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Text: It is important to note that the ongoing uncertainty related to COVID-19 and its potential effects on the global retail environment could continue to impact our business results going forward.
You may also hear us refer to amounts under U.S. GAAP.
At the beginning of last year, we were confronted with significant uncertainty about our business due to impacts from the COVID-19 pandemic.
With dynamic changes in purchase behavior and marketplace demand, we faced several obstacles as we worked through what we believe to be a recovery year following a difficult 2020.
At that point, it would have been easy to stay conservative and adopt a wait-and-see strategy, yet the tremendous progress we made following our multiyear transformation, including healthier demand for the Under Armour brand, and the passion that this team shows up with every day meant going on offense was the only path for 2021.
And because we stayed on offense, Under Armour delivered a record year of financial results, a year that exemplifies the power of our long-term strategic plan and our ability to stay hyperfocused on execution while leveraging our core strengths to position us more strongly for our next chapter of growth.
Throughout 2021, we worked methodically to expand our brand's awareness and engagement, ensuring we showed up more consistently, louder and with a sharper point of view about the distinct role we play in an athlete's journey to compete.
We underscored our commitment to performance by delivering some of the most innovative products that we've ever produced.
We forged deeper and more productive relationships with our key wholesale partners.
We saw significant progress in our largest long-term growth drivers, our international, direct-to-consumer, women's and footwear businesses.
And we're stronger financially than we've ever been.
In this respect, looking at some of our highlights.
While our year-over-year comparisons benefited from the significant COVID-19 impacts we experienced in 2020, we are equally pleased with our performance over the past two years.
For the full year 2021, revenue was up 27% to reach $5.7 billion, which is a record.
Versus 2019, revenue is up 8%.
So solid progress from before the pandemic, and the result driven by several strategies that have lifted the quality and composition of our sales compared to a few years ago.
Wholesale revenue increased 36% to $3.2 billion in 2021.
On a two-year basis, wholesale is up 3%.
As detailed in previous calls, this performance has been tempered by the strategic decisions we've made to improve brand health by reducing our sales to the off-price channel and exiting approximately 2,500 undifferentiated retail doors in North America, an effort which is now concluded.
Our direct-to-consumer business was up 26% to $2.3 billion in 2021.
Versus 2019, direct-to-consumer is up 29%, with strong momentum in our owned and operated stores and our e-commerce business.
Following a 40% increase in 2020, our e-commerce business was up 4% in 2021, equating to 45% growth on a two-year stack.
This result gives us confidence that this business is well-positioned following a prolonged period of elevated promotional activities.
2021 gross margin was up 210 basis points to a record 50.3%.
Versus 2019, gross margin is up 340 basis points, so excellent progress over two years, driven by benefits from pricing and a more favorable channel mix being offset by supply chain headwinds related to COVID-19 and the absence of MyFitnessPal, which we sold at the end of 2020.
Rounding out the P&L.
Our full year operating income reached $486 million, net income was $360 million, and our diluted earnings per share was $0.77, all three of which are records.
We also realized strong balance sheet and cash flow performances with inventory down 9% to an absolute dollar value that is only slightly higher than in 2015 when we were a $4 billion business.
And finally, one more record having ended the year with $1.7 billion in cash.
All in, what an incredible period for Under Armour.
Having operated for nearly two years amid a global pandemic, I am proud of the progress we've made, the resilience we've shown and the potential we have to do even better in the future.
By staying focused on our key strategies, we are competing and executing at progressively higher levels, helping us unlock value and returns for our shareholders.
Driving us forward at the heart of why we exist is our purpose.
We empower those who strive for more.
For Under Armour, everything is about the journey.
From an awful workout when you want to quit but don't, to pushing through that last rep and adding one more, to earning that PR because you put in the work, Under Armour makes you better.
We do this by delivering innovative products, experiences and styles influenced by athlete insight and real-world data.
Innovations wrapped in our engineering to empower the journey to sport through training, competition and recovery, 2021 was an exceptional year for Under Armour products.
There are too many to list, but a few standouts on the apparel side include RUSH, Iso-Chill, Rival Fleece, Crossback, Infinity, Unstoppable and Meridian, all names that delivered a 33% increase in revenue we achieved.
On the footwear side, franchises like HOVR Sonic, Machina and Infinite; UA Flow Velociti Wind; Charged Pursuit, Assert, Aurora; Curry; and Project Rock contributed nicely to 35% growth, validating one of our largest long-term growth opportunities.
2021 was also an exceptional year in Under Armour's progress to connect our brand even more deeply with consumers.
