管理層發言
Good morning everyone and welcome to Under Armour's Q4 2024 Earnings Conference Call. All participants will be in a listen-only mode. After today’s presentation there will be an opportunity to ask questions. Please note today’s event is being recorded. At this time, I would like to turn the floor over to Lance Allega, Senior Vice President, Investor Relations, Treasury, and Corporate Development. Sir, please go ahead.
Good morning and welcome to Under Armour's fourth quarter and full year fiscal 2024 earnings conference call. Today's event is being recorded for replay. Joining us on today's call are Under Armour President and CEO, Kevin Plank; and CFO, David Bergman. Our remarks today will include certain forward-looking statements that reflect Under Armour management's current view of our business as of May 16, 2024. These statements may include projections for our business in the present and future quarters and fiscal years. Forward-looking statements are not guarantees of future business performance and our actual results may differ materially from those expressed or implied in the views provided. Statements made are subject to risks and other uncertainties detailed in this morning's press release and documents filed regularly with the SEC, including our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q. Today's discussion may also include the use of non-GAAP references. Under Armour believes these measures give investors a helpful perspective on underlying business trends. When applicable, these measures are reconciled to the most appropriate U.S. GAAP measures, reconciliations along with other pertinent information can be found in this morning's press release.
Thank you, Lance, and everyone joining us this morning. We've got a lot to get through on today's call, including some extended prepared remarks so let's dive right in. Four plus years removed from the President and CEO role at Under Armour, I'm bringing a clear sense of purpose and 100% commitment with zero distractions from making UA excellent. I gained unique perspective from the Executive Chair Board seat and while I've maintained a presence in the business throughout, that role was very different from the responsibility and opportunity I now have as CEO to affect the day-to-day decisions of this brand. I look forward to applying these lessons with a renewed approach to leadership. During this time, our industry has undergone significant changes including a global pandemic that tested the resilience of the consumer value chain and increased competition with many new capable entrants that have altered shopping behavior and preferences.
However, our aspiration to build the world's best athletic performance brand has not changed. Our goal has always been to be a premium brand of choice, driven by industry-leading athletic performance products, inspirational storytelling, and elevated consumer experiences. Yet, we have not consistently nor holistically delivered on this ambition. A lack of continuity has increased the complexity of challenges to our execution. With several CEOs and Heads of Products Marketing in North America over the past half a decade, ongoing turnover of critical leadership has been central to our inability to stay agile and decisive. From uneven execution across product and marketing to sub-optimal segmentation, wholesale relationships, and DTC performance, there remains a significant opportunity to activate more effectively across the dimensions that matter to drive improved brand affinity and therefore demand.
With several of our executive team being new to their roles, my top priority has been clarity and stability for our business. Said better, we must make the complex simple and the simple compelling. To address this, we will reconstitute Under Armour’s brand strength over the next 18 months by focusing on brand-building fundamentals, like making great products, telling the best story about those products, and servicing every aspect of delivering our business while building the best team. As a podium brand, meaning one of just three or four global brands that have the credibility of being recognized worldwide as an authentic on-field, court, and pitch athletic performance brand, we have an incredible foundation from which to reconstitute a winning culture. And while I have no delusions that this has to be a repeat of how this brand was built the first time, there are certainly parts that will run.
And I plan to use every tool, resource, or experience available to me and UA to make us successful. That said, I did not arrive at the next part of the call easily, but it is where we are today. Amid a confluence of factors including lower wholesale orders, proactive decisions to restore brand health in our e-commerce business, and lead times to bring new products to market, we are at a crossroads of defensive necessity and offensive opportunity. Therefore, before driving forward, we'll be taking a larger step back in fiscal 2025 with an expectation that our revenue will be down at a low double-digit rate. This includes an approximate 15% to 17% decline in North America, driven by three factors that I will go into later in the call as we work to meaningfully reset this business while navigating an environment made more challenging by our execution in the past. In our international regions, we expect revenue to be down at a low single-digit rate due to some conservative macro consumer trends we see as well as applying lessons learned here in North America to ensure that we protect the brand strength built in EMEA, APAC, and Latin America.
From a channel perspective, we foresee our wholesale business being down at a low double-digit rate, and direct-to-consumer to be down approximately 10% due to proactive actions to significantly reduce the discounting level within our own e-commerce business. This reflects some of the foundational steps in our ambition to create a more premium stance for our brand. By product, we expect apparel and footwear sales to be down at a low double-digit rate and our accessories business to remain essentially flat year-over-year. Even with this revenue contraction, we expect a gross margin improvement of 75 to 100 basis points due to the material reduction in promotional and discounting activities through our DTC business and proactive product and costing initiatives. Turning to SG&A, as we work to further streamline our business, we anticipate our expenses to be down 2% to 4% in fiscal 2025. This includes a Board-approved restructuring plan to help strengthen and support additional financial and operational efficiencies.
While Dave will provide more detail, we expect to incur a total estimated pre-tax restructuring and related charges of approximately $70 million to $90 million. Excluding the midpoint of this restructuring range, we expect $130 million to $150 million in adjusted operating income, representing $0.18 to $0.21 of adjusted diluted earnings per share. This is not where I envisioned Under Armour playing at this point in our journey. That said, we'll use this turbulence to reconstitute our brand and business, giving athletes, retail customers, and shareholders bigger and better reasons to care about and believe in Under Armour’s potential, a potential backed by nearly 1,900 retail stores, and a worldwide presence in almost 100 countries, respected by athletes as a podium brand with a distinctive positioning of innovation and performance that is truly unique. From a product perspective, we're not just chasing the low-hanging fruit of sportswear.
We're reinvigorating our culture of blowing athletes' minds with a consistent drumbeat of innovation. We must become a brand of launches, creating products that solve athlete problems while communicating the story of how and why our products deliver. The good news is that we're already doing this. For example, we delivered six new footwear drops in February alone, Infinite Pro and Infinite Elite, SlipSpeed Mega, Curry Color Drops at the NBA All-Star game, the Apparition from the UA sportswear, and the Drive Pro in golf. The larger problem is that you've probably never heard about any or most of them. We will make sure that if a product is important enough for us to make and release, it's also important enough to celebrate with storytelling, or plainly we just won't make it. So, giving stakeholders reasons to believe begs the question, how do we plan to strengthen the Under Armour brand? Well, it starts by reminding everyone, ourselves included, why we're here.
