Executive Officer at Under Armour
Thank you, Lance, and good morning to everyone joining today's call. Let me begin by saying that despite a challenging retail environment and consumer buying behavior that was inconsistent market-to-market, we are pleased with the results we achieved in our third quarter. With revenue in line with our November outlook and better-than-expected earnings. As I approach my first year at Under Armour, I am genuinely inspired by the power of the brand and our commitment to the strategies we are undertaking to unlock our full potential. Following our Protect This House 3 plan launched last spring, I am pleased with our progress in driving global demand creation and our focus on evolving and simplifying our approach to connecting with consumers. I also feel good about how our efforts are shaping up to deliver elevated design and products to the athletes we serve in nearly 100 countries around the world, strengthening our ability to drive success across our largest growth opportunities in footwear, Sportstyle, and our women's business.
With respect to driving U.S. sales, this remains a multiyear journey and candidly, we have much more work to do to become a healthier business capable of returning to growth in our largest market. As detailed previously, inconsistency has permeated our U.S. business over the past years. And how we go to market across consumers, customers and geographies, how our product is created and delivered with a consistent design language, channel segmentation, and how we show up in our own physical and digital businesses? With a critical mass of work underway and additional analysis that will yield more work and decision points in the months ahead, we are on the right path to addressing these inconsistencies and turning them into strengths. All of this will take time and it starts with leadership. To drive success, the right talent must be in the right places, with the trust and the freedom necessary to empower execution. Bolstering our leadership was amongst my highest priorities in my first year at UA, and we've made excellent progress. Since last summer, we've added several new experienced officers to lead our product, design, consumer, supply chain, and communications teams. Additionally, we named a nine-year company veteran to lead our America's region and announced the return of a UA veteran to head our EMEA business.
We have also streamlined our business to be more responsive, including our marketing functions, where we recently consolidated our global and North American teams, who will report to a new Chief Marketing Officer, a search that's currently underway. This unification will bring a cleaner, integrated approach to empower faster decision-making to accelerate our ability to connect more deeply with consumers. About two-thirds of my executive leadership team is new compared to last year. And each of these leadership changes is tied directly to the inconsistencies I mentioned earlier, so we are making good progress in hitting challenges head-on. The next steps are activating and empowering these teams to drive our strategic priorities. Creating a future flywheel of operational excellence and execution that drives consistency back into our business.
During the third quarter, I visited our Asia-Pacific region and met with our team, athletes, and retail and factory partners. Like my EMEA trip, I am encouraged by the energy, passion, and effort we're bringing to our daily business. I also toured many of our North American stores to evaluate the opportunities we have to leverage our full price locations as a premium brand showcase to further build relevance with our consumers.
In the near to midterm, as we navigate a dynamic global environment and our new leaders take time to ramp up, we are focused on cost management and profitability. As we close out fiscal '24 and assess how to best to allocate our investments in the year ahead. This includes efforts to understand where and how we are putting our resources to work, to drive the best possible returns, and identifying which strategies will be most critical to driving demand creation over the long-term, especially in North America.
With more strategic deployment of our marketing resources, we continue to see positive momentum here. A great example is the Curry brand driven by the Curry 11 Basketball Shoe. And we recently launched the Dub Nation pack, celebrating Stephen's commitment to the Golden State Warriors fans with unique colorways for the 11, the Curry 1 Retro, and the Spawn FloTro. The Curry brand also dropped exciting collaborations with Bruce Lee in apparel and footwear, including the new Curry SlipSpeed. And with the addition of De'Aaron Fox from the Sacramento Kings, we're looking forward to De'Aaron's first signature shoe later this year.
In global football, we're leveling up our roster with some of the best up-and-coming talent at the highest levels of sport. We recently signed Mexican national team player Sebastian Cordova, FC Barcelona's Fermin Lopez, and Real Madrid's Antonio Rudiger. As we look to grow relevance in the world's most popular sport, this marks the significant move to bolster our presence, so we are very excited about the possibilities this brings in the years ahead.
