管理層發言
Good day, and welcome to the Fourth Quarter 2025 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Lance Allega, Senior Vice President, Finance and Capital Markets. Please go ahead.
Good morning, and welcome to Under Armour's fourth quarter fiscal 2025 earnings conference call. Today's call is being recorded and will be available for replay. Joining us on this morning's call are Under Armour’s President and CEO, Kevin Plank; and Chief Financial Officer, Dave Bergman. Before we begin, I'd like to remind everyone that our remarks today will include forward-looking statements that reflect Under Armour management's current views as of May 13th, 2025. These statements may include projections about our future performance and are not guarantees of future results. Actual results may differ materially due to several risks and uncertainties, which are described in this morning's press release and in our filings with the SEC, including our most recent annual report on Form 10-K and quarterly reports on Form 10-Q. Today's discussion may also reference non-GAAP financial measures, which we believe provide useful insight into our underlying business trend. When applicable, reconciliations of these non-GAAP measures to their most comparable GAAP counterparts can be found in this morning's press release and on our Investor Relations website. With that, I'll turn the call over to Kevin.
Thank you, Lance, and everyone joining us this morning. I felt confident as we closed fiscal '25 and began preparing for this call. Over the past year, we've built greater agility into the organization while making purposeful and strategic choices, elevating the brand through higher quality revenue decisions, unlocking meaningful efficiencies, and advancing toward a stronger, healthier Under Armour, all while navigating top line pressures. We had a clear and disciplined strategy tailored to the environment we faced in fiscal year '25 and executed it with focus and determination. To date, we are energized and optimistic about our tangible progress, recognizing, of course, that there is still much work to be done to change our current trajectory and drive brand affection. As we look externally, the business environment is currently evolving, but so are we. Yes, the landscape is more dynamic, and visibility beyond the near-term is unclear.
That's precisely why our work over the last 13 months to build the muscle strength of agility and focus matters. We know what it takes to win, and we're ready. Dave will cover our initial thoughts on the current trade policy environment a bit, but the main takeaway is that we're confident in our ability to manage through whatever lies ahead and stay on offense. While we're never satisfied with declining revenue, our fourth quarter results allowed us to exceed our fiscal '25 outlook, demonstrating some of the foundational traction we're gaining as we reposition the Under Armour brand. Furthermore, we either exceeded or met the initial outlook we provided last May for every line item, with gross margin being our most important metric benefiting from our strategies of reducing promotions in our own direct-to-consumer businesses. As we work to regain pricing power, we see a significant long-term opportunity to expand gross margin by reshaping the composition of our business through a strategic refinement in our go-to-market process.
By being more comprehensive and ensuring every detail is considered from a product that only UA could make, this is our reason to exist. Innovation delivered with current or forward style. Second, sales force. Armed with the technical knowledge of how to explain the UA difference to wholesale partners. Third, the right point of purchase expression at retail or online that tells the story. And finally, social media collaborator and influencer support that provides the permission for our target consumers to engage with and buy UA. We have a great base to build from, and we'll continue to refine this competency in the coming seasons. Reflecting on my first year back as CEO, I'm proud of the progress we've made, sharpening our strategy, streamlining operations, and establishing a stronger financial foundation. Most importantly, we've confirmed our identity as a global sports house brand with undeniable authenticity on any court, pitch, or field across the world.
We represent the underdog, those who weren't given all of life's gifts, but had to instead work harder to achieve excellence, applying the rule of 10,000 hours to master their craft. We like to say that we don't innovate just to run up the score; we innovate to give our athletes a fighting chance. This mindset means continually striving for improvement. And in that spirit, we're becoming leaner and more intentional, shrinking the battlefield wherever possible, making challenges manageable and creating the ability for small wins to eventually add up to large wins. We're focusing on high return categories, markets, and initiatives. By simplifying the portfolio, streamlining operations, and exiting lower value activities, we're sharpening execution, boosting efficiency, and directing capital to its highest impact uses. Fewer things done better will feel stronger, creating more consistent value.
We're working to turn complexity into clarity and clarity into action. Quick strike capabilities drive brand heat through trend-led drops, while our 28 million member global loyalty program deepens engagement and drives repeat purchases. At the same time, streamlining materials, reducing SKUs, and optimizing our supply chain will help improve speed, lower costs, and unlock future growth. With sharper planning and greater liquidity, we're working to run a more agile demand-led model that keeps us aligned with athletes and well positioned to regain market share and expand margins over the long term. At our core, Under Armour was built on the belief that athletes deserve better. Today, we're fulfilling that promise with greater discipline and precision. As we evolve, our move toward a category management operating model represents a structural shift and a game changer in how we serve athletes by aligning product, marketing, and regional teams around key categories like training, running, team sports, basketball, sportswear, golf, and licensing.
We aim to execute faster and create greater impact. This athlete-first model gives category teams clear ownership with a single leader responsible for making decisions and acting quickly. At the same time, it centralizes key functions while empowering regional strategies to drive a leaner, more efficient go-to-market engine, strengthening the brand and improving returns. This disciplined approach is how we believe we will unlock value and succeed in the marketplace. Returning to my current role, and due to the 18-month lead times in our industry, the priority was product. Without great product, there is nothing else. Our spring/summer '25 collections hit retail floors with renewed confidence in the fourth quarter. Even in a challenging sales environment, key apparel wins emerged. HeatGear base layer outperformed expectations, our Unstoppable collection delivered strong results, and sportswear is gaining meaningful traction.