Under Armour is a sports house. This is our reason for being; it's our DNA and identity. Under Armour is about athletes and innovation. Leading with team sports, we equip those athletes to push the boundaries of what is possible by inspiring them with performance solutions they never knew they needed and, once they've tried them, cannot imagine living without. At the backbone of all this is an authentic passion; it is an identity of grit. Under Armour was not born on that podium but of an underdog spirit, the long shot, the athlete without all the gifts who somehow finds a way to persevere. That underdog grit is our differentiator. And we will embrace this mentality in this chapter as a brand. With this brand positioning recentered and solidified, we're narrowing and simplifying our Protect this House strategy to rebuild our core through three main priorities. First, is delivering better products and storytelling to amplify demand and loyalty.
Second, is running smarter plays by simplifying, modernizing, and optimizing our systems, structure, and processes so we harness efficiency for effectiveness. And third, is elevating consumer experiences, mandating excellence where, when, and how athletes choose to engage with our brand and transact. So, starting with delivering better products and storytelling, this is about the constant and a movement with Troika of athlete product and story, particularly in our North American business. This balance of this triad has been underserved for quite some time. In our largest market, we have become a brand that well competes primarily on price, versus our core competency, which is performance and technical innovation, an aspect of UA that has frankly gone untold for too long. To correct this, we must reprioritize our innovation agenda by reminding athletes that our products perform like no other in the industry, a flawless balance of science, function, and style made to empower them to be the best at whatever they do from Monday to Sunday.
We are eliminating products that do not meet our standards, to sell much more of many fewer products, accomplished by editing more intentionally led by our Chief Product Officer, Yassine Saidi, we are committed to this vision. But it requires having one point of view with considerably improved design language, a reduced but more intentional fabric library that includes a clear good, better, best segmentation for our distribution, trend-like colorways, and standardized fits across all the athletes we serve. Dissecting our execution further too many areas of our product strategy have been designated as priorities. This has caused operational inefficiency and a strain on resources, which has eluded our ability to have a consumer-centric point of view, consistent storytelling, and an effective go-to-market process. Over the past few years, it's also evident that we have taken our eyes off of our core men's apparel business, which particularly in North America has permitted this business to become more promotional and commoditized; that has significantly impacted our brand's perception.
We will rectify this. This focus does not mean that we are deprioritizing our footwear or women's business per se. But from a sequencing perspective, men's apparel will be our highest priority. We're also reorganizing our product and marketing teams around our largest revenue sports categories of training, running, sportswear, golf, and basketball while ensuring that the authenticator of team sports is still on our front porch in every region where we compete. Here in North America, that means our presence in American football, soccer, baseball, softball, volleyball, and lacrosse as core sports we will speak to and solve problems for with our amazing performance innovation. The specific core sport authenticators will, of course, vary by region. Given the newness of our leadership and product lead times, the critical mass of elevated offerings won't fully come to market until our Fall/Winter 2025 collection, which is the second half of fiscal 2026.
However, as we work through this in between period, I've challenged the team to adjust our operating go-to-market models in three actionable ways. First, refine our product assortment and reduce our SKU or style count by roughly 25% over the next 18 months, intentionally decreasing our good discount level mix while scaling our better and best offerings to drive balance into our segmentation. This will significantly reduce workloads for our teams and allow them to focus and prioritize on making any product that comes from our engine excellent with a product and story that we will be proud of. Secondly, our current go-to-market has only one gear with an 18-month process to get a product from an idea to the selling floor. This is just playing uncompetitive in a 2024 landscape. That said, we'll be pursuing a faster 6 and 12-month go-to-market capability, which was recently demonstrated with the release of the world's first true performance headwear that immediately sold out, the StealthForm Uncrushable Hat which debuted on Jordan Spieth at this year's Masters golf tournament, delivered in just six months and is now on preorder for athletes at a $45 price point.
The StealthForm Uncrushable is also a good metaphor for who we expect to be in our industry, innovative, premium, stylish, and nothing else like it in the market. A product that truly helps you perform better with its comfortable fit, technical material cooling, and stretch that feels like a secure hug for your head and delivered to the market with speed. And finally, building out a direct-to-consumer line of exclusive products for our own stores and e-commerce. Wholesale is about 60% of our business and will be hypercritical for our success, and how we will achieve the elevated position and vision of the UA brand I'm describing. Yet, it has been far too long since we have shown retailers our vision. So using our own physical and digital stores as a proving ground, we will demonstrate what excellence can look like for the Under Armour brand. Whether that is through a more premium price point or meaningfully amplified storytelling to drive success, we want our partners to call us because they're inspired by the innovation they see us building and not just what they sold from us before.
While delivering better products and segmentation is central to our ability to drive greater future demand, our products must be married with authentic inspirational storytelling and technical education about how Under Armour makes athletes better. Our DNA, reason to buy, and storytelling must permeate all consumer touchpoints. With some of the highest performing material sciences in our industry, including temperature management, moisture-wicking, sustainable fabrics, cushioning, compression-based support, to be candid, we've done a poor job consistently communicating our product advantages to athletes. This must be fixed as it's hard to sell something that is a best-kept secret. In this respect, we are working to dramatically overhaul our product descriptions and hang tags, and how our DTC and wholesale sales forces are equipped to tout our product attributes. When athletes research Under Armour online or choose our products in the store, it should be clear to them by answering three simple questions: what it is, what it does, and how it will make them better.
Going forward, a simplistic three-point description of every UA product will be found consistently on our hangtags, point of purchase, and website, and conveyed by our associates on the floor. Brands are built with consistency, so make no mistake, we'll be strengthening our brand in this chapter. That's not to say we haven't succeeded in marrying these efforts well in our recent past, when a product and marketing engines are lined showcasing product innovations with relevant storytelling, we've seen success in driving positive demand. A recent example can be seen at this year's Boston marathon where UA athlete Sharon Lokedi took her third podium wearing our $250 Velociti Elite 2 running shoe, a trend we think will continue. In preparation for the race, we immersed media and influencers in a run experience and flooded our social media channels. Of course, there are other examples where we've been running this consistent play and have shown her proudly, like our SlipSpeed launch and ongoing business there, our unstoppable pants and the surrounding collections that make unstoppable a force for UA.