In American football, I want to congratulate our hometown Baltimore Ravens for a fantastic season reaching the AFC Championship game, including UA athlete Kyle Hamilton, who was named a First Team All-Pro and to the Pro Bowl in just a second year. On the college side of the game, Notre Dame finished this season with a dominant bowl win, powered by Under Armour performance gear on the field, and had off the field swagger with UA SlipSpeed, HeatGear, Baselayer, hoodies and fleece.
Adding an excellent example of our evolving approach to brand activation was last month's UA Next All-American event in Orlando, where the best U.S. high school volleyball and football players engaged in a week of unforgettable experiences and elite level competition. As a pinnacle grassroots program, this provides the next generation of athletes an opportunity to elevate their physical and mental game. And, of course, they were kitted out in amazing UA gear, like the all-new SlipSpeed Mega, a maximalist running shoe in fire and ice colorways, and other products like unstoppable pants, infinite pro running shoes, and all the accessories necessary to excel at their sport. With a massive social media activation, the UA Next-All American Week demonstrates how we maximize the authentic connection to sports culture, showcasing product innovations that make athletes better, and leveraging up-and-coming influencers to generate brand buzz and engagement.
We have also made significant strides across social media over the past year and continue to gain traction. During this time, our Instagram followers showed strength across all UA accounts with a significant uptick in the Curry brand. Likewise, our TikTok followers have also gotten stronger, as have our engagement rates. This past quarter, our focus was elevating footwear and Sportstyle, and our strategic collaboration with external content creators and influencers meaningfully helped to amplify the impact of our social media content. To drive engagement and demand for the brand, we must deliver elevated design and products. With the appointment of Yassine Saidi as our Chief Product Officer, I am incredibly excited about the evolution and style for our apparel and footwear. Joining us just last week, Yassine brings nearly 20 years of industry experience from several powerhouse brands, with a deep pedigree of developing authentic performance and sportswear apparel, and a reputation as a significant influencer in the sneaker market.
With our Chief Product Officer and a new head of design in place, along with additional apparel, sneaker, and branding experts, we are making significant progress in getting the right team together to ensure a balanced approach to continuing to deliver industry-leading performance innovations on pitch, field, and court with an ability to attack the massive Sportstyle opportunity more effectively. Given our product creation cycle, it will take time for this newly led team to start driving more critical mass into the equation. Yet we're not hitting pause until then. We have a lot of newness to be excited about as we head into spring/summer '24, especially in apparel. Over the past few quarters, we've made substantial progress in style consolidation and leaning into premium as we started to place smaller run capsules and reposition existing products within our Sportstyle offering. Although early, we are excited for fresh updates of our key apparel franchises to hit shelves later this spring, including the Unstoppable Airvent, a new baggier on-trend silhouette of our classic woven pants. Additionally, an expanded line of our soft and versatile Meridian performance apparel is due out this spring with stylish, flattering products for women, including body suits and tanks that she can wear from the classroom to practice and from the gym to the office.
Next is an update to our iconic warm weather base layer with super light HeatGear compression shirts and shorts that wick sweat from maximum performance, receiving new and improved fits, colorways and styles for more versatile occasions. Our retail partners are excited about this evolution and bookings for this product are strong, especially our women's products. Speaking of our women's business, we were honored to have received two Women's Health fitness magazine awards. Our UA SmartForm Evolution Mid Sports Bra received the best sports bra overall and our women's UA Reign 6 training footwear was also recognized. We are proud of these wins, which helped drive more incredible momentum in this business, especially as we expand our Sportstyle offerings.
Shifting to our ability to harness innovation for our athletes in the planet, I'd highlight our collaboration with Celanese, a global chemical and materials company, in developing a new fiber for performance stretch fabrics called NEOLAST. This incredibly innovative fiber has the potential to offer our industry a high-performing, more sustainable alternative to elastane or spandex, which has recycling challenges. With the first apparel products due out later this year, we believe NEOLAST fiber could have a transformative impact on Under Armour and the textile industry.