At the center, we're accelerating innovation to energize athletes and elevate the brand. This quarter, we introduced the boldest SlipSpeed yet, ECHO, launched with Stephen Curry at the 2025 NBA All-Star Weekend through a collaboration with luxury car designer, MANSORY. Looking ahead, a premium apparel collection will debut this fall, uniting performance, sport, and style. The Curry brand continues to expand its impact with new colorways and exclusive athlete designs, keeping the brand relevant. On the collaboration front, we've had smaller drops like our UA United Arrows collaboration in Japan and our partnership with UNLESS, debuting at the Milan Design Week. Our regenerative plant-based sportswear collection of hoodies, T-shirts, and shorts are crafted from natural fibers designed to decompose without leaving toxic residue or microplastics. As we look toward fall/winter '25, our product direction continues to sharpen, and our design language is becoming more cohesive.
Our priorities are clear: win in men's apparel, unlock the full potential of footwear, and strengthen our connection with women, starting with trusted essentials like bras and bottoms and then building from there to grow her affinity for Under Armour. We're excited about the upcoming UA Halo collection, codenamed Aura, at our recent investor meeting, which represents a premium expansion into next-generation performance sportswear. UA Halo will debut with distinct footwear offerings designed to meet specific athlete needs while incorporating the UA logo into the midsole structure, adding support and balance. Complementing the footwear is a range of elevated apparel signaling a new era for the brand, both in design and innovation. Simultaneously, we're redefining our core base layer category with NEOLAST, a material revolution that enhances stretch performance while being fully sustainable.
As we near the completion of our initial 25% SKU reduction, we're maintaining disciplined inventory management to create space for a stronger, more focused product architecture. Together, these steps will drive brand momentum, enhance profitability, and unlock new growth opportunities. Our ambition is to sell more of less at higher full prices. We're testing a game-changing product, the No Weigh backpack, designed to evenly distribute weight. This is paralleled with our previous year’s successful StealthForm Uncrushable Hat, showcasing that we can introduce innovation at competitive price points. I'm sharing this detail about an accessory because it serves as a broader metaphor for our future offerings in shirts and shoes, focusing on comprehensive go-to-market strategies that encourage premium purchases. If you have the chance, please visit our investor page for a visual of our new approach and how we're raising the bar.
This includes an innovative design that only UA could build, the training of our teams to sell the products effectively, brand-right point of sale execution, and social and influencer support to generate buzz. This only happens when the product delivers the magic, and we're confident in our pipeline. We have always had great innovation, but we believe the greatest opportunity lies in how we support the product with a compelling story. This is brand. Great companies buy commodities and sell brand. We've not done enough on the story front for some time, and that changes with our recent launch of the No Weigh, setting the stage for broader market distribution. Under the leadership of Brand President Eric Liedtke, we've made significant progress in reshaping our narrative, aligning our storytelling strategy with our product vision and establishing a cohesive brand voice. As our storytelling aligns with our product innovation, our aim is to enhance our brand relevance and differentiation, focusing particularly on young athletes.
Rather than increasing our marketing spend, we're making it work harder with a budget emphasizing elite athletes and assets; reallocating resources for greater brand engagement. Big moments drive brand affinity, exemplified by campaigns celebrating key athlete milestones. As we extend this momentum to the Velociti footwear line, we ensure brand energy and commercial opportunity at all price points. Our athlete strategy is equally deliberate, signing new talents and enhancing our partnership credibility. We’re boiling down our strategy to bold moves supported by powerful storytelling. Under Armour is moving to lead in a dynamic environment, making steady progress in that direction. Our North American transformation continues, redefining our e-commerce channel to inspire and elevate the brand. By reducing promotional efforts, we prioritized brand equity and profitability. This has resulted in significant improvements in sales mix and profitable channel growth.
As we move into year two of this transformation, we’ll cultivate a dynamic and premium digital platform, applying lessons learned from our success in EMEA. We also aim to strengthen our value in physical retail, focusing on productivity and enhancing consumer clarity through a curated premium experience. Our brand houses exemplify UA retail excellence, and we’re investing in their growth. Starting in fiscal '26, we’ll roll out a market-specific strategy to enhance merchandising. Wholesale is essential and evolving; we owe partners great products and compelling stories for successful full-price sell-through. Our category-led model aids this goal, and we're enhancing demand from existing and new consumers. In EMEA, our top-performing region, we maintain discipline to protect brand strength. In fiscal '26, we’ll focus on key growth markets while deepening brand advocacy. In APAC, we’re resetting the marketplace for sustainable premium growth, laying groundwork for healthier expansion.
Proven strategies from North America and EMEA will help drive full price demand. Our leadership team, united by purpose, is focused on driving sustained performance. This represents a shift and signals a cultural transformation at Under Armour. A higher standard of excellence is taking hold, and I’m committed to ensuring this translates into better results. The move to our new headquarters accelerated this shift, infusing energy and ideas. We welcomed three new Board members with expertise to support our strategic priorities and fuel brand growth. As we enter fiscal '26, maintaining momentum across product, story, service, and team is vital for our brand transformation. We proceed with clarity, conviction, and discipline, ready to navigate the global landscape with agility and resilience. Our ambition is more than a comeback; it's a reinvention. Under Armour's best chapters lie ahead, driven by sharper focus and deeper connections with athletes.
