2020 Annual Report
A Year in Review
March 26, 2021
This past January marked my first anniversary as CEO of Under Armour.
As I reflect on my time in the role, I am appreciative of our 15,000 teammates around the globe for their teamwork, resiliency and commitment. They are the heart of the Under Armour brand. I am also grateful for our board’s guidance, specifically Executive Chairman and Brand Chief Kevin Plank, whose passion for our athletes and business is extraordinary and makes our partnership a terrific balance.
As we say at Under Armour, The Only Way Is Through. 2020 was a year that demanded agility, adaptation, and an unrelenting focus on changing consumer needs. Amid a global pandemic, we prioritized our teammates’ health and safety, launched our North American eCommerce platform, divested the MyFitnessPal platform, and continued to execute a comprehensive restructuring effort.
The work we have done over the past few years positioned us well to meet the challenges of this unprecedented year with resilience. We continued to execute against our strategy with patience and perseverance and remained true to our commitment to making athletes better.
And as consumers pivoted their exercise routines to at-home workouts and outdoor runs, Under Armour met them with athlete-led solutions. From our Project Rock collection, UA HOVR Machina, Phantom 2, and Breakthru footwear offerings to the Meridian pant, Infinity sports bra, and award-winning UA Sports Mask – we drove hard against our innovation agenda in 2020. Additionally, we passed one million pairs of connected footwear, a significant milestone in deepening our connection with consumers.
That said, there is no doubt that last year was challenging. In 2020, our revenue declined 15 percent to $4.5 billion and – on an adjusted basis: our gross margin increased 170 basis points to 48.6 percent, our operating income was $537 thousand, and our diluted loss per share was $0.26.
Yet even through the challenges and uncertainty, it is clear that we are on the right path. Our efforts to pursue a clearly defined target consumer, rebase our cost structure, and fundamentally change the way we work are beginning to yield results. And as we work towards improving profitability in 2021, we also believe we are on a measured path to return to a double-digit operating margin over the long-term.
Central to our transformation is an evolution from being a product-led to a purpose-led organization. We are clear about what defines us, why we compete and who we serve. Our purpose is to Empower Those Who Strive for More, which begins with our commitment to our target consumer – the focused performer. Any product or experience we bring to market must make athletes better.
Purpose lies at the intersection of our culture and our relationship with consumers. This empowers us to support the communities we serve more meaningfully. The launch of the Curry Brand is the perfect embodiment of this in action. In late November, we announced our partnership with Stephen Curry to deliver a suite of performance products, including the Curry 8 basketball shoe – the first
footwear to feature our proprietary, high-traction footwear cushioning technology: UA Flow. As a powerful foundation, community impact is built into the Curry brand’s business model. Product sales and focused partnerships are being engineered to help fund youth sports in under-resourced areas through equitable access and safe places to play.
Purpose also means greater consistency in strategic execution while maintaining our operating principles and enterprise-wide financial discipline. And earning trust from you, our shareholders, by delivering the outcomes that signal our playbook is working.
Throughout 2020, we worked to rebase our cost structure to ensure we are positioned with an appropriate foundation and agility to scale with future growth. In pursuit of premium brand-right growth, we have more sharply focused our voice, utilizing consumer-centric marketing activations to elevate industry-leading innovations and unique experiences across our business. Greater marketing productivity, along with the tighter alignment of our supply and demand planning functions, has also afforded us greater optionality to maintain a more consistent profitability trajectory over the long-term.
Simultaneously, we are hyper-focused on meeting consumers wherever and whenever they want to engage with us. With an emerging omnichannel focus, we are pursuing a channel-agnostic approach – an effort made even stronger by pandemic-accelerated eCommerce results, which represented nearly half of our total direct-to-consumer business in 2020. In retail, we are working to deliver more profitable formats and greater in-store productivity by reducing promotional levels and creating a more seamless shopping experience across all consumer touchpoints.
Deepening our relationship with consumers also means living up to increasingly higher brand expectations. This includes sustainability, which we believe drives performance innovation. Across our business practices, as we strive for proficiency, accountability, and transparency – we’re dedicated to making better, resource-efficient products, leaving a cleaner world wherever our brand touches the environment, and adding value to the communities we engage. Earth is our home field. It’s the only one we’ve got and we’re going to protect it.
