BALTIMORE, Dec. 12, 2018 /PRNewswire/ -- At an
investor meeting held today at its global headquarters, Under
Armour, Inc. (NYSE: UAA, UA) introduced the company's 2023
strategic growth plan which provided an overview of its long-term
strategy and key initiatives to deliver sustainable, profitable
growth and shareholder value.
"Under Armour is designed for resilience and over the past two
years, our global team has worked tirelessly to transform our
business - operationally, strategically and culturally," said Under
Armour Chairman and CEO Kevin Plank.
"With a distinct strategy engineered around a clear, uniquely
defined consumer supported by a disciplined go-to-market process
and data-driven demand mapping, we have never been more inspired,
aligned and capable of achieving our goals."
"As we execute against our long-term strategy, we remain
unwavering in our commitment to protecting and growing the Under
Armour brand," Plank continued. "Led by a strong management team,
an accelerated innovation agenda and comprehensive discipline
around our commitment to increasing total shareholder return, we
look forward to delivering the next chapter in our growth
story."
The company reports its financial performance in accordance with
accounting principles generally accepted in the United States of America ("GAAP"). This
press release refers to "adjusted" amounts, which are non-GAAP
financial measures described below under the "Non-GAAP Financial
Information" paragraph. References to adjusted financial measures
exclude the impact of the company's restructuring plans and the
related tax effects, as well as adjustments to our one-time impacts
of the 2017 U.S. tax reform legislation, which we refer to as the
U.S. Tax Act. All per share amounts are referenced on a diluted
basis.
2023 Strategic Growth Plan
The new 5-year plan is architected around two strategic
priorities: protect and perform.
The first priority is a continued focus on elevating and protecting
the Under Armour brand by taking actions to ensure the ability to
consistently deliver what consumers, customers and shareholders
expect from the company. This means an accelerated innovation
agenda, driving even deeper connections through return-driven
demand creation and brand experiences, and utilizing an optimized
supply chain model along with improving service levels to keep pace
within a dynamically evolving market. Simultaneously, the second
priority is performing with balance and working to create greater
financial and operational agility across the company's portfolio of
businesses to ensure future growth is repeatable and
consistent.
Serving as a foundation to its 5-year strategy are the following
core elements:
- Single-minded focus on innovative athletic performance product
and experiences.
- Becoming consumer centric by harnessing data science and
analytics along with the world's largest digitally connected health
and fitness community to drive engagement, preference and
consideration.
- Continuing to elevate investments toward the largest long-term
growth opportunities including the company's international,
direct-to-consumer, footwear and women's businesses.
- Emphasizing digital engagement and conversion, and retail
excellence.
- Protecting the brand through selective, optimal and premium
wholesale distribution.
- Delivering balanced, sustainable earnings growth through margin
expansion, cost efficiencies and investment in strategic growth
initiatives to drive consistent shareholder return.
2023 Financial Targets
Reviewing the company's expected performance against its
long-term growth strategy, Chief Financial Officer David Bergman emphasized foundational operating
principles set to drive consistent results over the five-year
period, "Focusing on sustainable, profitable growth while
increasing returns on capital and generating substantial cash will
empower our ability to deliver industry-leading innovation,
compelling premium consumer experiences and drive toward our
targets, while steadily increasing returns to our
shareholders."
- Revenue is expected to return to a low double-digit
growth rate by 2023, inclusive of a mid to high single-digit
five-year compounded annual growth rate ("CAGR"), driven primarily
by the company's International and Direct-to-Consumer
businesses.
- Gross margin is expected to increase approximately 275
to 300 basis points reaching at least 48.0 percent in 2023.
- Annual operating margin is expected to reach a low
double-digit percentage rate by 2023.
- Earnings per share is expected to grow at a five-year
CAGR of approximately 40 percent.
- Annual cash flow from operations, by 2023, is targeted
at approximately $700 million, with a
cumulative $2.5 billion in cash flow
to be generated between 2019 and 2023.
- Return on invested capital is expected to reach 20
percent by 2023.