We’re operating with urgency and are just getting to work. With the right team and a clear strategic vision, we are determined to dictate the future. With that, I’ll turn it over to Dave to walk through our fourth quarter fiscal '25 results and provide insight into our outlook for the first quarter.
Thanks, Kevin. Moving straight into our fourth quarter fiscal '25 results, which exceeded expectations and allowed us to surpass our full-year fiscal '25 outlook. From a revenue perspective, the fourth quarter was down 11% to $1.2 billion. The results by region follow. North American revenue declined 11%, primarily due to a decrease in our DTC business, which was driven by lower e-commerce sales resulting from our ongoing efforts to limit promotional activities. This was accompanied by a decline in revenue from our owned and operated stores. Within wholesale, we experienced a decrease in full price sales, which was partially offset by an increase in the timing of sales to the third-party off-price channels. Revenue in EMEA decreased 2%, although it remained flat on a currency neutral basis. Furthermore, the decline in full price wholesale was partially offset by growth in our direct-to-consumer, distributor, and off-price businesses.
Aligned with our expectations, revenue in APAC was down 27% or 26% when adjusted for currency fluctuations. This decrease was primarily due to the highly competitive and promotional environment as well as our efforts to foster a healthier business, including adopting some of the same strategies we've employed in North America for our e-commerce operations. Within Latin America, revenue declined 10%, primarily due to unfavorable foreign exchange impacts. Without FX, currency-neutral revenue rose by 3% in the quarter, driven by our distributor business. From a channel perspective, wholesale revenue decreased 10%, driven by lower full price sales, partially offset by growth in the off-price channel, and the timing of those sales to third-party partners. Direct-to-consumer revenue was down 15%, mainly due to a 27% decrease in e-commerce sales stemming from ongoing efforts to establish a more premium online presence through fewer promotions and discounts.
Sales at our owned and operated stores declined by 6% during the quarter. Licensing was down 15%, primarily due to the decision to bring our socks business in-house. This will be the final quarter of comparing this business change. Finally, by product type, apparel revenue was down 11% with softness across most categories in the quarter, partially offset by strength in outdoor. Footwear declined by 17%, reflecting in part our ongoing proactive portfolio management efforts as we work to optimize segmentation and assortment. Our accessories business was up 2% in the quarter, with strength in team sports and run. The category also benefited from our decision to bring socks in-house. Our fourth quarter gross margin increased 170 basis points year-over-year to 46.7%. This increase was driven by 150 basis points of supply chain benefits due mainly to lower product and freight costs, 80 basis points of pricing benefits, primarily from lower discounting and promotions in our DTC business, as well as some impact from more favorable royalty terms.
And roughly 20 basis points were gained from favorable foreign currency impacts and product mix. These benefits were partially offset by roughly 90 basis points of unfavorable channel and regional mix. Moving to SG&A, which increased 1% to $607 million in the fourth quarter. Excluding roughly $16 million in transformation expenses related to our fiscal 2025 restructuring plan and around $5 million in litigation settlement expenses, our adjusted SG&A expense was $586 million, up 7% versus last year's adjusted number. This was driven primarily by higher marketing expenses and incentive compensation, partially offset by savings from ongoing cost management efforts, including lower consulting expenses. Next, during the fourth quarter, we recognized $16 million in restructuring charges, and combined with the $16 million in transformation expenses recorded in SG&A, we had approximately $32 million in restructuring charges and related expenses for the quarter.
So far, under our fiscal 2025 restructuring plan, we have recognized $89 million in restructuring charges and related transformation expenses, of which $55 million is cash related and $34 million is non-cash. Our expectations for total charges and expenses under this plan remain within a range of $140 million to $160 million and we anticipate the remainder will incur by the end of fiscal 2026. Moving down the P&L, we recognized an operating loss of $72 million in the fourth quarter. Excluding the transformation expenses, litigation settlement expenses, and restructuring charges, our adjusted operating loss was $36 million. On the bottom line, our reported diluted loss per share was $0.16, while our adjusted diluted loss per share was $0.08. Shifting to our balance sheet, inventory was down 1% year-over-year to $946 million, which aligned with our expectations to finish in line with last year's level.
Our cash balance at the end of the quarter was $501 million, and we had no amounts outstanding on our $1.1 billion revolving credit facility. Additionally, we repurchased $25 million worth of our Class C stock during the fourth quarter, retiring 4.1 million shares. So far, under our three-year $500 million share repurchase program, we have repurchased $90 million of our Class C stock, retiring 12.8 million shares. Now, going briefly into our full-year results. Fiscal '25 revenue declined 9% to $5.2 billion, slightly better than our expected 10% decline. North American revenue was down 11% for the year, EMEA was flat, and APAC revenues declined 13%. Our full-year gross margin increased by 180 basis points to 47.9%, surpassing our outlook. This improvement was driven by reduced freight and product costs and the benefits of lower discounting in our DTC channel, especially in e-commerce. Full-year SG&A expenses rose 8% to $2.6 billion.
Excluding a $266 million litigation settlement expense, approximately $31 million in transformation expenses, and a $28 million impairment related to exiting our previous headquarters, adjusted SG&A expenses decreased by 2% to $2.3 billion. This decline was primarily attributed to cost management initiatives, including the benefits realized to date from our fiscal 2025 restructuring plan. Operating loss was $185 million, and excluding transformation expenses, restructuring, impairment charges, and litigation settlement expenses, adjusted operating income was $198 million, slightly ahead of our prior outlook of $185 million to $195 million. Full-year diluted loss per share was $0.47, and our adjusted diluted earnings per share was $0.31, which was above our previous outlook of $0.28 to $0.30. Moving into fiscal '26, building on Kevin's remarks, it's important to recognize the plan we established before the announcement of recent tariff changes.