And our women's Meridian products where we are building trust with her; we're at our best when we're on offense, we must harness and homogenize this approach more effectively across all consumer connections. Strong product teams also require strategic and operational collaboration with marketing to bring it all together. As mentioned on our last call, we've consolidated our global and North American marketing teams to bring a cleaner, more creative, integrated approach for faster decision-making and improve oversight into our spending and the returns we get for our investments there. Concerning our search for a new Chief Marketing Officer, I pressed pause while assuming the CEO role and we'll be reengaging that search immediately as we have a strong candidate pool and expect to have this chair filled soon. Over the past four-plus years, the company has become overly siloed and bureaucratic with competing internal agendas.
We now have just one agenda as I'm describing it to you today. Communicating that to internal and external stakeholders is my immediate priority to build complete alignment. Given these changes in iterative evolutions, we are working quickly to disband these silos and drive a more productive, collaborative culture. This brings us to the second priority within our refined Protect This House strategy, running smarter plays, where we will simplify our operating model, modernize our supply chain, and planning process and optimize our cost base to drive greater efficiencies. To begin with, on a broad basis we are simply doing too much stuff. There are too many products, too many initiatives, too much of too much. To reconstitute this brand, we must be highly focused and prioritize what needs to get done so that our teams know exactly what to do with a clear definition of success for them. As such, we are going to streamline across the organization.
We will reduce the number of agencies, consultants, and outside experts across the brand, which has reached unacceptable levels, especially in functions like marketing. We are building the talent, and they will now be empowered to run with their expertise and ability to drive our vision. We are also working to reduce the number of reports generated, unnecessary meetings, and even the number of fabrics for our designers to choose from. In the overall bureaucracy that occurs when the business scales from being small to midsize to large, in short, we will be much more intentional everywhere. This includes activities that may have had a reason to exist at one time or another but no longer serve the brand. We're now prioritizing to ensure that anything we do or have our teams do is only the activities that directly contribute in one way or another to our simplest job description: selling more shirts and shoes.
We've talked about being consumer-focused for years but never entirely organized our business as such. To enable consistency, we're employing a category portfolio structure designed to unlock the team's full potential, particularly how the work aligns with our talent, speed of delivery, and the execution required to put us on a growth path. Under this structure, our product, marketing, and sales organizations will work as a collective to develop singular go-to-market strategies that allow each category to obsess over the needs of our athletes throughout their journey under the broader UA innovation brand umbrella. We'll be driven by technology and design, enabling us to lead our categories with clear intent and a sharper point of view. This structure will also provide greater visibility in the category and product performance, which is critical to developing greater agility and adaptation.
On the product side, there was a critical piece of the puzzle that has been missing to power up this strategy. A few weeks back, we announced that Yuron White, a 25-year sports industry veteran, had joined UA as our Senior Vice President of Sportswear, Running, Basketball, Curry, and Collaborations. Complementing our legacy world-class experts already here, Yuron brings decades of game-changing product strategies, operational excellence, and talent development, so we're excited to have him joining Yassine's team to lead those critical categories for the brand. As an important companion to our changes in product and marketing, we'll also improve our supply chain, end-to-end planning capabilities, both of which offer significant opportunities to drive operating efficiencies within our cost of goods sold line. These initiatives, along with proactive moves to reduce discounting and promotions and a reduction in SKUs, gives us great confidence in our ability to improve ASPs and gross margin in the years ahead.
Being a better, more responsive organization is a big part of our strategy. The natural question is can we improve our cost structure while continuing to make the investments necessary to reconstitute our brand? Last year, we told you that we expected SG&A to be flat to up slightly. And with today's trend, we came in better even though our revenue was lower than our original expectation. To get there, we pushed hard on headcount and marketing, reduced travel and meeting costs, and tightened our overall SG&A. This prudence will certainly continue as we move forward. In fiscal 2025, we will optimize our SG&A cost base to ensure efficient and effective spending that supports the long-term health of the Under Armour brand. Of course, it's more than just cost cutting. This year, we will be even more intentional, identifying ways to streamline and realign the entire organization globally to set us up for an even more productive P&L once revenue inflects more positively.
Now we move to our third priority, elevating consumer experiences, which is critical to becoming more premium in building better connections with athletes. In this case, we must drive excellence in our retail, e-commerce, and wholesale businesses, aligning with our Protect This House strategy. We must ensure that our efforts to deliver better products and storytelling, enabled by a simplified operating model will manifest through deliberate merchandising strategies and thoughtful distribution choices, particularly here in North America. And this brings me to probably our most important question to answer: so what is happening in North America? The anticipated North American decline in fiscal 2025 is driven by three factors. The first is sector-specific. We're expecting lower wholesale revenue due to retailer caution amid softer consumer demand in an intensely competitive environment. The second is specific to Under Armour, as our softened brand and inconsistent execution were worsened by the impacts of the challenging retail environment over the past few years.
The third is our proactive action to reset our business in our largest market by significantly reducing the discounting occurring with the brand, starting with our own DTC business. This reset begins through new leadership here in the Americas. Kara Trent, who is just a couple of months into the role, is a nine-year Under Armour veteran, who most recently led our EMEA region, where she built an accretive brand and business strength over the last few years. She's a leader with a point of view and knows what winning looks like. To arrest the slide in North America, Kara is bringing a strategy to simplify the business by focusing on three key areas: digital, team sports, and our premium wholesale partners. Our e-commerce business has been overly dependent on promotions and is yet to be a flagship representation of a premium athletic brand. That said, our fiscal 2025 outlook contemplates, among other actions, more than 50% fewer site-wide promotional days than last year and a reduction in the depth of discounts on the days that we do choose to promote.
As consumers adjust to our new value proposition, these actions will weigh on our top line. The digital goal is to transform our e-commerce business into a significantly more premium platform over the next 18 months. This includes improving our online merchandising, creating a more engaging brand-building environment that encourages our consumers through compelling products with a clear story of why it will make them better. This means more DTC exclusive products and utilizing our new 6 or 12-month speed-to-market process to deliver limited volume products that drive brand heat and help create more brand demand moments. Further, we intend to reduce the number of made-for-outlet products on our website to drive a more premium assortment as well overall. So these actions will benefit us in creating a more elevated product offering and shopping experience for athletes over the long term. It also means harnessing the growing power of our U.S. loyalty program, UA Rewards, where we continue to see strong enrollment trends.