From the optionality we created in our P&L, we were able to make incremental marketing investments, which we expect to fuel even stronger brand momentum in the years ahead.
At the center of these efforts, product, experience and inspiration fits The Only Way is Through.
More than a mantra, it's become an ethos, synonymous with the hard work necessary to power the journey, and it's always a journey.
From an initial product drawing to shopping bag to the closet, we obsess athletes and those who strive for more.
However, being purpose-led means that it's about more than just shirts and shoes.
And sport is so much more than just a game.
It teaches us to push past our limits, to be collaborators, to be leaders.
It increases confidence, reduces stress and improves mental health.
Yet many young athletes face barriers that prevent them from starting their journey to sport.
With a lack of fields and courts, gaps in coaching, shrinking leagues and the shortage of gear to play, train and compete with, we recognize that not everyone has access to sport.
Addressing this opportunity, a few weeks ago, we announced the long-term commitment of our resources, focus and energy to break down these barriers.
As we lay the foundation for our Access to Sport initiative, we are excited to share more in the years ahead as we build opportunities for millions of youth to engage in sport by 2030, ensuring that the next generations of focused performers are inspired even more holistically than those before them.
Now back to our business.
And the last two years have proven to be one of the most dynamic yet opportunistic times in Under Armour's history.
Managing the marketplace prudently through our constant focus on operational excellence to ensure we're keeping the brand healthy and moving forward, we are delighted with our results.
That said, let's look at how our regions performed in 2021, starting with North America, where revenue was up 29% to $3.8 billion or up 4% since 2019.
In our largest market, we continue to focus on three fundamentals.
First is becoming a better retailer by creating more compelling in-store experiences and delivering best-in-class service across our fleet.
Additionally, this means continuing to build on the momentum we've seen in our e-commerce business.
Realizing we'd likely see traffic declines compared to the abnormality that was 2020, we stayed focused on quality by investing in high-return vehicles like targeted PLAs and improved product wayfinding to improve our online shopping experience, and it's working.
In 2021, while we did experience a year-over-year traffic decline, it was more than offset by meaningful increase in conversion and therefore, solid revenue growth.
Second, with the critical mass of undifferentiated wholesale door exits behind us, we are encouraged by the productivity KPIs we're seeing across this channel in North America.
A more premium position driven by outstanding inventory management and promotional discipline is translating nicely to additional shelf space opportunities with our largest strategic partners, higher AURs and significantly better turns.
And that last point turns, which is really about execution, is a core element that gives me confidence that we're in an excellent position to adapt to however the environment may develop over the short term.
Third, we are continuing to drive performance by investing more smartly in marketing, which shows up in improved brand affinity scores around awareness, consideration and conversion.
Gaining better productivity from how and where we spend has always been the goal.
By delivering higher quality traffic through strategic paid media and targeted email activations, our ability to connect more meaningfully across key moments and multiple platforms has never been greater.
Turning to our international business.
Revenue in EMEA was up 41%, driven by nearly 50% growth in our wholesale business and continued momentum in direct-to-consumer.
We are encouraged by the quality of business results delivered in 2021.
Our efforts to position Under Armour as premium performance, healthier wholesale relationships and improved retail capabilities continue to validate the power of our playbook.
Our two-year performance is strong as well, with revenue in EMEA up 36% versus 2019.
Next up is Asia Pacific, where revenue was up 32% in 2021, driven by nearly 50% growth in our wholesale business and a strong increase in direct-to-consumer sales.
Clearly, the story here is about a more challenging environment that has developed in China as of late as evidenced by a 6% decline in our fourth quarter APAC revenue.
The recent market trends in China are impacting our business.
However, our focus in China remains the same: staying premium; continuing to invest in digital innovation, including working to deliver much improved end-to-end consumer engagement platform; and ensuring that store expansions are done at an appropriate pace in the dynamic market conditions.
Versus 2019, revenue in Asia Pacific was up 31%, so strong growth on a two-year basis.
And finally, revenue in our Latin America region in 2021 was up 18%, driven by strength in our full-price wholesale and distributor businesses.
As a reminder, we have transitioned certain countries in this region to a strategic distributor model, a decision we believe will begin to optimize this region's ability to grow and contribute more profitably in the years to come.
Versus 2019, revenue in Latin America is about flat on a two-year basis.
So in closing, we remain both confident and cautious in this operating environment.
And while current macro factors are having material impact on our business, we have no intentions of sitting idle.
Innovation, consumer connectivity and inspiring those to strive for more are not tactics at Under Armour.
They are a way of life.