Updated Fiscal 2018 Outlook
At the meeting, the company provided the following updates to
its previous annual outlook, which was issued October 30:
- Gross margin is now expected to be flat versus the previous
expectation of "flat to down slightly" versus 45.1 percent in 2017.
Adjusted gross margin is expected to improve 20 to 30 basis points
compared to 45.2 percent in 2017 as benefits from product costs and
lower planned promotional activity are offset primarily by
inventory management actions.1
- Operating loss is now expected to be approximately $40 to $55 million
versus the previously expected $50 to
55 million loss. On an adjusted basis, operating income is now
expected to reach the $160 to
$165 million range versus the
previous $150 to $165 million range.
- Excluding the impact of the restructuring efforts,
adjusted diluted earnings per share is now expected to be
$0.21 to $0.22 versus the previous expectation of
$0.19 to $0.22.
- Year-end inventory for 2018 is now expected to be down at a
mid-single-digit rate versus the previous expectation of flat to
down slightly.
Initial Fiscal 2019 Outlook
In addition to updating its 2018 full year outlook that was
provided on its October 30 earnings
call, the company presented an initial outlook for the full year
2019:
- Revenue is expected to be up approximately 3 to 4
percent reflecting a low double-digit percentage rate increase in
the international business and relatively flat results for
North America.
- Gross margin is expected to increase approximately 60 to
80 basis points compared to 2018 adjusted gross margin due to
channel mix benefits from lower planned sales to the off-price
channel and a higher percentage of direct-to-consumer sales along
with more favorable product costs due to ongoing supply chain
initiatives.
- Operating income is expected to reach $210 million to $230
million.
- Interest and other expense net is planned at
approximately $40 million.
- Effective tax rate is expected to be in the 19 percent
to 22 percent range.
- Earnings per share is expected to be in the range of
$0.31 to $0.33; and,
- Capital expenditures are planned at approximately
$210 million.
Meeting Presenters and Content
Additional presenters from Under Armour's senior management
included: Patrik Frisk, President
and Chief Operating Officer; Paul
Fipps, Chief Digital Officer; Clay
Dean, Chief Innovation Officer; Colin Browne, Chief Supply Chain Officer;
Kevin Eskridge, Chief Product
Officer; Jason LaRose, President,
North America; Jim Mollica, SVP, Consumer Engagement; Attica
Jaques, VP, Global Brand Management; Massimo Baratto, Managing Director, EMEA;
Manuel Ovalle, Managing Director,
Latin America; Jason Archer, Managing Director, Asia Pacific; and, Christina Mei, Managing Director, China.
The U.S. Tax Act was enacted into law on December 22, 2017. The new legislation contains
several key tax provisions that affect Under Armour and, as
required, the company has included reasonable estimates of the
income tax effects of the changes in tax law and tax rate in the
company's 2017 financial results. These changes include a one-time
mandatory transition tax on accumulated foreign earnings and a
re-measuring of deferred tax assets, resulting in an increase to
the company's provision for income taxes of $39 million and a decrease to diluted earnings
per share of $0.09 for both the
fourth quarter and full year of 2017. During 2018, the company has
revised its reasonable estimate made in the company's 2017
financial results for the one-time mandatory transition tax on
accumulated foreign earnings and the re-measuring of deferred tax
assets due to the U.S. Tax Act. Since the U.S. Tax Act was passed
late in the fourth quarter of 2017, and ongoing guidance and
additional accounting interpretation were expected over the
subsequent 12 months, the company considers the accounting of the
transition tax, deferred tax re-measurements, and other items to be
provisional. The company expects to finalize its estimates within
the one-year measurement period allowed by the SEC.
Non-GAAP Financial Information
This press release and materials presented at the company's
investor meeting refer to "adjusted" results as well as "adjusted"
forward looking estimates of the company's fiscal 2018 outlook and
2017 results. Adjusted gross margin, adjusted operating income,
adjusted operating income percentage (or margin) and adjusted
diluted earnings per share exclude the impact of restructuring and
other related charges and the impact of the U.S. Tax Act, as
applicable. Management believes this information is useful to
investors because it provides enhanced visibility into the
company's actual and expected underlying results excluding the
impact of its restructuring plans and recent significant changes in
U.S. tax laws. These non-GAAP financial measures should not be
considered in isolation and should be viewed in addition to, and
not as an alternative for, the company's reported results prepared
in accordance with GAAP. Additionally, the company's non-GAAP
financial information may not be comparable to similarly titled
measures reported by other companies.
