Business context and reporting period
Under Armour, Inc. develops, markets and distributes performance apparel, footwear and accessories through wholesale, direct-to-consumer and licensing channels. This Form 10-K covers the fiscal year ended March 31, 2024 (“Fiscal 2024”), compared with the year ended March 31, 2023. It is an annual filing, not a standalone fourth-quarter report; quarterly figures below are included where disclosed.
Key financial metrics
| Metric | Fiscal 2024 | Fiscal 2023 |
|---|---|---|
| Net revenue | $5.702 billion | $5.903 billion |
| Gross profit / margin | $2.630 billion / 46.1% | $2.644 billion / 44.8% |
| SG&A | $2.401 billion | $2.380 billion |
| Operating income / margin | $229.8 million / 4.0% | $263.6 million / 4.5% |
| Net income / diluted EPS | $232.0 million / $0.52 | $374.5 million / $0.81 |
| Operating cash flow | $354.0 million | $(39.9) million |
| Capital expenditures | $150.3 million | $158.1 million |
At March 31, 2024, cash and cash equivalents were $858.7 million, total current assets $2.864 billion and current liabilities $1.165 billion. Debt principal outstanding was $680.9 million: $80.9 million of 1.50% convertible notes due June 2024 and $600 million of 3.25% senior notes due June 2026. No revolving-credit-facility borrowings were outstanding; the facility provided $1.1 billion of commitments, and the company reported compliance with its covenants. Operating lease liabilities were $767.0 million on the balance sheet. Approximately $632.2 million of cash was held by foreign subsidiaries and intended to remain invested abroad.
Material changes versus the prior comparable period
- Revenue declined 3.4%. Wholesale revenue fell 6.5%, while direct-to-consumer revenue rose 3.0%. Apparel revenue fell 2.1%, footwear 4.9% and accessories 0.7%.
- North America revenue fell 8.3% to $3.505 billion. EMEA rose 9.0%, Asia-Pacific 5.8% and Latin America 7.6%.
- Gross margin improved 130 basis points, mainly from approximately 290 basis points of supply-chain savings, including lower freight and product costs. This was partly offset by approximately 130 basis points from inventory-management actions and promotions, and 40 basis points from foreign currency.
- Despite the higher gross margin, operating income fell 12.8%; SG&A rose 0.9% and increased to 42.1% of revenue from 40.3%. Net income declined largely alongside the operating result and a substantial year-over-year change in tax expense: Fiscal 2023 included a benefit from releasing U.S. federal deferred-tax valuation allowances.
- Operating cash flow improved by $393.9 million, chiefly from working-capital changes, including a $585.5 million cash inflow attributed to inventory changes in the MD&A. Balance-sheet inventory declined to $958.5 million from $1.186 billion.
- For the quarter ended March 31, 2024, revenue was $1.332 billion, operating loss $3.6 million and net income $6.6 million. The comparable quarter’s revised figures were $1.399 billion, operating income $29.6 million and net income $174.4 million; the prior-quarter net income included a large tax benefit.
Outlook, risks, contingencies and unusual items
- The filing provides no specific Fiscal 2025 revenue or earnings guidance. Management describes a focus on premium, brand-right growth and improved profitability, while citing a challenging retail environment, particularly in North America, with greater promotions and lower wholesale demand.
- On May 15, 2024, the board approved a Fiscal 2025 restructuring plan. The company expects $70 million to $90 million of pre-tax charges, including approximately $50 million cash-related and $40 million non-cash charges; the filing describes these components as approximate maximum amounts.
- The company recorded a $100 million accrual for legal-proceeding contingencies. The securities class action was scheduled for trial beginning July 15, 2024; management says the claims are without merit, but an adverse outcome or settlement could result in a substantially larger loss and cash outlay. The availability of some insurance coverage was being challenged on appeal.
- The company identified material weaknesses in financial-reporting controls involving certain balance-sheet reconciliations and general-ledger classification and presentation. Management and the auditor concluded internal control over financial reporting was ineffective as of March 31, 2024; the auditor nevertheless issued an unqualified opinion on the financial statements. Remediation was in progress, not yet complete.
- Under Armour corrected accounting errors affecting revenue, cost of goods sold, SG&A and other items in prior periods. It concluded the errors were not material to previously issued financial statements, but revised comparative figures and disclosed immaterial interim-period revisions.
- Other key risks include discretionary consumer demand and discounting, competition, demand forecasting and inventory valuation, reliance on concentrated third-party manufacturing, foreign-exchange and input-cost exposure, litigation, and cyber and data-security risks. The company also reported executive turnover; Kevin Plank became CEO in April 2024.
- The board authorized a new Class C share-repurchase program of up to $500 million through May 2027. No cash dividends were paid, and the company does not anticipate dividends in the foreseeable future.
Important facts for investors to verify
- Progress in remediating the material weaknesses and whether subsequent filings report effective controls or further revisions.
- North America demand, wholesale orders, promotional intensity and whether gross-margin gains can persist without weakening sales.
- Fiscal 2025 restructuring execution, actual charges and realized savings and cash-flow benefits.
- Outcome and timing of the securities litigation and related proceedings, the $100 million accrual’s adequacy, and the final insurance coverage available.
- Repayment of the $80.9 million convertible notes due June 2024 and cash availability, including the location and intended use of foreign-held cash.