Moving forward, we believe that the things we can control will continue to serve us as strengths, just as they did in fiscal 2021.
Regardless of the short-term environment, we are running a stronger, better company, one that is increasingly more capable of delivering sustainable, profitable growth and value creation for our shareholders over the long term.
I am pleased with where Under Armour is sitting, incredibly proud of this team.
And in my nearly five years here, I have never been more excited about our future.
And with that, I'll hand it over to Dave.
Since the beginning of COVID-19 pandemic, our intent has been to deliver appropriate financial performance while protecting the Under Armour brand and positioning ourselves for sustainable, profitable growth over the long term.
Leveraging the strength of a data-driven, consumer-centric strategy and a constant focus on operational excellence, we believe we can emerge from this unprecedented time as a stronger, more profitable company.
Despite the high level of uncertainty, we committed to staying agile to minimize downside risk while executing against our playbook to help us capitalize on upside opportunities as they arose.
In 2021, we did just this.
That isn't to say that uncertainty is over.
We remain vigilant about the dynamic environment we are operating in, including ongoing supply chain headwinds, rising wages and inflationary input cost pressures that continue to permeate the marketplace.
Yet we remain confident in our ability to deliver against our plan by staying focused on our business strategies and remaining nimble as we implement them.
Our fourth quarter results reinforce that confidence.
Compared to the prior year, revenue was up 9% to $1.5 billion.
As a reminder, we expected several headwinds in the quarter, including lower sales of SPORTSMASKs, lower sales to the off-price channel, the absence of MyFitnessPal and proactive supply constraints, among others.
Versus our previous expectation, our revenue overdrive was primarily due to higher demand across our full-price wholesale and direct-to-consumer businesses, particularly in North America, coupled with better-than-expected supply chain execution during this challenging environment.
From a channel perspective, fourth quarter wholesale revenue was up 16%, driven by strong performance in our full-price business, partially offset by lower year-over-year sales to the off-price channel.
Our direct-to-consumer business increased 10%, led by 14% growth in our owned and operated retail stores and 4% growth in our e-commerce business.
In addition, our e-commerce business is up more than 30% on a two-year basis.
And licensing revenue was down 33%, driven primarily by the recognition timing of minimum royalty payments.
By product type, apparel revenue was up 18%, with strength in our training and outdoor businesses.
Footwear was up 17%, driven primarily by our running and training categories.
And our accessories business was down 27% due to planned lower sales of our SPORTSMASKs compared to last year's fourth quarter.
From a regional and segment perspective, fourth quarter revenue in North America was up 15% to $1.1 billion, driven by premium growth in our full-price wholesale and direct-to-consumer businesses.
So excellent barometers to improving brand strength and consumer demand in our largest region.
Compared to 2019, North American revenue was up 8% in the fourth quarter, driven by higher quality revenue than two years ago.
In our international business, EMEA revenue was up 24%, driven primarily by strength in our wholesale business.
Compared to the fourth quarter of 2019, revenue in EMEA was up 11%.
Next up is APAC, where the business was down 6% in the quarter, driven by softer demand in our wholesale business, which more than offset DTC growth.
Compared to 2019, total APAC revenue was up 19%.
And finally, in line with expectations, Latin America revenue was down 22% due to the change in our business model as we moved certain countries to distributors, an effort which is now completed.
Versus the fourth quarter of 2019, Latin America was down 20%.
Related to gross margin, our fourth quarter improved 130 basis points to 50.7%.
This expansion was driven by 350 basis points of pricing improvements due primarily to lower promotional activity within our DTC business, favorable pricing related to sales to the off-price channel and lower promotions and markdowns across our wholesale business.
And 90 basis points of benefit related to lower restructuring charges.
These improvements were partially offset by 190 basis points of COVID-related supply chain impacts, driven by higher freight costs, which meaningfully offset product cost benefits during the quarter; 80 basis points related to the absence of MyFitnessPal; and 50 basis points of unfavorable product mix, related primarily to lower SPORTSMASK sales, which carry a higher gross margin.
Versus our previous expectation, our fourth quarter gross margin overdelivery was primarily due to favorable pricing developments from lower-than-planned promotional activity within our DTC business, more favorable pricing related to sales to the off-price channel and lower-than-planned promotions and markdowns within our wholesale business.
SG&A expenses were up 15% to $676 million, primarily due to increased marketing investments, incentive compensation and nonsalaried workforce wages.
Related to our 2020 restructuring plan, we recorded $14 million of charges in the fourth quarter.
So we now expect to recognize total planned charges ranging from $525 million to $550 million.
