Kevin Plank
President and Chief Executive Officer at Under Armour
Thank you, Lance, and to everyone for joining us on this morning's call. At the halfway point of fiscal '25, we're pleased with another quarter of profitability ahead of our outlook. Thanks to gross margin improvement from actions we've taken to produce promotions and discounting in our DTC businesses and ongoing initiatives that improve product costing.
Although we are early in our reset, I believe this demonstrates that our strategies to strengthen this brand are beginning to gain traction. Our team is working incredibly hard and diligently to build a better business and I'm so proud of this collective effort. Though we still have much work to do, we are on offense and are committed to reconstituting the Under Armour brand, deliberately and methodically.
With a roughly $50 million second quarter adjusted operating income beat, compared to the outlook we provided in August, we are splitting the difference and allocating about half of those dollars to our revised adjusted operating income outlook for fiscal '25. The other half will be invested in marketing and brand building efforts to deepen our connection with consumers.
Q2 also marked another quarter of planning our flag as a sports house, meaning one of only a handful of athletic brands globally who can credibly outfit athletes head to toe on field, court, or pitch in virtually any sport or athletic endeavor. We will defend and build on this position to exploit our global opportunity. To be clear, Under Armour is more than just a single category or activity of athletic excellence. And this breadth is what provides us with the sports house status to build from.
And what differentiates the UA Sports House from the other brands on the podium with us is our position as the brand for the little guy or little girl, who has not had the size or resources to truly compete. Therefore, we're not innovating so that our athletes and teams can run up a score, but simply to give them that fighting chance to compete. This try-hard persona and grit that defines UA has four key attributes: Athlete, Sports, Innovation, and Passion. This is our constant muse and describes our affinity for the underdog. The athlete who puts in the work from pillar to podium, looking for every edge possible from their training, studying, and especially from their gear. The ones who have no choice but to apply the rule of 10,000 hours to achieve excellence in their sport. And who also are seeking a competitive edge from the best athletic performance apparel, footwear, and accessories on the planet. These are our Under Armour athletes.
Because of this, we must use every resource and waking hour to help them improve. This mindset drives our product storytelling and commercial strategies ultimately expressed by the perfectly balanced UA logo, where the top is the same as the bottom, the left is the same as the right, and an ambition or at the least the metaphor for the gear that we make. Performance apparel and footwear meant to prevent you from getting too hot or too cold, targeting equilibrium in every wearing occasion. The symbol of our athletes' underdog spirit was something to prove. Being clear about who we are and where we're going, front and center in all interactions, including those with retailers, athletes, and teammates.
A direction that is being received well as we've taken this narrative to our partners and we will build on from here. As a podium brand with a foundation of performance products forged at the highest levels of athletic competition, we worked tirelessly to deliver head-to-toe outfitting, with style, fit, form, and function across the high school, club, and professional levels. UA must give athletes an edge to perform, feel, and look their breath. We will honor our nearly 30-year history with that hard-earned place on the podium by elevating our products, amplifying our stories, delivering best-in-class service, and empowering our team to drive consistent execution.
As we have said previously, this chapter is not a repeat of the first time building the brand, there will certainly be parts that rhyme. We plan to utilize every tactic, relationship, strategy, or ethos that served this brand in the past to our benefit. One of those is certainly product, story, service, and team, four powerful dimensions that when working in concert can drive this brand to greater heights. This is what we have brought to life, what we are evangelizing internally and externally and what we are executing against.
The elevation of our product offering continues to gain momentum. This includes a critical mass of new products designed and developed by our expert product team with an immediate focus on our men's apparel business and footwear, as well as a significant evolution in style and innovation offerings as we work toward fall-winter '25. Based on previews in the initial sell-in cycle, we've received strong feedback, showcasing products with brand-new innovations, refreshed design direction and a holistic approach to outfitting our core revenue categories, training, running, basketball, sportswear and golf.
In the meantime, we've refocused and relaunched basics like base layer compression, where we have market leadership, which gives us the ability to change our trajectory. This includes recent success in premium distribution with heat gear, franchises like Unstoppable, particularly Fleece, as well as our Vanish Training collection and an increasing, but targeted selection of UA Sportswear.
In addition to what we call Trojan horse products, recently articulated accessories with the StealthForm Uncrushable Hat, where we showcase what Under Armour's take on a category as seemingly ordinary as a ball cap that traditionally has been only the logo on the front that differentiates it from other brands and apply the performance lens of stretch, recovery and moisture management, which also allow us to charge a premium of $45 to a category that typically sells for less than $25. This is the type of consistent innovation and premiumization you should now expect from UA with the purpose of making your consumer wonder. They put this much performance thinking into a hat, I wonder what their shirts and shoes are like.
In footwear, we're making some of the greatest strides with our enhanced product team having an impact. There's much work to do as we're experiencing challenging results in the near-term, particularly in our good level products. While it will be a couple of seasons until it hits the market, we've taken a different tact here with good level, refining and eliminating redundant SKUs, assigning our best footwear designers to work on some of our lower ASP products, but that have big volumes like the UA Assert, whose volume is in the millions of payers with updated designs that focus on the price to value perception and winning consumers to the brand with just simply better looking and performing product at great value. Just because the shoe costs less than $100 does not mean that it does not deserve to be beautiful.