Next is Footwear, which remains our single most significant growth opportunity, and we know we have a lot of work to do here. During the third quarter, our Footwear business was down 7% in part due to a tougher prior year growth comparison of 25%, but also due to softer demand, primarily in North America. In the rearview, we recognize some of the inconsistencies from our past are showing up in our current results. However, we believe these challenges are near-term in nature, and we continue to look forward by evolving our footwear strategies and investments to support our long-term growth expectations. Rounding out our product leadership changes, a search for a new Head of Footwear is also underway, further emphasizing our commitment to having the right talent to drive the right results in the years ahead.
Leveraging our knowledge of knits, expertise in mid-soles, and innovative cushioning, we have made good headway in our approach to our running footwear. As a highlight, our Velociti and Infinite running franchises are getting important updates for spring/summer '24, with Base, Pro, and Elite styles to cover our good, better, best segmentation. In this spirit, we are intensely focused on franchises, identifying where we can win, and partnering with our wholesale customers to scale our footwear business more effectively.
Shifting next to our Americas business and much work remains. During the third quarter, our North American business was down 12%, which I will note was in line with our expectations and reflective of a challenging wholesale environment in the U.S. and softer demand. Here, we remain focused on serving our retail partners and working with them to optimize our assortment and segmentation, ensuring greater overall consistency and profitability. In our North American DTC business, I'd highlight that underneath flattish results in the quarter, we are encouraged by specific operational gains made during the crucial holiday period. These included exceptional customer service scorecards, elevated talent across our fleet, and significantly improved in-stock levels. Thus, our work to become a better retailer is beginning to shine through. We are also progressing on our new full price brand house design and are set to test a smaller, easier to navigate format with a more premium and curated product positioning.
One of the bright spots for our North American DTC business continues to be our UA Rewards Loyalty Program with encouraging member engagement and spending trends. Our enrollment has hit nearly 3 million members, which is well ahead of the target we set for fiscal '24. Our members continue to show a higher premium purchase frequency than non-members in these early months. We drove engagement during the third quarter via our first-ever members week, along with eight members-only holiday campaigns, which directly contributed to peak holiday business.
We are also working to improve our digital business. Given that our North American e-commerce channel has been tempered during fiscal '24, as we turn to fiscal '25, we are exploring plans to reduce our promotional dependence to create a more premium online presence. Simply put, ua.com will become a showcase for our brand. We have done a lot of work to make our website more functional to increase conversion, but we must create a more premium shopping experience to elevate the brand.
Closing out North America, we've recently appointed Kara Trent to head up our largest region. Kara has been with Under Armour since 2015 and most recently led our EMEA business to consistent double-digit revenue growth during her tenure. She is an exemplary leader and an industry veteran who builds performance-based teams, discipline segmentation, optimized marketing strategies, and strong wholesale relationships. As she steps into this role, I am confident that she has the right skill set, demeanor, and drive necessary to put this business back on a path of top line growth over the long term.
And finally, another leadership appointment is the return of 25-year industry and nine-year Under Armour veteran Kevin Ross, who will serve as Kara's replacement in EMEA to lead that business as Senior Vice President and Managing Director. With deep experience in general management, sales, team sports, and product creation, we look forward to Kevin's ability to hit the ground running in one of our most successful markets.
In summary, as we close out the fiscal year amid a dynamic market environment, we are incredibly focused on managing the business and making the hard but necessary decisions now to set ourselves up for a more promising future. In the near term, this is involved at making several leadership changes engineered to address our areas of opportunity. In concert, we are committed to prudent cost management, including identifying and optimizing the investments in our business towards the highest returns. Over the mid- to long-term, we are confident in our ability to drive global demand creation and elevate design and product, while ensuring that trifecta of product, place, and promotion are optimized to put us on a trajectory to reignite growth and deliver improved value to our shareholders.
With that, I will turn it over to Dave for his comments on the quarter and our outlook.