Thus far, we've realized $514 million of pre-tax restructuring and related charges.
We expect to recognize any remaining charges related to this plan by the end of the first quarter of our fiscal year 2023.
Moving on, our fourth quarter operating income was $86 million.
Excluding restructuring and impairment charges, adjusted operating income was $100 million.
After tax, we realized a net income of $110 million or $0.23 of diluted earnings per share during the quarter.
Excluding restructuring charges, income related to our first year of the MyFitnessPal divestiture earnout and the noncash amortization of debt discount on our senior convertible notes, our adjusted net income was $67 million or $0.14 of adjusted diluted earnings per share.
From a balance sheet perspective, inventory was down 9% to $811 million, driven by continued improvements in our operating model and inbound shipping delays due to COVID-related supply chain pressures.
Our cash and cash equivalents were $1.7 billion at the end of the quarter, and we had no borrowings under our $1.1 billion revolving credit facility.
Finally, following last year's convertible bond exchanges, we are proud to share that our cash position less debt of $663 million nearly doubled to $1 billion by the end of the fourth quarter.
Looking forward, one last reminder about our fiscal reporting year change.
Mechanically, the current period we're in right now, January 1 through March 31, 2022, will serve as a transition period until we begin our new fiscal year 2023 on April 1.
To revisit what we detailed last year, we believe this change, namely putting our two largest quarters in the middle of our new fiscal year, will provide us with greater visibility when providing our initial annual outlook.
In this respect, by the time of our next call, which is expected in early May, we'll have booked orders in hand for the majority of our fall/winter wholesale business.
That said, let's turn to our outlook for the current transition quarter.
From a revenue perspective, we now expect our transition period to be up at a mid-single-digit rate compared to the previous expectation of a low single-digit rate increase.
This includes approximately 10 points of revenue headwinds related to reductions in our spring/summer 2022 wholesale order book from supply constraints associated with ongoing COVID-19 pandemic impacts.
Moving forward, we expect many of these headwinds to continue well into fiscal 2023 until longer-than-usual transit times, backlogs and congestion find balance, associated freight and logistics costs normalize and inbound shipping delays subside.
At this time, we do expect these uncertainties to cause material impacts and variability in our future results.
And accordingly, we will remain cautious and agile as we operate our business into fiscal 2023.
That said, the proactive strategies we're employing, greater operational agility and overall demand for the Under Armour brand give us confidence in our ability to navigate this dynamic and challenging business environment effectively.
And we believe these COVID-related supply chain pressures are just a temporary speed bump on our road to continued profitable growth over the long term.
Turning to gross margin.
We expect our transition quarter rate to be down approximately 200 basis points against our Q1 2021 adjusted gross margin, which includes approximately 240 basis points of negative impact from higher freight expenses related to ongoing COVID-19 supply chain challenges in addition to an unfavorable sales mix, partially offset by pricing benefits.
With that, we expect operating income to reach approximately $30 million to $35 million and diluted earnings per share to be approximately $0.02 to $0.03.
In closing, we're proud of the record results we achieved in 2021 and the consistent progress we've made over the past couple of years.
This gives us great confidence in our brand and business and our team's ability to navigate this dynamic environment.
As we work through our transition quarter and head into fiscal 2023, we're monitoring and tracking the dynamic supply chain and inflationary pressures.
And we'll be mindful of the uncertainty and volatility that comes along with it.
These conditions demand that we maintain a high degree of agility, and I am confident we will.

user
q4 adjusted earnings per share $0.14.
q4 earnings per share $0.23.
qtrly revenue was up 9 percent to $1.5 billion (up 8 percent currency neutral) compared to prior year.
qtrly inventory was down 9 percent to $811 million.
under armour - qtrly gross margin rose 130 basis points to 50.7% versus prior year, driven by benefits from pricing and restructuring charges in prior year.
sees gross margin is expected to be down 200 basis points compared to prior year period's adjusted gross margin in q1.
now expects to recognize $525 million to $550 million in charges related to 2020 restructuring plan.
currently expects to recognize any remaining charges related to plan by end of q1 of its fiscal year 2023.
sees q1 revenue to increase at a mid-single-digit rate versus previous expectation of a low single-digit rate increase.
related to restructuring plan, recognized $514 million of pre-tax charges to date, including $14 million in q4 of 2021.
q1 diluted earnings per share are expected to be $0.02 to $0.03.
currently expects material impacts for its spring-summer 2022 season.
could be further material impacts on under armour's results in future periods due to covid-19, supply chain constraints, others.

assistant