And I'm excited about our strategies for improved assortment across our better and best segmentation over the next few seasons as more elevated products like our Infinite running collection have been tracking well for us. While our footwear business continues to reset, our objective is to merge with a more substantial, better and best level offering and a streamlined improved good level offering. All-in all, more precise, well-defined segmentation within our franchises to deliver for all tiers of distribution that will serve us in the ambition of preimmunizing the UA brand. It's really about selling so much more of so much less.
Critical to our evolution is our team sports positioning, the sharp point and epicenter of our connection with young athletes. With school back-in session, we saw a solid performance from cleated products in baseball and American football. As well as in basketball with Curry brand footwear. Building on that a few weeks ago, the Curry-12 launched globally following limited releases of select colorways, including the red, white and blue version Stefan wore during his iconic performance in the Paris Olympics, which helped secure gold for Team USA. The response to the Curry-12 has been solid, so we're off to a good start ahead of our next launch, which will see the first-ever Signature shoe for Rising NBA star, De'Aaron Fox under the Curry brand.
Next up is story and continuing with Stefan as an excellent example. In September, we conducted our first tour in China with him since 2019. The response to Stefan and market was frankly overwhelming and demonstrated the power of the Under Armour brand when we holistically integrate compelling athlete moments with elevated products and storytelling. Despite our four-city tour turning into a three-city tour, because the second stop in SHEIN had to be canceled due to a Taylor Swift-like reaction with for just one example, from, SHEIN 7,000 people waiting outside of his hotel to greet him.
We unfortunately had to cancel that visit, but successfully pulled off our most impactful tour ever. With historically high brand exposure, including over 4 billion media impressions, nearly 34 million live stream views and incredible social buzz and engagement. Overall basketball sales impacted in China that week, along with a threefold increase in Curry sales.
One thing that is certain is that the opportunity we have with Stefan to build-on his celebrity for the benefit of Curry brand, UA Basketball and Under Armour as a whole we plan to be much more aggressive with Stefan's global presence as we scale our business in the upcoming years.
Taking this learning and replicating it more frequently at multiple touch points is the goal. Holistic and synergistic moments to reach young team sport athletes more effectively as a sports house with an ability to outfit the world's most incredible athletes at the highest-level of competition, including Major League Baseball's World Series and Los Angeles' Freddie Freeman driving in 12 runs and four homers to become the MVP as the Dodgers won their eighth title.
American Football NFL standouts, Justin Jefferson, Zay Flowers and Kyle Hamilton headlined the UA roster in the sport our brand was founded in. And with that, we have Notre Dame sitting squarely in the college football playoffs top-10. Also, Elite runner Sharon Lokedi with her top-10 finish at last weekend's New York City Marathon wearing the unreleased Velocity Elite 3, the most technologically advanced running shoe we've ever made truly.
And our mark-on the world's most Elite football stage with players like Ben White at Arsenal, Pedro Porro at Tottenham, Antonio Rudiger at Real Madrid. We have an incredibly talented global athlete roster that demonstrates our breadth and why we are a sports house. Engaging young athletes more effectively while telling their compelling stories. As a work-in-progress, activations will look and feel more aligned over the next several months, underscored by our brand identity and ethos.
Next, shifting to service and an update on elevating our consumer experience. In these efforts, our initial strategies have primarily focused on DTC and evolving our e-commerce channel into a more premium manifestation of the Under Armour brand. The second quarter has continued to give us confidence in what is possible. One of the most visible aspects of our work has been the impact of our significant reduction in promotional activities, particularly in our e-commerce business in North America. It is still early, but this, along with our work to reduce SKUs, creates a more deliberate and premium product assortment, better curated looks and outfitting presentations for a cleaner, faster consumer experience.
So despite sector declines in traffic and revenue, the quality of our business has improved, creating a better foundation from which to grow in the future. With lower promotions and markdowns, our full-price sales rose again in the second quarter, representing now about 50% of e-commerce revenue versus about just 30% just a year-ago.
Further, our average order value and average unit retail metrics increased by double-digits for the second quarter in a row, a promising trend that gives us confidence in our ability to move our e-commerce business to a more premium position with a higher-quality of revenue and better profitability over the long-term as a flagship representation of the brand.
In North American DTC, currently our largest business is our factory house outlet stores, where we're shifting from a full store discounting approach to a targeted strategy, which excludes certain programs that will remain full-price regardless of broader promotions. The goal here is driving higher profitability, store productivity and improved brand affinity. This is one area we see significant upside margin potential over the long-run as our brand and therefore our business become stronger.
With more than 1,400 full-price Brand House locations globally, we're working to create an elevated experience for our athletes with a cleaner, better curated product assortment and presentation. The culmination of this work will show-up in our new 24,000 square-foot flagship store set to open on November 21, at our new global headquarters at the Baltimore Peninsula. As our most premium full-price expression, this store will serve as a living laboratory to inform how we think about what perfect looks like for our entire fleet.