With nearly 4 million members, we've engaged members with exclusive programs like a trip to the NBA All-Star game, an exclusive members-only product, including collaborations with Logic and Justin Jefferson, which sold out in just hours. Our members also continue to show a higher premium purchase frequency and revenue per member, so we're encouraged about what this can mean over time. As a companion piece of this, as we improve our operating model and supply chain, we'll increase the awareness and velocity when we release new products, ensuring that newness is consistently associated with the brand, underscoring this concept of becoming a brand of launches, products that you never expected but could only be built by UA, telling a better story with fewer, more impactful products. Shifting to our own doors: though a very small portion of North America's revenue today, our brand houses must become a premium showcase for the Under Armour brand.
There is a significant opportunity to improve these stores, and we're working to create a more homogenous look and feel, curated with less product and more storytelling. We're piloting a new store concept now that we expect to test and learn from throughout fiscal 2025. Our Factory House business must elevate the consumer experience by reducing unnecessary complexity. For example, in our 183 outlet doors in North America, we're over assorted across categories and have too many different floor sets. This compromises the clarity of experience for consumers when they walk through the door and from an operational efficiency perspective, it's unacceptable, and we're correcting it with the right leadership now in place. We will also enact greater discipline and balance between our promotional activities and inventory management needs in our outlet stores. Discounting can drive revenue in the short term, but it's not good for gross margin, balancing market price algorithms, and clearly can negatively impact brand perception.
In tandem with optimizing our operations and logistics, we believe these actions should lead to higher store profitability, which will have a meaningful impact on our nearly $1 billion Factory House business. Turning to North America wholesale. In my first month on the job, while I still have a few to meet with, I've had top-to-tops with several of our largest U.S. accounts, including DICK’S Sporting Goods, Academy, Shields, and more. I’ll be meeting with key franchise, retail, and manufacturing partners when I travel to Europe and China before month’s end. These interactions with our U.S. partners have been productive as to where we've been and where we are, and encouraging as to where we expect to be once our product and marketing engines are re-optimized and firing on all cylinders. Given product lead times, the critical mass of this renewed product vision will not be coming until fall/winter 2025 with a build into subsequent seasons from there.
So it will take some time for our North American wholesale business to inflect positively. We will be making meaningful progress until then. In the meantime, we're focusing on rebuilding high-quality relationships with our key retail partners. We are confident we'll represent Under Armour in a brand-right manner, especially in sporting goods and mall accounts. But this will only occur for us as long as we stay committed to being authentic in the team sports arena, which is critical for our success. We'll continue this focus through team outfitting on the field, court, and pitch. This is our differentiator and reason for having a relationship with our targeted 16 to 24-year-old varsity athlete. Elevating our product offering from mostly good and distorting towards better and best level products are also critical enablers combined with inspirational storytelling and more joint marketing with our wholesale partners.
We have the opportunity to do much more with key accounts but to do so we need to drive our aligned product and marketing engines to differentiate our business and convince athletes and our customers to covet Under Armour. Simply put, we haven't been as consistent in giving athletes or retail customers a reason to buy our brand as robustly as possible. As we execute our Protect This House strategy over the next 18 months, I'm confident this will set us on a path towards returning to growth in our critical North American market. We have the right formula for success and are driving forward with clarity and continuity of purpose. With our priority of reconstituting the brand in North America, it's essential to explain the role that the international business plays in our go-forward strategy. The attention we are placing on the U.S. business is underscored by our 28 years of learning and understanding of brand management.
To be strong abroad, we must be our strongest at home. EMEA and APAC remain vital markets for Under Armour and our brand is better positioned in these regions than in the U.S. today due to a history of channel discipline across our DTC and wholesale businesses. With consistently optimized brand activations, our expectation for a low single-digit revenue decline in our international business is partly due to more conservative consumer trends, and ensuring that we don't erode brand equity by chasing lower-quality revenue. In EMEA, there are signs of retail caution, particularly in the UK, which is our largest market there, including softer wholesale outlooks and increasingly cautious consumer sentiment and macroeconomic uncertainty. Sensing that trend and maintaining discipline, we expect to grow faster in our DTC channels in the region and we'll invest in e-commerce processes and systems to support this growth.
In wholesale, we'll continue to focus our business on the right partners, working to manage the environment appropriately. There is significant long-term growth potential in APAC. Still, in the near term, the environment remains materially promotional in China, Southeast Asia, and Japan. Our focus is to grow carefully and productively while investing in key markets, balancing short-term performance with long-term brand affinity. So we're not taking our eye off the ball in our international markets. We will focus on maintaining high-quality sales across all channels and protecting our premium brand positioning. Significantly, once we start to see a positive inflection in our largest and most profitable region of North America, more resources will be available to invest outside our home market to drive sustainable growth and profitability over the long term. And with that, I'll hand it over to Dave to review our fourth quarter and fiscal 2024 results, provide more color on our fiscal 2025 outlook, and then I'm going to come back to close out our prepared remarks.
Thanks, Kevin. Starting with our fourth quarter fiscal 2024 results, which were in line with our outlook, revenue was down 5% to $1.3 billion with a 10% decline in North America due to softer wholesale demand and lower sales to the off-price channel. Our DTC business was also down during the quarter, with positive store growth offset by softness in our e-commerce business. EMEA revenue was up 10% or 7% on a currency-neutral basis driven by strength in our wholesale and DTC businesses. APAC revenue was up 1% in the quarter or 5% on a currency-neutral basis driven by positive DTC sales, while wholesale results remained flat. And in Latin America, revenue was up 20% or 12% on a currency-neutral basis. From a channel perspective, fourth quarter wholesale revenue was down 7% driven by softer demand in our full-price and distributor businesses and lower sales to the off-price channel. Our direct-to-consumer business was flat with 7% growth in our stores, offset by a 7% decline in our e-commerce business.