As we enter the second year of our turnaround, we've made measured progress across our strategic, operational, and financial objectives. Before the recent changes in trade policy, this translated into an expectation of a modest top line contraction for fiscal '26 as we continue to prioritize higher quality revenue and brand strength while driving further gross margin expansion, and getting back to leveraging our SG&A cost structure. Altogether, driving operating income that was set to be ahead of fiscal '25 levels. However, since changes in trade policy are expected to have a significant impact, we are proactively evaluating a range of mitigation strategies. This includes exploring potential cost sharing initiatives with key partners, diversifying our sourcing footprint to minimize exposure to affected regions where feasible, and examining targeted price adjustments to protect margins in areas with unique pricing power.
Providing a clear view of our global sourcing profile, approximately 30% of our volume is sourced from Vietnam, 20% from Jordan, and 15% from Indonesia. The remaining third is strategically diversified across a number of other countries, each representing a low to mid-single-digit percentage. This deliberate diversification creates a well-balanced portfolio, reducing reliance on any single market and enhancing our ability to navigate geopolitical costs and supply chain complexities from a position of strength. We also remain focused on managing SG&A by enhancing organizational efficiency, tightening discretionary spending, reducing travel and third-party costs, and concentrating investments on initiatives directly supporting near-term revenue and margin expectations. Given the significant uncertainty that tariffs create concerning potential shifts in consumer demand and rising product costs, we believe limiting our outlook to the first quarter of fiscal '26 is prudent.
This measured approach demonstrates our commitment to maintaining flexibility and ensuring transparency as we navigate the evolving environment. As such, we expect our first quarter revenue to decline by 4% to 5%, with North America also experiencing the same rate of decline due to softness in our spring/summer ‘25 wholesale order book, which we've detailed in our last few calls. We anticipate high single-digit revenue growth in EMEA, supported by FX tailwinds, and the Easter shift along with a mid-teen percentage decline in APAC as we continue actions to lay the groundwork towards a healthier business. Regarding gross margin, we expect an expansion of 40 basis points to 60 basis points compared to the previous year. This includes anticipated benefits from a more favorable product mix, reduced product freight costs, and favorable foreign exchange rates. It is important to highlight, however, that changes in tariff policy are not expected to significantly impact our first quarter.
For SG&A, we remain focused on cost management in the context of our expected top line decline and the current operating environment. Excluding anticipated transformation expenses related to our fiscal 2025 restructuring plan, adjusted SG&A expenses are expected to leverage slightly compared to the prior year, driven mainly by ongoing savings from actions taken under our restructuring plan and other spending efficiencies. Bringing this together, we expect adjusted operating income to reach $20 million to $30 million and adjusted diluted earnings per share to be $0.01 to $0.03 in the first quarter of fiscal '26. In closing, while the environment remains dynamic, the sharper agility and stronger processes we've embedded give us confidence in our ability to manage near-term challenges while staying squarely focused on long-term value creation. Most importantly, we have the right team, energized, resilient, and relentlessly committed to delivering an authentic brand and business transformation.
We remain unwavering in our strategic priorities, firmly believing they position us to unlock our full potential while maintaining the flexibility to adapt. Simply put, we are ready and built for what's next.
分析師問答
The first question comes from Jay Sole with UBS. Please proceed.
Great. Thank you so much. I'd love to ask about the North American reset. Can you just give us a little bit more color and dive in a little bit more about how it's working and how it's shaping up in fiscal '26?
Thank you for the question, Jay. Leadership is key in this process, and we are fortunate to have Kara Trent, who has been instrumental for us in Europe and is well-prepared for her role here in North America over the past 14 months. Her leadership, along with the strong team built around her, is invaluable. We've been focusing on modeling the behavior we want to promote, learning from our past reliance on constant discounting. It's time for us to redefine excellence, akin to how a well-crafted backpack feels significantly lighter when worn. We need to effectively communicate this to our sales teams and ensure our in-store presentations are engaging. Additionally, we are shifting our social media strategy to connect better with the 16 to 24-year-old demographic. While we don’t have a set timeline, we are committed to improving our execution. If we can showcase the value of our products, particularly with innovations like the Halo trainers and updated base layers, we believe we can capitalize on significant opportunities.
Before April 2, we had clear visibility, though it was not perfect and growth was still uncertain. However, we feel we are starting to build momentum. We aim for this brand to resonate more deeply with consumers, and while we're navigating a reset aimed at May 2024, we are making steady progress. Working with our wholesale partners, we are gradually building their confidence. It's a step-by-step process, but we have a strong narrative and a compelling brand to compete effectively in the market.
Got it. Kevin, that's great. If I can ask one more. Maybe can you share just some more details about your upcoming major brand activation? When will we be able to see it?
