Under Armour Q1 2010 Earnings Call Transcript

Under Armour Q1 2010 Earnings Call Transcript
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Under Armour (UA)

Q1 2010 Earnings Call

April 27, 2010 8:30 am ET

Executives

Kevin Plank - Founder, Chairman and Chief Executive Officer

Brad Dickerson - Chief Financial Officer and Principal Accounting Officer

David McCreight - President

Alex Pettit - Director, Investor Relations

Wayne Marino - Chief Operating Officer

Analysts

Thomas Shaw - Stifel, Nicolaus & Co., Inc.

Sharon Zackfia - William Blair & Company L.L.C.

Taposh Bari - Jefferies & Company, Inc.

Jim Duffy - Thomas Weisel Partners Equity Research

Kate McShane - Citigroup Inc

Michelle Tan - UBS

Sam Poser - Sterne Agee & Leach Inc.

Omar Saad - Crédit Suisse First Boston, Inc.

Mitchel Kummetz - Robert W. Baird & Co. Incorporated

Chi Lee - Morgan Stanley

Robert Ohmes - BofA Merrill Lynch

Presentation

Operator

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Good day, ladies and gentlemen, and welcome to the Under Armour Inc. First Quarter Earnings Webcast Conference Call. [Operator Instructions] I’d now like to turn the conference over to your host, Ms. Alex Pettit, Senior Director of Investor Relations. Please go ahead.

Alex Pettit

Thank you, and good morning to everyone participating in this morning's conference call. During the course of this conference call, we'll be making projections or other forward-looking statements regarding future events or the future financial performance of the company. The words estimates, intends, expects, plans, outlook or similar expressions are intended to identify forward-looking statements. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially. Important factors relating to our business, including factors that could cause actual results to differ from our forward-looking statements, are described in our press release and in the Risk Factors section of our filings with the SEC.

The company assumes no obligation to update forward-looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. Before we continue, I'd like to direct you to our website, investor.underarmour.com. There, you will find this morning's press release and, on our webcast page, images of a number of products and initiatives we will address on the call.

Joining us on today's call will be Kevin Plank, Chairman and CEO; followed by David McCreight, our President; and finally Brad Dickerson, our Chief Financial Officer, who will discuss the company's financial performance for the first quarter and provide an updated outlook for 2010. After the prepared remarks, Kevin, David, Brad and Wayne Marino, our Chief Operating Officer, will be available for a Q&A session that will end by 9:30. And with that, I'll turn it over to Kevin Plank.

Kevin Plank

Thank you, Alex, and good morning, everyone. The Under Armour brand is about leadership. That means leading on the field by working with the world's best athletes to improve performance. It means leading our industry in sell-through, which is evident in our results, not just in this past quarter but over the past year. And it means leading in communicating with our consumer, whether it's a familiar one who plays football or a new one who's getting her exercise on a ski run.

So we look at our results this past quarter and we see continued steady progress. We have broad-based strength in Apparel. And I want to talk about what was behind that strong growth. But I also want to talk about the opportunities that exist for the Under Armour brand to continue to lead, because I believe those are areas where we are focused in investing and are making progress.

These opportunities in Footwear, in new geographies and in distribution are critical to our growth over the next several years. These are the opportunities that will enable Under Armour to continue to lead. It will be up to us to execute against those opportunities, whether they are new categories, new sports, new geographies or new ways of reaching our consumer. And it is the criteria by which we will judge our progress.

But first, I want to discuss our main engine, the growth story that is powering the brand for us in 2010, U.S. Apparel. More important than the fact that we grew our Apparel business 31% this past quarter is the fact the strength was so broad-based. There was strong growth in all of our categories; Men's, Women's and Youth. There was strong growth with our wholesale partners, with each of those three categories, showing 20-plus percent growth. And there is strong growth across all categories in our Direct-to-Consumer business, with Men's, Women's and Youth all growing more than 50% in our own channels. The growth story for Under Armour Apparel is more than just intact; in fact, it's dynamic. In Q1, we continue to drive business at retail, with our core products such as compression, base layer and underwear.

Our equity with our core consumer continues to grow, and we are benefiting as new, young athletes, the younger brothers and sisters of our core consumer, enter the world of organized sports. They are growing up in homes where Under Armour has been the brand of choice for the athletes in the family, and we are building loyalty because our product performs on the field. And we remain laser-focused on accelerating the Under Armour innovation agenda. It's what we’ve built our brand on and what drives our product teams. That innovation is recently evident in the course short. Our new $45 compression short that was featured at the NFL Combine and will help us extend our leadership position in compression. Our core consumers continue to show their loyalty to Under Armour, and our core apparel is vibrant. We benefit from the fact that with each new season there is a new sport to be played.

When the baseball and lacrosse fields open up in spring, our consumer reaches for our brand. And when it's time for football, soccer or field hockey, our consumer is reaching for our brand. Those team sports will always be at the center of where our brand lives.

So with abundant growth opportunities still in front of us, our decision criteria on investments are simple. We will invest to protect what we have and we will invest with a view toward succeeding on a global platform. We will protect our core strength on the American sports field with innovation, great athletes and great stories.

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