About Under Armour, Inc.
Under Armour, Inc., headquartered in Baltimore, Maryland is a leading inventor,
marketer and distributor of branded performance athletic apparel,
footwear and accessories. Designed to make all athletes better, the
brand's innovative products are sold worldwide to consumers with
active lifestyles. The company's Connected Fitness™
platform powers the world's largest digitally
connected health and fitness community. For further
information, please visit www.uabiz.com.
Forward Looking Statements
Some of the statements contained in this press release
constitute forward-looking statements. Forward-looking statements
relate to expectations, beliefs, projections, future plans and
strategies, anticipated events or trends and similar expressions
concerning matters that are not historical facts, such as
statements regarding our future financial condition or results of
operations, our prospects and strategies for future growth, our
anticipated charges and restructuring costs and the timing of these
measures, the impact of recent tax reform legislation on our
results of operations, the development and introduction of new
products, the implementation of our marketing and branding
strategies, and the future benefits and opportunities from
significant investments. In many cases, you can identify
forward-looking statements by terms such as "may," "will,"
"should," "expects," "plans," "assumes," "anticipates," "believes,"
"estimates," "predicts," "outlook," "potential" or the
negative of these terms or other comparable terminology. The
forward-looking statements contained in this press release reflect
our current views about future events and are subject to risks,
uncertainties, assumptions and changes in circumstances that may
cause events or our actual activities or results to differ
significantly from those expressed in any forward-looking
statement. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee
future events, results, actions, levels of activity, performance or
achievements. Readers are cautioned not to place undue reliance on
these forward-looking statements. A number of important factors
could cause actual results to differ materially from those
indicated by the forward-looking statements, including, but not
limited to: changes in general economic or market conditions that
could affect overall consumer spending or our industry; changes to
the financial health of our customers; our ability to successfully
execute our long-term strategies; our ability to successfully
execute any restructuring plans and realize expected benefits; our
ability to effectively drive operational efficiency in our
business; our ability to manage the increasingly complex operations
of our global business; our ability to comply with existing trade
and other regulations, and the potential impact of new trade,
tariff and tax regulations on our profitability; our ability to
effectively develop and launch new, innovative and updated
products; our ability to accurately forecast consumer demand for
our products and manage our inventory in response to changing
demands; any disruptions, delays or deficiencies in the design,
implementation or application of our new global operating and
financial reporting information technology system; increased
competition causing us to lose market share or reduce the prices of
our products or to increase significantly our marketing efforts;
fluctuations in the costs of our products; loss of key suppliers or
manufacturers or failure of our suppliers or manufacturers to
produce or deliver our products in a timely or cost-effective
manner, including due to port disruptions; our ability to further
expand our business globally and to drive brand awareness and
consumer acceptance of our products in other countries; our ability
to accurately anticipate and respond to seasonal or quarterly
fluctuations in our operating results; our ability to successfully
manage or realize expected results from acquisitions and other
significant investments or capital expenditures; risks related to
foreign currency exchange rate fluctuations; our ability to
effectively market and maintain a positive brand image; the
availability, integration and effective operation of information
systems and other technology, as well as any potential interruption
of such systems or technology; risks related to data security or
privacy breaches, including the 2018 data security issue related to
our Connected Fitness business; our ability to raise additional
capital required to grow our business on terms acceptable to us;
our potential exposure to litigation and other proceedings; and our
ability to attract key talent and retain the services of our senior
management and key employees. The forward-looking statements
contained in this press release reflect our views and assumptions
only as of the date of this press release. We undertake no
obligation to update any forward-looking statement to reflect
events or circumstances after the date on which the statement is
made or to reflect the occurrence of unanticipated events.
1 As previously disclosed, the company
identified an immaterial prior period error in the presentation of
premium subscriptions in its Connected Fitness reporting segment,
which resulted in a 10-basis point change to its previously
reported 2017 gross margin.
Under Armour, Inc.