And licensing was up 11%, led by positive results in our North American business. By product type, apparel revenue was down 1% driven primarily by softness in our team sports, run, and outdoor businesses, offset by strength in train and golf. Footwear was down 11% due to a tough comparison and softer demand, primarily in North America. As a reminder, we had robust growth during the fourth quarter of fiscal 2023 as a significant volume of footwear products that were previously delayed due to COVID-related factory constraints meaningfully hit the market. And our accessories business was down 7%. Next is gross margin, which was up 170 basis points to 45% and aligned with our outlook. This increase was driven by 260 basis points of supply chain benefits, including lower product and freight costs, and 100 basis points of favorable channel mix primarily related to lower sales to the off-price channel.
These benefits were partially offset by 90 basis points of unfavorable pricing related to our proactive inventory management actions, including promotional activities in our DTC business and actions to reduce inventory through our factory houses. We also realized about 90 basis points of unfavorable foreign currency impacts. Moving down the P&L, our SG&A expenses in the fourth quarter were up 5%. Excluding a $58 million litigation reserve expense, adjusted SG&A expenses were down 5% due to ongoing cost management actions, including reduced salary and non-salary compensation, and driving efficiencies and discretionary spending across our marketing and consulting budgets. Bringing this together, we had an operating loss of $4 million, or excluding the litigation reserve expense, adjusted operating income of $54 million. Taking this to the bottom line, we realized a diluted earnings per share of $0.02 or adjusted diluted earnings per share of $0.11.
From a balance sheet perspective, inventory was down 19% to $958 million, approaching our pre-pandemic levels. We closed the year with a strong cash position of $859 million and no borrowings under our $1.1 billion revolving credit facility. For the full year, fiscal 2024 revenue declined 3% to $5.7 billion, primarily due to challenges in our North American business, partially offset by international growth. Despite the revenue contraction, our full-year gross margin increased 130 basis points to 46.1% driven primarily by supply chain benefits related to lower freight and product costs. This was partially offset by proactive inventory management actions, including increased promotional activities in our direct-to-consumer business. Full-year SG&A expenses were up 1% to $2.4 billion. Excluding an $80 million litigation reserve expense, adjusted SG&A expenses were down 2% to $2.3 billion. Operating income was $230 million, or $310 million on an adjusted basis if you exclude our litigation reserve.
This aligns with the outlook we provided one year ago. Full-year diluted earnings per share was $0.52, and our adjusted diluted earnings per share was $0.54, a beat versus our previous outlook of $0.50 to $0.52 mainly due to a better-than-anticipated tax rate and lower net interest expense. Shifting next to our fiscal 2025 outlook. Given the magnitude of a low double-digit revenue decline, including a large step back in our wholesale volume and proactive actions we are taking to reset our North American e-commerce business, we are encouraged by our expectation for gross margin improvement and what that will mean as we retune the base over the next 18 months. Additionally, we will continue to prioritize investments and manage costs aggressively. As part of this effort, our fiscal 2025 restructuring plan amplifies our focus on driving higher returns to deliver more consistent, long-term shareholder value.
Within this plan, we expect to incur total estimated pre-tax restructuring and other related transformational charges of approximately $70 million to $90 million, including up to $50 million in cash-related charges, consisting of approximately $15 million in employee severance and benefit costs and $35 million related to various transformational initiatives. Up to $40 million in noncash charges comprised of approximately $7 million in employee severance and benefit costs and $33 million in facility, software, and other asset-related charges and impairments. That said, we continue to dig in and may uncover additional opportunities. Concerning anticipated savings and what that means for run rates moving forward, because we've only recently begun the work executing against this plan, it is too early to share those expectations. We anticipate providing additional details on our Q1 call in August.
Next, I'd like to provide some color on the first quarter of fiscal 2025. From a revenue perspective, we expect our first quarter to be down at a low teen rate, marking the most pronounced decline of the year due to continued wholesale softness and DTC contraction, with growth in our retail stores more than offset by a decline in our e-commerce business reflecting our actions to reduce promotions. Next, we expect our first quarter gross margin to be down about 20 to 30 basis points due to a tough comp related to the timing of prior year supply chain benefits and negative foreign currency impacts. These challenges more than offset the benefits we expect to see with less discounting in our DTC business. After that, we expect our gross margin to expand for the rest of fiscal 2025 as our product costing initiatives and material reductions to our promotional activities should drive more meaningful improvement as we progress through the year.
From an SG&A perspective, we expect to realize close to half of our restructuring charges during the first quarter of fiscal 2025. Bringing this to the bottom line, we expect a first quarter operating loss of approximately $75 million to $80 million. Excluding planned restructuring and other related impacts, we expect an adjusted operating loss of $35 million to $40 million, translating to an adjusted diluted loss per share of $0.08 to $0.10. Given our expected revenue decline, inventory management is top of mind. Having planned for this impact, our initial expectation is that inventory will be down at a high single-digit rate in the first quarter followed by slight declines after that and then bringing fiscal 2025 to a close at essentially the same level as fiscal 2024. Regarding CAPEX, we anticipate spending approximately $200 million to $220 million. Finally, our Board of Directors approved a new three-year, $500 million share buyback program.
With confidence in our ability to generate cash, we believe this program provides an excellent opportunity to enhance shareholder value without compromising the financial flexibility necessary to reconstitute our brand as we target our return to top line growth. With that, I'll turn it back to Kevin for closing remarks before we open it up for questions.
Yes. Thank you, Dave. As we wrap up today's prepared remarks, and thank you for your patience in allowing us a chance to lay out our strategy and the actions we're already taking at UA, I'll touch on one final question: so what's different this time and what are reasons to believe in Under Armour? From my vantage point, we've got a lot going for us as an authentic on-field performance brand with more than $5 billion in revenue. Millions of athletes worldwide believe Under Armour products make them better. To be sure, there is much more work to be done, and while there may be 50 things to fix at Under Armour, there are also 500 things that are working really well. We are a sports house centered on athletic performance and a heritage authenticated in competition. Our refined Protect This House strategy is engineered to cut through the noise and complexity we've allowed to dilute the clear mission that once gave us our core focus and energy.