Yeah. Look, we told you that it was going to be a large full-force campaign that we're going to have. But to be clear, it's embracing that underdog DNA that we've spoken about, I think several times, including our investor meeting back in December. Eric is digging into this marketing function, so just getting our arms around that. We've also brought in a new SVP of Brand and Americas Marketing in Tyler Rutstein who really has driving a lot of that connection that we want to the target consumer. So what you're not going to see is just a big campaign with Super Bowl ads. It is going to be smaller breakdowns of content that's relevant to the channel where we're marketing. The idea we have from a branding or marketing standpoint is that I think anyone would tell you, we make good product. What we need though is we need permission from this kid or more importantly, the person that kid is looking to across social media, the influencers, the NIL, the athletes, the others.
And so that's where I think we're doing a better job of just telling the story of the product and making sure they understand that what the brand DNA is all about. I can't emphasize enough a big part of this, and what's coming with this campaign is that we're leading with story, we're not leading with a price. The activation will mostly be in the back half of the year too, Jay, but as I said, you're going to feel this in more sort of micro doses than you will as one sort of big splash, and we think that's the most effective way for us to deal with our marketing dollars right now. I also think that you'll feel the benefits of this as we get probably a little more focus with our category management structure. And that's what's going to lead us is that each of those GMs, the five separate GMs that we have, driving across selecting the right influencers, making sure that we're in the culture, what NIL will do for us.
And then we're going to lean on some of these intrinsic assets we have. And I don't just mean our headliner banner athletes like the Stephen Currys or the Justin Jeffersons, but it's also getting into NIL athletes. It's leaning on our UA Next platform, which is we found just as part of that, and a kid who hasn't engaged with Under Armour or seen us without UA Next, the NPS score is something that we believe can be significantly improved on. And if a kid has seen us or interacted with us through that our 3,000 high school base that we have, plus how that rolls up to our All-America or UA Next events, the consideration goes up considerably into the high 50s and 60s. And so we're going to continue to build out these platforms that we've got long-term legacy, and you'll continue to see us just spend our money a lot more thoughtfully and appropriately. So, product marketing is going to be a part of this as well.
I think as we're showcasing with the backpack because I think that's the greatest example of what does this brand mean or stand for, it gives us the ability to do that, ensuring that we give them the A, what it is, B, what it does, and C, how it's going to make you better, and the whole time allowing you to feel something. That's what brands do and that's I think we're in the process of making happen.
Got it. Sounds great. Thank you so much.
Thank you, Jay.
And the next question comes from Simeon Siegel with BMO Capital Markets. Please go ahead.
Thanks. Hey guys, good morning. Kevin, how are you thinking about the path just normalizing e-com specifically, maybe with the planned reduction in promo activities? Is there a specific revenue level or just some other way we can think about the timing duration, maybe magnitude of the expected e-com revenue declines and stabilization? And then, Dave, I think you noted the costs related to the restructuring plan. Just how are you thinking about the expected savings from it? I guess, current uncertainty tariffs notwithstanding, looking a little bit longer-term, how you're thinking about the ability to take SG&A expenses out of the model with this new lower revenue base? Thank you.
Sure, Simeon. I’ll start with e-commerce. We have seen positive progress after a year of focusing on what we can control, especially in our direct-to-consumer business, which has shown significant improvement, as indicated by double-digit growth in full-price sales on our website while promotional and clearance sales are down. We want our website to be more than just a transactional platform where customers find products; we want them to engage and feel inspired by our brand. Many sites offer efficient ordering from various sources, but when customers visit our site, they should experience our brand story since that sets us apart. For too long, we've presented ourselves merely as clothes on hangers. From an e-commerce perspective, it's crucial that we're not just welcoming visitors with a broad assortment of items; we need to be intentional about their experience. When we get it right, as we showed with the backpack example, we aim to have multiple expressions of our products throughout the year.
This will also be evident when we introduce the new Halo product later this year. Loyalty programs are essential to us, with 18 million rewards members in the US and 10 million in APAC. Active members significantly contribute to our revenue, generating over 50% more and doubling repurchase rates. This highlights the importance of understanding our consumers and how to communicate with them effectively. Online, we want to showcase our products dynamically, moving beyond simple grid pages with static images to include more video content. We're also investing in upgrading the back-end infrastructure of our website. Social commerce will play a significant role in our strategy as well, with Tyler and his team driving efforts at the grassroots level. Ultimately, we are focused on establishing a stronger e-commerce foundation that supports sustainable growth, and we have compelling stories to share across our own channels.
Simeon, on the restructuring and SG&A side, as we drove through the restructuring plan in '25, we brought about $35 million of savings in fiscal '25 from that. When you think about the full-year run rate of those actions and then layering on the additional actions for fiscal '26, especially the closure of the Rialto DC out in California, that expected run rate savings on a full year as we get to the end of fiscal '26 is going to be closer to $75 million or so, which we're excited about and then essentially a little bit higher than that as you step into fiscal '27 and you have a full year of all the fiscal '25 and '26 activities. So, that's definitely helpful and a big step in the right direction for us. And as we stepped into planning for fiscal '26 pre-tariffs, we were looking for slight leverage in our cost structure, which is a great step in the right direction as well. And we're also seeing that as we plan out just Q1 that the outlook that we've given.
We do want to be mindful not to cut too deep when we think about any additional SG&A work that we want to drive, depending on what happens from a tariff and overall demand scenario, and especially in brand marketing where sustained investment is critical to the long-term breadth and health of the company. But we do manage each of our expenses pretty tightly now. We've made a lot of progress there, a lot more discipline around consulting, around CapEx spending, discretionary spending, T&E. Again, as Kevin mentioned, optimizing the marketing, spending smarter, not more. And we've been able to reduce the SG&A now for multiple years in a row. So we're definitely getting to a pretty good spot. And we're going to continue to manage it tightly as we drive through the year.