Outlook for the Year Ending December 31, 2018
The table below presents the reconciliation of
the Company's fiscal 2018 outlook for income from operations
calculated in accordance with GAAP to adjusted operating income.
This adjusted amount is a non-GAAP financial measure. See "Non-GAAP
Financial Information" above for further information regarding the
Company's use of non-GAAP financial measures.
ADJUSTED OPERATING
INCOME RECONCILIATION
|
|
(in
millions)
|
Year Ending December
31, 2018
|
Loss from
operations
|
$
|
(40)
|
|
|
$
|
(55)
|
|
Add: Estimated impact
of restructuring
|
200
|
|
|
220
|
|
Adjusted operating
income
|
$
|
160
|
|
|
$
|
165
|
|
The company is not able to provide a reconciliation of the
non-GAAP adjusted effective tax rate or adjusted diluted earnings
per share to the GAAP effective tax rate or diluted earnings per
share for its 2018 outlook. As a result of the 2018 restructuring
plan, the company's GAAP net income for fiscal year 2018 is
expected to be a net loss, and therefore the GAAP effective tax
rate is subject to significant variability. Given this variability,
the company cannot provide a meaningful outlook of the GAAP
effective tax rate or diluted loss per share without unreasonable
effort. These non-GAAP measures exclude the impact of the 2018
restructuring plan.
Under Armour, Inc.
For the Year Ended December 31, 2017
The tables below present the reconciliation of
the Company's fiscal 2017 income (loss) from operations as a
percentage of revenue calculated in accordance with GAAP to
adjusted operating income as a percentage of revenue. This adjusted
amount is a non-GAAP financial measure. See "Non-GAAP Financial
Information" above for further information regarding the Company's
use of non-GAAP financial measures.
|
|
Year Ended
December 31,
2017
|
Total Operating
Income Percentage
|
|
|
Income from
operations - GAAP
|
|
0.6 %
|
Impact of
restructuring, impairment and restructuring related
costs
|
|
2.6 %
|
Adjusted income from
operations - Non-GAAP
|
|
3.2 %
|
|
|
|
North
America
|
|
|
Income from
operations - GAAP
|
|
0.5 %
|
Impact of
restructuring, impairment and restructuring related
costs
|
|
1.7 %
|
Adjusted income from
operations - Non-GAAP
|
|
2.2 %
|
|
|
|
EMEA
|
|
|
Income from
operations - GAAP
|
|
3.8 %
|
Impact of
restructuring, impairment and restructuring related
costs
|
|
0.4 %
|
Adjusted income from
operations - Non-GAAP
|
|
4.2 %
|
|
|
|
Asia-Pacific
|
|
|
Income from
operations - GAAP
|
|
18.9 %
|
Impact of
restructuring, impairment and restructuring related
costs
|
|
— %
|
Adjusted income from
operations - Non-GAAP
|
|
18.9 %
|
|
|
|
Latin
America
|
|
|
Loss from operations
- GAAP
|
|
(20.5)%
|
Impact of
restructuring, impairment and restructuring related
costs
|
|
7.9%
|
Adjusted loss from
operations - Non-GAAP
|
|
(12.6)%
|
|
|
|
Connected
Fitness
|
|
|
Loss from operations
- GAAP
|
|
(54.3)%
|
Impact of
restructuring, impairment and restructuring related
costs
|
|
46.9%
|
Adjusted loss from
operations - Non-GAAP
|
|
(7.4)%
|
Under Armour, Inc.
For the Year Ended December 31, 2017
The table below presents the reconciliation of
the Company's fiscal 2017 gross margin calculated in accordance
with GAAP to adjusted gross margin. This adjusted amount is a
non-GAAP financial measure. See "Non-GAAP Financial Information"
above for further information regarding the Company's use of
non-GAAP financial measures.
ADJUSTED GROSS
MARGIN RECONCILIATION
|
|
|
|
Year Ended
December 31,
2017
|
Gross
margin
|
45.1
|
%
|
Add: Impact of
restructuring
|
0.1
|
%
|
Adjusted gross
margin
|
45.2
|
%
|
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SOURCE Under Armour, Inc.