Stephanie Linnartz
President and Chief Executive Officer at Under Armour
Thank you, Kevin, and good morning, everyone. I'll open my remarks today by underscoring that I am honored and thankful for the conviction that Kevin and the board have placed in me to lead Under Armour. In the past that led me here, respect for iconic and innovative brands love for sport and admiration for Under Armour's hard-earned and unique reputation have remained a constant backdrop. Reflecting on my first 70 days here, it's been exciting, intense and eye opening. There are quite a few topics I plan to touch on today, and I will be as transparent as possible about my observations and thoughts thus far. Having learned much in a short time, I will say that the potential for this brand is even bigger than I imagined when I walked through the door at the end of February. I am realistic about our challenges and I am confident that we have the right core components and are developing the right plans to reignite growth in the company and to create value for shareholders. That said, like any athlete, we must measure ourselves against our competition and potential. Operating in the athletic performance, sportswear and retail sector, which has a huge addressable market and consistent revenue CAGRs to tap into, we have yet to capitalize on our full potential. For athletes, customers and shareholders, we must realize this potential and stop at nothing until we deliver renewed growth. Growth is without a question, our highest priority. Throughout my career, I have prioritized people and believe that the only way to succeed is to have a great team around you. This is something that I noticed right away at Under Armour. The teammates working here are talented, hard-working and passionate about our purpose of empowering those who strive for more and our mission to make athletes better. This energy will be a crucial asset as we leverage our strengths, drive through areas where we need to finish the play and accelerate our ability to reshape our future trajectory.
Under Armour has always had a unique strength in the commitment and engagement of Kevin Plank, bringing his passion and energy to the business in ways only a founder can do. Having worked in a founder-led culture for the past 25 years, I know firsthand the advantage that this presents. Over the past few months, I have had deep dives with teammates, key wholesale customers, athletes, and have piled through a mountain of analyst reports. As a result, there are three areas that I would like to address today as an initial assessment of our strengths and opportunities, brand, product and North America. In light of this, I've set three priorities to drive clarity and business alignment across the company and appropriately, we are calling this Protect This House three or PTH 3, which is about three big things over the next three years. With the plan taking shape, I am excited to share my initial ideas on it today and look forward to providing more details and progress reports in the coming quarters. Of course, execution will not happen overnight. It's a journey that will require improved execution in some areas, new talent and greater accountability for our leaders to drive positive and tangible business results. At its core, it's about focus, execution and accountability. With that, let's start with brand. Under Armour is one of only a few brands that can be found on the field of play globally at the highest levels of competition meaning Under Armour products are chosen by professional athletes who trust us to equip them as they push the boundaries of what is possible. With the demand to support nearly $6 billion in expected revenue in fiscal '24 our base business remains solid and sizable. Yet we are not pulling in our fair share of market growth. I believe a causal factor here is the inconsistency of how the Under Armour brand shows up across our regions, with the most significant opportunity to improve in the United States.
Outside the United States, our brand has received in its most premium position in Europe. This results from nurturing strong quality wholesale relationship, disciplined channel segmentation and consistently optimized brand activations. And this, of course, shows up in our results. In fiscal '23, EMEA was our highest growth region with a 23% increase in currency-neutral revenue. Moving forward, we'll continue to build on this momentum, focusing full-funnel medium sports marketing efforts, especially with global football in the U.K. and Spain to win with 16- to 20-year old varsity athletes. In APAC, particularly China, Under Armour's view is what locals generally describe as a professional athletes brand. So the connection of brand heat delivering results continues to be consistent with our objectives. Growth-wise, fiscal '23 was challenged in the first nine months of the year due to ongoing lockdowns and market disruptions from lingering COVID impacts. As we ended the year, however, currency-neutral revenue was up 31% in the fourth quarter. So the environment seems to be normalizing more now. With fitness of the tailwind, improved storytelling and a growing loyalty program in China, we remain bullish on the region's future. In North America, specifically the U.S., there is no question that athletes love the Under Armour brand. And while our consumer insights tell us that we have tremendous brand awareness there is also a high level of latent brand equity. Latent because consumers are aware and engaged, yet conversion is more dormant than it should be. I attribute this state to inconsistent execution across our product, marketing and retail efforts. From aligning products to be premium at every price point, to disciplined channel segmentation to more consistent product marketing. There is a significant opportunity to activate more simply across the dimensions that matter and drive improved brand affinity. So how is this translating into action? From both the global and U.S. perspectives, we're assessing how our products, athletes and marketing strategies are or are not breaking through to reach our target consumers.