That's great. Thanks a lot, guys. Best of luck for the year ahead.
Thank you, Simeon.
And the next question comes from Sam Poser with Williams Trading. Please go ahead.
Thank you for taking my questions. Can you provide some insight into the current inventory levels in terms of units and dollars? Are there significantly fewer units in inventory compared to the dollar value? Additionally, how do you see this evolving over time, along with the units and dollars in revenue for the fourth quarter and within the guidance for growth?
So, from an inventory perspective, again, we feel pretty good about where we landed the year, pretty much right on what we expected. Obviously, we're managing this year pretty tightly as we get into fiscal '26 and a little bit of the uncertainties around demand with the current tariff environment. So we're being pretty tight with that, managing the POs. We do expect that wherever demand ultimately develops through the year that we'll be able to manage inventory within a pretty tight range to that. Obviously, the cost per unit is going to be going up, by how much we're not sure as obviously with each announcement, that seems to change a little bit. But we feel confident in our ability to manage it tightly. We don't have a large percentage of old or excess inventory. A lot of it is current, and we believe that we're going to be able to use our factory houses in a really positive way to move through a lot of that.
And then obviously still tapping the off-price channel a little bit, but staying within our kind of our operating principle where we've been keeping that to the 3% to 4% mix of revenue as we did in fiscal '25. And relative to the Q1 guide, again, we're not necessarily getting into too many details for full year, but on Q1, we feel pretty good about the outlook that we gave. There's not that much change in price versus unit in the Q1 guide; more of that will probably come as pricing changes come about later in the year.
Okay, I think I may have said it wrong. Your inventory is up 18% at the end of the quarter in dollars. What are the units up? And within the guidance you provided for the first quarter, with revenue down 4.5% to 5%, do you expect units to decline less since you're aiming for a more premium goal? I'm not trying to determine if your inventory is aligned or not. I'm really trying to understand if the average selling prices will steadily increase within the guidance and inventory levels, so if your inventory is down 18% and your units are down 25%, does that indicate that you are elevating your brand?
Yeah. I guess, Sam, the way that we're looking at it is a little bit more holistically because there's going to be puts and takes between the different regions. We did take some returns in Q4 of fiscal '25 to help make sure that we are coming into this year healthy. More of that was footwear driven, which has a little bit of a higher unit cost. So there's a lot of mix items going on. I don't know that digging into it relative to the unit progression from Q4 into Q1 is going to tell much more of a different story for us.
Hey, Sam, just to be clear, inventory is down one on the quarter. Down 1%. I thought you referenced plus 18%.
No, I'm sorry, I'm looking at the numbers for myself. I apologize for that. Yes, inventory is down. However, the key question is whether units are down more than dollars or less as a percentage. Do you expect that as your inventory reaches the right level and you elevate the brand, your dollar inventory will grow faster than your unit inventory, meaning that units could decrease as you become more focused?
I understand. What I'm trying to determine is how much more we're selling at a significantly higher full price. One of the key metrics I monitor daily is the average unit retail, assessing whether consumers are willing to pay more or less for Under Armour across apparel, footwear, and accessories equally. We pay close attention to that. Our goal is to drive margin and enhance brand perception. We're focused on offering better, more premium products and not just cutting costs to increase margins. Pricing power is crucial for any brand, and we're very attentive to that. This means we can't just sell products at lower prices in bulk. We intend to be very deliberate about the products we release into the market. Yes, it will require more investment, but we need to demonstrate that our strategy is valid. We'll approach this step by step, building on a solid foundation.
Thanks very much.
Thanks, Sam.
The next question comes from Laurent Vasilescu with BNP Paribas. Please go ahead.
Good morning. Thank you for taking my question. Kevin, Dave, I understand you’re not providing guidance for the full year, but could you share insights on your complete order book and any changes over the last few months due to tariff-related issues? Should we anticipate a slight decrease on a year-over-year basis? Thank you.
Yeah, I'll jump in on that one. Right now, we're definitely limiting to Q1 at this point. And a lot of that, if you think about it with the tariff rates, they're pretty much temporary at this point. They may change significantly. So we don't feel it's prudent to give an outlook that will also have to change and be adjusted kind of announcement to announcement. So we're trying to be prudent there. So we're really only looking at Q1 covering spring/summer '25. But I would say that the product feedback has been positive, and the influence of the new product organization, I think, is clearly visible. And as momentum grows, fall/winter '25 will build into spring/summer '26. And at this point, even with the tariff and uncertainty, we're not seeing any key partners with cancellations. I think our partners know that they're valued and we're really focusing on that, and we're giving them reasons to believe, and Kevin went through a lot of those points in his prepared remarks. And I think that there are clear improvements in the design and style that are being noted by our partners. So regaining shelf space takes time as you think about the back half of the year, but our focus and execution are improving and we're seeing those results.
Very helpful. Regarding the gross margin, it was another strong quarter. Dave mentioned that we saw 150 basis points of supply chain benefits mainly from lower product and freight costs, and an additional 80 basis points from reduced promotions. I assume that the 80 basis points will continue to be a positive factor moving forward. How many more quarters can we expect the 150 basis points of benefits from lower supply chain costs? Does that conclude in the first quarter, or will it extend beyond that? Lastly, you guided for EMEA to achieve high single-digit growth in the first quarter. How should we interpret that? Is it something unusual for the first quarter? Are there any one-time factors we should be aware of, or does this suggest ongoing momentum for the brand in that region for the foreseeable future? Thank you.