As such, we are urgently working to regain our front foot, put wins on the board that can continue to build over time, and optimize our business across the dimensions that matter. I cannot guarantee perfection as we undertake this journey, but I promise 100% team commitment to get Under Armour on a winning front foot. Leading from the top, along with our energized executive team, we will bring a clear unified vision and power the organization by providing stability and alignment to drive consistent execution with a clear articulation for all stakeholders of what success looks like. I'll say to investors today that when you buy Under Armour, you're buying a brand, a brand with a formidable heritage that is not easily replicated, and one that is more valuable than even the company is at this point. Our job, my job, is to close that gap with a strong balance sheet, global presence and awareness, ample resources, and a talented team to take the necessary actions to evolve our company.
We'll lead from the front foot. I will lead from the front foot knowing the name on the front of our UA jersey matters more than the name on the back. As a team, we'll take care of the Under Armour brand. We are fully committed to shifting our trajectory and for that to happen, we must change rhetoric into results. With that, we'll open it up for questions.
分析師問答
Our first question today comes from Simeon Siegel from BMO Capital Corp. Please go ahead with your questions.
Thanks and good morning. Kevin, so recognizing the tone shift, it makes me think of the last time you successfully focused. I think your words have been building a healthier rather than a lateral company or something to the effect. So how do you think about this go around of the brand elevation versus revenue contraction versus the last time you successfully reelevated the brand and the gross margins? Maybe could you speak to how you'd expect the timeline of that improvement to look? Obviously, the focus on brand health feels like the right move, but understandably, it's not an overnight fix, so would love to hear how you think that timeline and goal post to hurdles we should be watching for? And I guess, is your expectation in North America would return to growth in 2026 or later? And then just if I can, Dave, can you just remind us what percentage of the OPEX or fixed versus variable costs, the gross margin gains are going to be powerful, and they feel key but just also trying to think through what the right longer-term OPEX should be on the lower revenues? Thanks guys.
Thank you, Simeon. That really captures the essence. I'm unsure if we have a repeat strategy available, but we have certainly learned a lot about brand building. This will be approached differently, and we will utilize the reasoning, thoughtfulness, experience, and wisdom we've gathered over the years to apply it to this new chapter. Let me emphasize what's occurring in North America. Our lack of success here resonates deeply with me and our fantastic team. We are an authentically American brand, which is something we can address. It won't happen overnight, which is why we’ve been suggesting an 18-month outlook. We're experiencing the same cautious consumer sentiment that you are hearing about in the market. The changes in consumer behavior and excessive industry inventories have led us to be conservative, and we are responding to this situation. For Under Armour, it's time for us to strengthen our brand and ensure transparency in our messaging.
About two-thirds of the challenges we’re facing in North America are self-inflicted, and the good news is that we can control them. More importantly, we can address these issues and fix them. At the simplest level, when we show up at retail, we are primarily competing on price instead of showcasing our product quality, which doesn't reflect the potential of our brand. We’re not insisting on being premium; we recognize that there is a consumer base for us, and they're not upset with us. When we execute well and present the product, brand, and story effectively, as we did with SlipSpeed, it is remarkable. Our team has created that and many other products in development. However, we need to better contextualize them and bring them to market; improving our storytelling is essential. I often mention reconstituting the brand, which encompasses our products, supply chain, distribution, and segmentation.
We need to improve across the board, but it is most clearly represented in our inconsistent storytelling with our great products. Therefore, I am focusing on how I can best contribute by aligning the product and storytelling functions. While there is an entire organization supporting these efforts, we have been inconsistent and can improve quickly. We must define our amazing products that will reach the market, which is why we are efficiently prioritizing decisions. This focus is critical, especially in retail, whether in-store or online, as we concentrate on our best offerings. I also want to highlight our opening in the Chief Marketing Officer role and building our marketing capabilities. We are proud of the team we've built, especially with John Varvatos joining nearly a year ago and Yassine leading our CPO efforts along with Yuron White, who is strengthening that team. It will take some time to see the results from John, Yassine, and Yuron, supported by our talented team at Under Armour.
Our worldwide team is not disappointed by the new leadership; they feel inspired because everyone sees this as an opportunity for collective success. The marketing side relies on three critical components: product, storytelling, and regional expertise. Kara, whom I mentioned, has been exceptional in reestablishing relationships with our important wholesale partners and is effectively managing our direct-to-consumer strategy. We are laying the groundwork for success. While I cannot predict precisely what will happen beyond fiscal 2025, we know that our brand needs to define its voice moving forward. We have a clear vision of how to achieve that and what success looks like. Now it all comes down to execution. If we want to identify a measure of our success, gross margin will be a significant indicator for us throughout fiscal 2025.
And Simeon, this is Dave. Relative to variable and fixed, I think if you kind of remove the compensation cost, which isn't necessarily fixed, and just get back to what's kind of locked in, that isn't going to change with revenue, that's probably a little bit less than a third of our SG&A base, something that we've been working on over the years.
Great, thanks a lot guys. Best of luck.
Thank you.
Our next question comes from Jay Sole from UBS. Please go ahead with your questions.
Great, thank you so much. Kevin, I'm really interested in something you said at the top of the prepared remarks. You mentioned you have a renewed view on leadership. Can you just kind of take a step back and think about all of UA, tell us what's renewed? Tell us how you think about leadership today maybe versus how you thought about it before and how it is going to help drive Under Armour forward? I mean it's clear that you have a clear vision about what needs to be done and where Under Armour needs to go, connect for us how the leadership is going to play into that?
Yes. Well, thanks, Jay. I think from the top of the script to the end of my prepared remarks, number one, I love the 80 hockey reference, which is about the name of the jersey on the front versus the name on the back. It's building a team. We've done a really good job, I think, of understanding what that means to set a vision and power that team and let them run. And we've got capability. Being in sort of the roles that I've been around the company, I've always had the ability, I think, to plug in different areas but really been able to focus, I think, on building a team. Probably the thing I'm most proud of in the last 10 months is, as I described about our product team with the ability to attract John Varvatos to get John here, to be able to attract Yassine here, the ability to get Yuron here as well. Most importantly, it was the ability to complement and keep those existing team members, our 15-year innovation head, our 21-year design head now gets to work with John.