By utilizing consistent freshness, dynamic brand inspiration and an evolved two-way conversation with our consumers, we're excited about the opportunities to harvest learnings from the store and roll them out to the rest of our fleet over time.
Turning to our loyalty program, continues to be a significant unlock for driving repeat business and attracting new consumers. In October, we celebrated the first anniversary of our U.S.-based UA rewards program and are pleased with its performance.
Early in the second quarter, we initiated an account upgrade that welcomed another $6 million existing ua.com members into the program, taking our total to nearly 13 million members. Fiscal year-to-date, active members accounts for roughly half of U.S. DTC revenue. Members also have nearly doubled the 90-day repurchase rate compared to non-members generating approximately 50% higher revenue per consumer. Across all programs in the U.S. and APAC, we now have more than 28 million members and growing. I'm confident that loyalty will help us gain valuable insights to inform our business and enhance consumer engagement, driving even more benefits in the long-term.
Within our wholesale business, we're managing through this reset period, while focusing on our relationships with strategic retailers across distribution tiers. This includes working with UA partners, delivering elevated products with compelling storytelling and driving toward a more premium representation of our brand in all doors where athletes shop for our products.
Our strategic retail partners are family and we have significantly revamped our frequency, touch points and communication. First and foremost, letting them note that they are strategic partners as one of the most foundational elements of a sales relationship and we have not been doing this well. This means a two-way conversation and openness to incorporating their constructive feedback as we evolve our strategies to unlock UA's full potential as we know that it will take time to build back shelf-space. Still, we believe we will gain traction with our cadence of new product launches and improved marketing activations over the next several quarters.
Finally, none of our strategies will succeed without the hard work of an energized and inspired team. With momentum is absolutely building here. Ensuring we have the right people, focusing on the right parts of our business is crucial to empowering our efforts and this is a work-in process, being clear with every teammate, so that they know exactly what we expect of them each and every day. Teams knowing what they're supposed to do when they show-up while incorporating continuous improvement. And they're knowing exactly what that definition of success is.
In this respect, I feel confident about our evolution, team and the opportunity in the market we see for Under Armour's unique underdog brand positioning. One of my focal points of leadership in the first seven months has been empowering our product, marketing and commercial teams, ensuring the coordination and absolute teamwork of these three aspects of our sports house. It's essential to our success and it leads in every management discussion that we have today. The entire organization is in support of this aspect of Under Armour leading for the brand.
Expiring on all cylinders, Yassine Saidi leads an experienced team of experts to elevate our products, innovation, design language. And with only two months on-the-job, the new perspectives, Eric to our work, especially through marketing, but also evolving our strategy, approach to category management and go-to-market process. We are driving tangible brand right changes to improve our positioning in the market. With clear alignment of who we are, what we stand for and in preparation to launch the most significant marketing effort in our history in 2025.
Our team is on the court with a playbook capable of stabilizing and driving this brand to growth over the long-term. With the focus of being an incredibly loud brand and quiet company. Our organization is more aligned and focused than in past years, and we're ensuring that time and resources are effectively prioritized to strengthen our brand. At the center of this though is trust, which I believe is something that is built-in drops and lost in buckets. For us, this means a cultural focus on positive relationships, well-informed decision-making and consistency. I believe our energy, collaboration and unity as a team will take an even more significant step next week as we begin moving into our new headquarters.
So this work to reconstitute our brand coincides with reconstituting our culture. And that's what's at the heart of it. We're not just building a company; we're building a brand. Companies can become famous, because they make one thing defining for their business. While brands are famous because we've proven that we can do that over-and-over again. Our job is to relentlessly fulfill our promise to inspire and surprise athletes for performance and design solutions they never knew they needed yet once they tried them, could not imagine living without.
Share this messaging and what this direction means for Under Armour. We're going to host an investor meeting on December 12, in New York City. At this meeting, we will detail our strategies to strengthen UA's premium marketplace and underdog positioning and our ability to deliver improved long-term value-creation for shareholders.
So now in closing, our reset to drive greater affinity with athletes, while delivering sustainable, consistent long-term growth is a journey that requires patience. We are progressing on critical aspects of our strategies, gaining early traction and confidence in our ability to run a better, more agile and disciplined business. Agility and being responsive to the market are critical as set forth in our new nine-month speed-market capability to complement our historical 18-month go-to-market.
This product pipeline looks truly differentiated and excellent, and we are positioning ourselves to more effectively deploy our marketing dollars to connect with consumers even more deeply. We have leadership and a team that is united and aligned on the critical dimensions of our business to unleash the full potential of the Under Armour brand.
Underscoring all of this, our culture. It's re-energizing and it's focused with steadfast resolve as we strengthen this sports health. Both one day, an athlete at a time. Both the passion and care that Under Armour deserves.
And with that, I'll hand it over to Dave for more details on our results and outlook.