Yeah. I think relative to gross margin, prior to the new tariffs, we were looking for continued gross margin expansion due to continued product costing improvements, ongoing work with higher quality revenue, including the DTC discounting and promotion reductions, and a slight expected FX headwinds. However, the new developing tariffs will create obviously some significant headwind. And so we're only providing Q1 at this point. The larger benefits when you think about Q4 of '25 with the favorable supply chain impacts, product costs, freight costs, so some of that will continue. But we've got a lot of that that's been recognized and worked through with our partners through fiscal '25. So I wouldn't expect or anticipate that those benefits would be as large in fiscal '26. And then same thing relative to the DTC discounting favorability, because we took such big strides in fiscal '25, especially in Americas, we wouldn't see as much of that year-over-year benefit continuing as an incremental benefit in fiscal '26. There's a little bit of benefit there in APAC because we've started to do more of that as we're helping to clean up and reset APAC a little bit, but definitely not to the magnitude that we saw in fiscal '25. And then, Kevin, I don't know if you want to touch on EMEA.
Let me provide a broad overview first. We recently made some leadership changes in the APAC region, and we are about four to five months into that process. The markets are reporting to me, and I'm heading back there in a few weeks. Regarding EMEA, similar to what you've heard about our American team and their appreciation for Kara's leadership, we are also fortunate to have excellent leadership in EMEA with Kevin Ross. The momentum we've experienced, which started under Kara's guidance, has been significantly accelerated by Kevin over the past 18 months. This strong momentum allows us to focus on growth, creating a sense of achievement as we consistently succeed globally. The clear proposition for consumers is rooted in our authenticity in sports, particularly football. We have nearly 30 athletes across various European leagues, including stars like Achraf Hakimi from PSG who will be playing in the Champions League final this weekend in Germany.
This highlights our cultural influence emerging from Europe, notably in France, Paris, and the UK. We are well-positioned with robust fundamentals. Our ambition is for consumers to recognize Under Armour's distinctive edge—not just as a fashionable hoodie or shoe, but as a brand synonymous with performance. We are committed to solidifying our authenticity in sports, which has garnered us a strong following. Athletes, agents, and clubs are reaching out to us concerning our football boots, which significantly contributes to our entire ecosystem. In addition, we have built solid relationships with sports directors and distributors in places like Turkey. We're making positive strides and continuing to focus on our products. We are generating excitement around our sportswear, including the launch of Halo, and ECHO is also performing well for us. We're learning a lot, and it’s rewarding to observe EMEA's success, which stems from the strategic playbook we've been following for quite some time.
That's great to hear. Thank you very much for all the color.
The next question comes from Peter McGoldrick with Stifel. Please go ahead.
Hi, good morning. Thank you for taking my question. With the ongoing evolution of the good, better, best product pyramid, I was curious if you could discuss how the structural product offering impacts AUR and the underlying gross margin as we look ahead?
Let me provide some structure to my thoughts. A great metaphor for how we're approaching our business is our current product lineup. Right now, we're producing a lot of good products, some better ones, but not enough that we consider the best. Our goal is to reshape our offerings to have 25% good, 50% better, and 25% best. We don't want to limit the amount of good products; we simply want to rearrange our business. A great example of this is the recent success of Sharon, who broke a course record at the Boston Marathon. Our $250 Elite product, the Velociti Elite, demonstrates our capability. While we had a strong execution in the past, we're now ensuring that this hierarchy flows throughout our entire product ecosystem. The $250 Elite shoe will be found in specialty running stores, and we’ve also commercialized a $160 version available in big box retailers and other specialty run shops. Additionally, we have a $130 and a $100 version, which we can make accessible to families, leading into our $75 Assert line.
Importantly, the same designers worked on the top Elite product and maintained a consistent aesthetic all the way down to the $75 item. This approach gives us greater synergy across our product range. Our apparel is following the same principle, and I believe we’re getting it right. The Halo line will represent a pinnacle of our offerings, combining excellent performance with attractive design, all while reflecting the Under Armour DNA. Addressing these aspects is crucial for us.
And I think, Peter, when you think about AUR and also even ASPs too, in fiscal '25, we had a pretty much lower e-com mix. We also had a lower APAC mix. We also had lower footwear mix. All three of those contributed to a little bit lower ASPs. As we drive further into fiscal '26 and back-half of fiscal '26, those things will probably change a little bit from a mix perspective and will help ASPs in general. And as we kind of comp the promo and discounting reductions that we've been doing, that will start to stabilize and turn more towards a positive for us. So, we're definitely focused on that, we're going to keep driving that forward.
Okay. Thank you. And Dave, I recognize challenge in forecasting and guidance, but I was curious if you could give us a run rate gross tariff impact to COGS given current level of visibility.
Yeah. Listen, I totally appreciate the question. And obviously, we're running through a lot of different scenarios at this point. And every few days, it seems like there's new information and new rumors out there. So at this point, we're going to kind of stay prudent and just speak to Q1. And then obviously, we would hope to be able to give a lot more color on that as we get to the next call.
Totally understand. Thank you.