You're watching our team sports and working with Yuron and his experience. So that meld of old and new is something that we're just going to utilize, agility that we're going to play the best hand that we have. I think at the SCP and above level, we brought in nine executives in the last 8 or 10 months. I've been directly involved in recruiting virtually eight of the nine. Touching this team, it really feels like it's ours. But I think not having to press too much and hopefully that an energy of finding that wisdom where you can tip your glasses to the end of your nose and sort of answer or say much more just through the way that you respond and the energy that you have. I'm really looking forward to that and watching this leadership team really explode with the likes of the Yassines, what we've done with the supply chain and Shawn Curran coming here from 30-year experience at Gap. Now it's a matter of just combining them together and melding. As we're pulling everybody together, this team likes each other, and it's just a matter of us running.
Got it. And maybe, Kevin, if I could follow up on that in the spirit of leadership. Are there other potential changes in the management team in the future and how will you work to retain this fairly new team?
Well, I think we're all incentivized by seeing where we are right now is that we believe that we've got a brand that is not trading at the value that it's at, and so everyone is incredibly inspired by that. No, I think most importantly, I'm looking for the additions. We are in the market, and we're looking for a CMO and we'll have that position posted and leaving it open for the best candidates that come. Our phone has been ringing. There is this buzz; I keep describing that product organization that we built, and you walk into that product, and you can just feel something. I feel that obligation to make sure we're getting a team to complement and round them out. I know that we've got the regional leaders between Jason in APAC, Kevin Ross, and other former UA veterans in EMEA and Kara Trent here. We're pretty much stabilized, but there'll always be some limited amount of movement there. But the next one we're looking for is the addition of our new CMO.
Got it, thank you so much.
Thank you, Jay.
Our next question comes from Bob Drbul from Guggenheim Securities. Please go ahead with your questions.
Hi, good morning. I have a couple of questions, if that's alright. The first one is about the international outlook. How much of the macroeconomic situation is contributing to the low single-digit percent decline in international sales, or is there a specific weakness related to Under Armour? Do you believe your international outlook is conservative? I have another question as well.
Yes, thanks, Bob. I think that we're cautiously approaching this. We've got the benefit of 20 years having done and driven the UA brand and frankly, the lessons over the last five or six years here in North America. We're incredibly bullish on the opportunity that we have, especially mid and long term. I think we're being cautious in the short term because we don't want to get caught up in a situation where we feel like we're trying to flood big logo hoodies. Like we've run that play. We've seen how that works. We're bringing a bit of cautiousness and frankly, a bit of experience or wisdom to the way that we're approaching that. In EMEA specifically, it is soft. There are the same sort of inventory issues that we're seeing with some of our wholesalers here. We're just representing a bit of caution there, and we don't need to push the sales, meaning that we don't need to do anything other than what's in the absolute best interest of making sure that the 16 to 24-year-old just loves and covets the Under Armour brand.
What we've done in Europe, it's probably its own little sound bite. We brought Kara here from Europe from the success that she had from going back to 2019, a $600 million-ish brand that ended in this past year, crossing over $1 billion. The one thing that's compelling is that we grew contribution margin from 8% to 16%, so doubling that contribution. We want to make sure we can invest there as well. We have the right leader to take us to the next level. What we're seeing are the signs of success. Our largest market there is the UK. We're the number one training brand, for instance, at JD Sports. We're within an arm's length at SDI, if we're not number one, depending on the week. We've got a great base to build from. We have a significant opportunity there and we're just going to build it smarter and build it correctly.
Great. And just if I can ask a second question. Can you talk about the progress, your view on the progress that you've made in e-commerce and the e-commerce channel and how long will it take you to get your website to where you want it to be?
Yes, I believe this is an ongoing process that will never truly be complete. However, we have an excellent team, and Jim's arrival has added substantial expertise that aligns with our loyalty program, which has been very effective and beneficial for us. We've made significant strides in our online capabilities. I feel we haven't yet maximized our online potential, which is why we're focusing on reducing promotions to present a clearer story on our website.
Great, thank you very much. Good luck.
Thank you.
Our next question comes from Brian Nagel from Oppenheimer. Please go ahead with your questions.
Hi, good morning. I have a couple of questions, Kevin, and I'll combine them for simplicity. First, regarding the product innovation you mentioned, when can we expect to see these new products? Also, about the team you've put together, there was already ongoing product innovation prior to your leadership. Are you continuing with that, or is there a more comprehensive revamp of product innovation at Under Armour?
Let’s clarify that we have not been idle. We appreciate that question. We have been progressing steadily. We're not just waiting for Fall 2025; we still plan to sell over $5 billion in products this year. There are athletes currently using our products, and we are excited about our strong base in team sports. Our focus is more refined, which involves reducing the number of SKUs and clarifying our outlook. The Unstoppable initiative, particularly our jogger pants line offered in several styles, is performing exceptionally well. We are committed to returning to the core principles that define Under Armour, including our base layer compression, heat gear, and cold gear. We have tested these in DSG's houses of sport with great success, and we plan to expand in that area. We are re-establishing our priorities, with men's apparel taking precedence as it represents the most accessible opportunity for us.
This does not mean we will overlook women's apparel or footwear; we are actively bringing in experts from the footwear industry. Our primary goal is to validate our brand, which is why we focus on team sports. Our revenue aligns with the five key categories mentioned earlier, but we recognize areas for improvement. We can't simply expect sportswear to be the solution; we need to approach this effectively, ensuring that every product we introduce impresses consumers. We are focused on three main functions for our product teams: edit and innovate to speed up our processes, ensuring every product starts with the athlete's needs, and enhancing our storytelling. While we have successful collections like Advantage and Meridian, we believe there is significant potential in our Curry footwear line. We will continue to drive innovation as we did with the new StealthForm Uncrushable Hat. Our strategy is to become renowned for fewer exceptional products, as successful companies often gain recognition by perfecting a single offering repeatedly. We need to concentrate on this through our product development, ensuring each product has a compelling narrative to share. Aligning these efforts will be crucial moving forward.
That's very helpful. I appreciate that. And then as a follow-up, and I guess bigger picture as well, you're talking about and others have discussed the more promotional environment within the space broadly. So I guess the questions I have there; I mean, one, do you view that as more shorter term in nature? And then secondly, this is a bigger picture part. I mean for those of us who have followed Under Armour for a while, we remember very clearly when the brand was very successful. As you look at the competitive landscape now, you're putting aside some of these promotions, do you still see that clear lane for the Under Armour brand when Under Armour was performing well, or has competition changed that lane?