From brand activations to a roster that includes Stephen Curry, Justin Jefferson, Jordan Spieth and others, we have a massive investment in place. Yet it's clear to me that we are not capitalizing on our assets to our best advantage or return. Driving brand heat, of course, is not a one-size-fits-all approach. We cannot simply apply the same storytelling product and distribution strategies across the regions and expect to generate the same levels of brand heat globally, yet unifiers can be crucial to driving consistency. As Kevin mentioned, one unifier we are all proud of is the relaunch of Protect This House. Since then, the execution of our teams and positive response from consumers has been impressive and inspiring and a simple reminder of the strength of Under Armour's core brand DNA. Reinventing Protect This House is a new call to action for young athletes whose motivations differ from the generations who came before them, will continue to be brought to life across many dimensions, including this summer's Women's World Cup. Targeting young women, our World Cup campaign will feature Kelley O'Hara and Alex Greenwood and the journey to compete, highlighting the grid, edge and swagger necessary to perform on the world's most elite stage, employing a digital-first content strategy that distorts beyond typical media placements we're utilizing an always-on approach to meet athletes where they live, train, compete and recover. Also, local activations like our all American and UA Next events will continue in North America and transition into other regions like EMEA to drive brand advocacy further. Taking a step back to accelerate my understanding of how the various components of these elements play together. I have made some leadership changes, and we are in the midst of a search for a Chief Consumer Officer. So for now, the heads of brand, sports marketing and digital all report directly to me. As I get closer to these areas of our business and continue to assess our needs, we are working on adding new world-class marketing and commercial talent to ensure our teams have the right leadership and capabilities to fuel our growth expectations.
To wrap up this section, when taken in total, drive global brand [Indecipherable] with a focus on the U.S. becomes the first of three priorities that I laid out for the company. With love for a brand that plays considerably larger than the business, I am confident that simplification and doing more with less will be an outstanding unlock to generate excitement and increase conversion towards greater top line growth. Next up is product. From a core athletic performance perspective, we continue to deliver industry-leading innovations that once athletes have them, they can't imagine living without. That said, we haven't finished the play on becoming premium at every price point, nor created a critical mass business in the better part of the product pyramid, especially in footwear, where most of our peers enjoy considerably larger businesses. From any cut, footwear remains our single most significant growth opportunity. We have built a successful $1.5 billion footwear business, which is challenging given the barriers to entry in competition. A large part of this momentum is due to our focus on building franchises which have resulted in loyalty and repeat business. From Velocity, Phantom and Infinite and running to Curry Breakthru and spans and basketball to our coveted highlight and spotlight fleets in American Football. This business is established, gaining strength and ready to realize greater future potential. That said, you will hear us talking a lot more about sneaker culture, especially as we open the aperture to Sportstyle. Additionally, Under Armour sneakers are ripe for collaborations, which will become a larger part of our future offering. To do this and do it well, we are bringing in sneaker and branding experts who will add industry-proven design horsepower to the team, especially as we expand our Sportstyle offerings. Ultimately, it's about getting the right talent in the right place to ignite our product and marketing engines in performance and style. Our performance apparel business also continues to deliver on our promise to make athletes better.
With a strong portfolio of products that have made us famous like HeatGear, ColdGear and Compression we have an excellent base to leverage to -- into existing and new categories. In our current lineup, RUSH Energy, Peak Woven, Flex Woven and Vanish along with our Bras collection, they all continue to elevate our premium offering. Additionally, given our strengthened partnership with Stephen, there is a significant opportunity to amplify the Curry brand in basketball in categories like Golf. And speaking of Golf, we are working on a premium collection and partnership with a top designer to be launched this time next year, strengthened by one of the world's best players Jordan Spieth. Golf is a business that I believe we have underserved as of late, and it is an area where we have a right to win, where product performance and style win the day. So expect more here too. Another significant opportunity is our women's business. As a woman and an athlete, I believe we make exceptional women's products in specific collections. However, at less than 1/4 of our revenue, we are still not cutting through enough to realize the growth available in the marketplace. In apparel, we have had success, specifically with our bras and bottoms products. But we have yet to make our definitive must have it product, so that it is top of mind as we work to drive more significant growth. Footwear must also be part of the long-term equation to grow the women's business. And here, too, we have a solid base from which to grow, but we need accelerators. The consistency of great design fit and the all-important style factor across the entire offering is not where we need it to be and where I am confident we can take it. So to underscore this opportunity, we will go after women harder than this company has ever seen full stock. Another important area of opportunity is Sportstyle, where we have begun leveraging the credibility of our solid athletic performance foundation to compete deeper across the marketplace. Here, we are progressing by repositioning some of our current products and showing them in nonactive occasions, the live part of an athlete day.