And the next question comes from Paul Lejuez with Citi. Please go ahead.
Hi, this is Kelly filling in for Paul. Thank you for addressing our question. I would appreciate some insight into your thoughts on the business before the tariff announcements. Can you help clarify the discrepancy between the mid-single-digit revenue guidance for Q1 and the previous expectation of slightly reduced sales? It would be helpful if you could discuss this from both a geographic and channel perspective. Thank you.
Yeah. I mean, I guess a couple of things there. We are giving the outlook for Q1 to be down 4% to 5%. We did mention that prior to the tariff announcements and a lot of the uncertainty over there, we were anticipating a full year modest revenue decline as we continue to kind of work to reset and strengthen the brand and progress on our strategic priorities. That decline that we were anticipating for full year was anticipated to be a little smaller than the decline we had in fiscal '25. So, to kind of give a little bit of a box around that. But then also expecting some gross margin expansion due to the continued costing improvements, and also some of the continued reductions in DTC discounting and promos. And then with the SG&A leveraging that we expect to start driving in fiscal '26 as well, landing with operating income that was going to exceed fiscal '25. So that was a lot of the work that we were driving towards, and we're going to keep focused on all of those areas as we learn more about the tariffs and any potential demand impacts. But we feel pretty good about that. And you can tell from the outlook in Q1 that would basically back you into originally thinking our back half was going to be slightly better than our front half. Again, we'll have to see how things develop now with the tariffs and the uncertainty that are out there, but that's originally what we were seeing.
Got it. And just one more from us. Regarding the North American DTC channel, where you've been experiencing some weakness due to a reduction in e-commerce, as you begin to see the effects of those promotions, should we anticipate that your DTC channel growth in '26 will continue, aside from any tariff impacts, or will the changes in the factory outlets offset that? Thanks.
Yeah. Again, we're not going to give a lot of detail on full-year, but what I would say is that as we move towards the back half of fiscal '26, we would have made a lot of those steps in finishing those plays from a DTC and health perspective in North America. So the pressures that we've had in DTC North America because of a lot of those strategic decisions should be much more minimized in the back half of fiscal '26. And so we feel pretty good about that, and obviously stepping into fiscal '27. Again, tracking the demand situation here with tariff uncertainties, but that was where we were heading.
And, Kelly, I'll drop a little color on the model that you're working on too, because as Dave is talking through some of the technicals that we're working through, we're just looking to drive brand affection right now. So, as we're thinking about fiscal '26, there's always a silver lining in everything. And so we're using this moment an opportunity just to make sure that we're really clean and we're delivering ourselves and showing up at retail with our wholesale partners the way that we want to be seen. And we're modeling that behavior by demonstrating that in our own e-com and our own stores as well. And so it will be a full funnel approach for us for sure.
Got it. Thanks for the color. Best of luck.
Thank you.
Next question comes from John Kernan with TD Cowen. Please go ahead.
Good morning. This is Krista on for John. Two questions for us. First, in terms of sort of a broader picture for North America, kind of in relation to the broad initiatives that are underway with this reset, kind of what do you see as a normalization or long-term opportunity for segment margin recovery in North America as you kind of move along this strategic reset? And I have one follow-up. Thank you.
Let me start by emphasizing that while we aren't completely satisfied with our current position, we are optimistic about our future direction. Culture will be essential in this transformation, and it's critical that we share this belief across our organization, including our partners, suppliers, retailers, distributors, franchisees, and especially our team. As we undergo this reset, which I referred to in my prepared remarks as the brand's reinvention, it truly begins with our team. The past 13 months have been quite valuable in this journey. We don't want to make excuses; it's not merely about focusing on pricing, which we've leaned on for too long. Our goal is to foster a connection with young athletes aged 16 to 24, along with our current consumers, and we believe we can enhance that engagement. We often talk about the importance of product story, service, and team as the foundation we need to prioritize.
Product is our core focus; the best products we create should tell our story. The entire team is focusing on ensuring we have the right products in the right places at the right times. We're honing in on the fundamentals. During this reset, we are transitioning in North America from simply asking what consumers would like from Under Armour to presenting them with four specific ideas we believe they will love. That's when we will truly see success. We have challenges ahead, but we are committed to making progress across all channels—from e-commerce and outlet stores to factory houses and full-price brand locations, as well as in collaboration with our retail partners. They are eager to see us succeed. While there is competition from various fronts, I have confidence in our positioning, and I'm excited about what lies ahead in the short, mid, and long term.
Terrific. Thank you for that. And then just how should we think about the category mix within the context of apparel and footwear in your Q1 revenue guide? And is there anything that you can talk to you about the margin differential between those two categories currently, and kind of where you see that longer-term? Thanks so much.
Yeah. I'll jump in on that real quick. When we think about Q1, we do anticipate that footwear will have a little bit more pressure than apparel and accessories for Q1, and that's something that we've been talking about over the last year as well. And from a margin perspective, that actually does help us a little bit because our footwear is a little bit lower gross margin than our apparel. That gap is something that we've been decreasing a little bit each year as we continue to design our footwear differently and continue to improve relative to our price points there. So it is something that we're cognizant of relative to the mix. We're looking forward to continuing to drive up footwear longer-term. We understand that can create a little bit of a gross margin headwind for us longer term, but that's something that we can plan for and navigate, and are looking forward to that.
Thanks very much. Best of luck.
Thank you.
Thank you.
This concludes our question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.