Thank you. I can’t predict the future of the market, but we are focusing on the present. We are providing information and managing our efforts with constraints in mind. We have a long way to go, but we’ll concentrate on the immediate tasks at hand. Regarding Under Armour, our position in team sports as a podium brand is quite distinctive. While other companies appeal to different segments, Under Armour represents the underdog, the athlete who might not be the first choice. This message resonates with many people worldwide, and I believe it’s a unique advantage for us. I don’t take this position for granted, so we need to act on it quickly. I’m enthusiastic about our future and the unique role we play in the market. Our goal now is to ensure we deliver both the product and the accompanying story effectively at retail.
Appreciate all the color. Good luck here. Thank you.
Our next question comes from Sam Poser from Williams Trading. Please go ahead with your questions.
Thank you for taking my question. Kevin, I have a couple of things to discuss. You mentioned Europe in relation to the United States. In the U.S., as you work to elevate the brand, does this mean that you will reduce some of the more moderate distribution to enhance the brand over time and achieve better visibility? I also have a follow-up.
Yes, I am not satisfied with our current distribution. We will always be evaluating and refining our retail partners. Some of the responsibility lies with us as well. When we visit premium sporting goods stores in the U.S., it’s often difficult to distinguish our products, as the only indicator of their quality is the pricing in the upper left-hand corner. It's challenging to convey the difference between a $20 graphic T-shirt and a $45 vantage T-shirt with Rush technology, and that message is not clearly presented. Overall, I believe we are making progress. We may reduce the number of retail locations we work with to ensure we align with the right partners. This is something we will continually assess. As I’m early in my role, my main focus is on ensuring our products effectively communicate their value and story.
Thank you. What prompted your decision to return to this role? Additionally, over the past few years, what insights have you gained that influenced your return? You mentioned that everyone should concentrate on selling shirts and shoes, but I have experienced challenges with prioritizing brand versus product. Is the focus on selling shirts and shoes to the right audience at the right time and at the right price, rather than just selling them in general?
Yes. First of all, taking a step back allowed me to reflect. After 24 years of working hard with the company since it started in 1996, I had the chance to watch my son and daughter play high school sports and attend graduations. I took a moment to breathe, but I have still been close to the business, just from a different perspective. Coming from being the Chairman to the active CEO gives a very different outlook on day-to-day decisions. Honestly, I've been pinching myself for the past six weeks. I've done various things, but I've realized that what I truly enjoy is selling shirts and shoes. And let me be clear: this isn't just about selling any shirts and shoes. It's about selling the best. In terms of product quality, Under Armour offers a lot of good items, some better items, but not nearly enough that are the best. Our focus will be on enhancing that. We want to maintain and solidify our good business level while putting more emphasis on our better and best products. I can confidently say that we now have the product team in place, with both legacy members and new additions, led by Yassine. We owe it to ourselves to create a compelling narrative. We have talented people in our marketing teams, but we need to integrate all those elements and ensure that our product and story work together effectively, focusing on better and best products as we aim for growth.
Thank you.
Our next question comes from Laurent Vasilescu from BNB Paribas. Please go ahead with your questions.
Hello, good morning. Thank you very much for taking my questions. I wanted to ask about the guide for international being down low single digits. Is that on a reported basis or a constant currency basis? And then, Kevin, I think you mentioned that the environment in China is very promotional. Can you provide a little bit more color on what you're seeing in that marketplace overall and how you're thinking about that business, that geography for fiscal year 2025?
Hey Laurent, this is Dave. I'll jump in on this one. I don't want Kevin to lose his voice. I think that a couple of different things. When we think about the high-level lead-in, I think Kevin gave a lot of color around that relative to how we're kind of smartly approaching our international and our growth and being prudent about that. I think within APAC, and this is actually consistent with EMEA as well, the DTC growth, we do see it being offset by some of the wholesale and distributor slowdown and caution that we see. So where we can directly control and drive the brand within DTC, we see that growing well. But it is some challenges in the markets with the wholesale and distributors. Within APAC more specifically, I'd say that it's a little bit around the retail and e-Comm traffic, but we're driving against that very well. We've also got a little bit of pressures with a partner in South Korea that we're working through.
There are some financial pressures there. But we are planning to increase our APAC store fleet by more than 80 doors this year, and that's more back half weighted. We're excited about the upcoming Curry tour in Asia as well, which is really going to help from a brand voice and energy perspective. Within EMEA, Kevin alluded to this, but we have seen some higher inventory levels within some of our retail partners as we finished out fiscal 2024. That does impact the fiscal 2025 orders a little bit. We planned for that appropriately. We do believe that's more of a temporary situation. As those inventory levels clean up, you would expect better order flow coming through because the brand is very strong in EMEA. We have great relationships with our partners there. A little bit of caution maybe, a little bit of prudence, making sure that we're fueling the brand, making sure we're not chasing any revenue that's not the most premium revenue that we want to get after and just playing a smart game going forward.
That’s very helpful.
In the spirit of supporting the team, Dave did a great job on that answer. I have nothing to add.
Okay, thank you. And then, Dave, maybe in order to spare Kevin's voice, you mentioned the adjusted SG&A was down 5% in Q4. Maybe for the audience, can you just parse out where did marketing go as a percentage of sales for Q4? As we think about the SG&A guide for the year of down 2 to 4%. To your point, Kevin, you mentioned how you were able to manage that for fiscal year 2024. Where does marketing as a percentage of sales go for fiscal year 2025?
Yes. When we think about marketing throughout all of fiscal 2024, we ran pretty close to kind of the 10% of revenue mark. So little fluctuations up and down. Q4 is probably high 9%, really close to 10%, finishing out the year at about 10%. That play for fiscal 2025 isn't significantly different. We've rebalanced some of that and really making sure that we're prioritizing the marketing investments. Jim has done an excellent job working with the teams on that. But you're not going to see a noticeable difference in that percentage of revenue as we go through fiscal 2025.
Very helpful. Thank you very much.
You are welcome, thank you.
And ladies and gentlemen, with that, we'll be concluding today's question-and-answer session as well as today's conference call and presentation. We thank everyone for joining this morning. You may disconnect. Have a great day.