To be clear, Sportstyle through an Under Armour lens is the intersection of our style and design meet performance. This means easy to wear premium executions of fabric fit and finish. With a robust product road map continuing to take shape due to the product design cycle, this business will not become a material driver until fiscal '25. Even so, we have seen early success in our essentials and Unstoppable apparel collections, fleece and warm-ups, and we are looking forward to new offerings as our SlipSpeed footwear platform adds new options this fall. Of course, footwear, women's and Sportstyle are not mutually exclusive. They are a Venn [Phonetic] diagram of opportunity that takes our total addressable market to more than $300 billion globally. That said, linking back to our first priority, brand heat must always work symbiotically with product, and I don't believe we've done a great job at this consistently. Through research, we have discovered that even our athletes are not fully aware of the depth of innovations we offer. The opportunity to close this gap will require the redeployment of dollars to support better storytelling to enhance demand. Here, too, we are on it. So all of this translates to our second priority, which is deliver elevated design and products with a focus on footwear, women's and Sportstyle. And this brings us to the third area, which is North America. Assuming we execute well with the first two priorities, drive global brand heat and make better products, we expect growth to return to North America in fiscal '25. Digging into this a bit more, historical context is important to understand where we were and where we are. Following the sector-wide promotional environment of 2017 and '18 and the current one, which started last year, Under Armour is continuing to navigate a legacy of higher-than-desired promotional activities in our home market.
I believe this can be attributed to many of the factors I have discussed today, in consistent product, marketing and segmentation discipline, along with sector-wide inventory malaise, all of which have constrained brand affinity in the U.S. That's not to say we have not made progress in the quality of our U.S. business. For example, going into the pandemic, we exited undifferentiated wholesale doors reduced our off-price exposure by more than 2/3 and reorganized our people, systems and processes. As a result, we have seen customer acquisition and retention metrics improve, establishing a healthier base for growth. In North America, we run a very productive and profitable outlet business with our Factory House concepts, but these represent about 90% of our physical DTC locations in the region. That leaves only 18 full-priced brand health stores in our home market, not many places where we can showcase our brand in the best presentation possible. So compared to the roughly 75-25 split that many of our competitors have working for them, this is an opportunity for premium growth. As such, we plan to focus our full price stores and productivity and consumer experience, driven by smaller, easier to navigate store formats, better storytelling to appeal to young athletes, exceptional customer service and always being in stock. By the end of this calendar year, our full price concepts will also be revamped to showcase Sportstyle products with a more robust curation. Longer term, we want to build on this progress by expanding the number of full-priced health stores as we perfect this. Nearer term, based on learnings from our Flatiron New York City pop-up as part of the SlipSpeed launch, we are working to identify additional ways to support critical moments like sporting events, competitions and festivals. From a digital perspective, we will continue to work to reduce promotional activities in our e-commerce business. However, in short order, ua.com must become a showcase for our brand. So we are investing in improving the digital experience, including better product presentation, streamlined checkout and faster mobile site speed.
The team understands the interconnectivity between physical and digital retail and is making the right investments to ensure that our stores and website drive more meaningful sales across our broader North American ecosystem, including our wholesale partner business. That said, we are making good progress with our U.S. loyalty program, which we plan to roll out more broadly later this year based on a successful pilot. Early reads continue to show meaningful improvements in metrics including higher conversion rates and average dollars per transaction and program members versus nonmembers in our test markets. In our wholesale business, we have solid relationships with best-in-class sports specialty, department stores and pure-play e-com companies. Still here, too, the critical mass in our U.S. business is oriented towards good level products. So we have an opportunity to build out the better and best part of our segmentation. In addition, we continue to evolve our strategic partnerships towards areas where we believe we are underpenetrated, including the mall and run and golf specialty shops as examples. To wrap up, this becomes our third strategic priority, which is to drive U.S. sales. Improving our U.S. business is critical to growing our global business. As a most profitable region, growing faster here means more future dollars to invest in product, marketing and our international business as well as increasing returns to shareholders. With that, you now have the three initial priorities I've mandated for Under Armour over the next three years, PTH 3, obsess driving global brand heat, stay relentlessly focused on elevating design and building better products and drive growth in the U.S. As I said, while these priorities are clear, they are at a starting point, and we have just begun thinking about how we can make UA better. And I look forward to providing more detail on these in coming quarters. I love and believe in Under Armour, and I couldn't be more excited to be here. I want this brand to win to really win by achieving the vision we all have for it. We are operating and executing with our eyes wide open. We know there is much work ahead of us and that we must move with urgency. Although fiscal '24 will be a year of building as we lay the groundwork aligned with our priorities, I am confident that we will achieve the growth and profitability that I know this brand is capable of over the long run. Now is the time for bold decisions and distinct actions that yield results. Our athletes, teammates, shareholders and brand deserve it. And with that, I will pass it to Dave to review our financial results and outlook.