Bringing it all together, we remain focused on maintaining our discipline around profitability to drive sustainable shareholder value over the long term. From ongoing operating model refinements, our robust innovation pipeline, and brand elevating strategies to our tighter inventory management and a rebased cost structure, we are working to deliver greater confidence, consistency and credibility.
At this point in 2021, the global pandemic’s current state means we’re still operating with a high level of uncertainty. That said, I remain appropriately cautious and confident in our future. We are on the path to becoming a stronger brand and a better run company. We are leading with greater purpose and more assertive discipline. And we are working hard to continue earning your trust with our actions and performance.
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Mr. Plank became Under Armour’s Executive Chairman and Brand Chief in January 2020, after serving as Chief Executive Officer and Chairman of the Board of Directors from 1996 to 2019, and President from 1996 to July 2008 and August 2010 to July 2017. Founded in 1996 out of frustration that cotton T-shirts were unable to keep him dry and comfortable while playing football at the University of Maryland, Mr. Plank designed and created a new apparel innovation that efficiently wicked sweat to optimize athletic performance. Nearly a quarter of a century later and Under Armour has grown into one of the world’s leading developer, marketer, and distributor of branded performance apparel, footwear and accessories. Mr. Plank also serves on the Board of Directors of the National Football Foundation and College Hall of Fame, Inc., and is a member of the Board of Trustees of the University of Maryland College Park Foundation.
Mr. Frisk was appointed Chief Executive Officer and President of Under Armour and a member of its Board of Directors in January 2020, after serving as President and Chief Operating Officer since July 2017 when he joined the company. Mr. Frisk has more than 30 years of experience in the apparel, footwear and retail industry. Before joining Under Armour, he was Chief Executive Officer of The ALDO Group, a global footwear and accessories company. Before that, he spent more than a decade with VF Corporation where he held numerous leadership positions including Coalition President of Outdoor Americas (The North Face® and Timberland®), President of the Timberland® brand, President of Outdoor & Action Sports (EMEA), and Vice President and General Manager of The North Face®. Before joining VF Corporation, Mr. Frisk ran his own retail business in Scandinavia and held senior positions with Peak Performance and W.L. Gore & Associates.
Douglas E. Coltharp has been a director of Under Armour since December 2004. Since May 2010, Mr. Coltharp has served as Executive Vice President and Chief Financial Officer of Encompass Health Corporation (formerly HealthSouth Corporation). Before that, Mr. Coltharp served as a partner at Arlington Capital Advisors and Arlington Investment Partners, a Birmingham, Alabama based financial advisory and private equity business from May 2007 to April 2010 and as Executive Vice President and Chief Financial Officer of Saks Incorporated and its predecessor organization from 1996 to May 2007.
Jerri L. DeVard has been a director of Under Armour since May 2017. Ms. DeVard served as Executive Vice President, Chief Customer Officer of Office Depot, Inc. from January 2018 to March 2020, leading their eCommerce and Customer Service functions and Marketing and Communications and as Executive Vice President and Chief Marketing Officer from September 2017 to December 2017. Before that, Ms. DeVard served as Senior Vice President and Chief Marketing Officer of The ADT Corporation, a leading provider of home and business security services, from March 2014 through May 2016. From July 2012 to March 2014, she was Principal of DeVard Marketing Group, a firm specializing in advertising, branding, communications and traditional/digital/multicultural marketing strategies. Before that, she served as Executive Vice President of Marketing for Nokia. Ms. DeVard served in a number of senior marketing roles throughout her career, including as Senior Vice President of Marketing and Senior Vice President, Marketing Communications and Brand Management of Verizon Communications, Inc., Chief Marketing Officer of the e-Consumer business at Citibank N.A. and other senior marketing positions at Revlon Inc., Harrah’s Entertainment, the NFL’s Minnesota Vikings and the Pillsbury Company. Ms. DeVard currently serves on the Board of Directors of Cars.com and is a member of its Compensation and Nominating and Governance Committees.
Mohamed A. El-Erian has been a director of Under Armour since October 2018 and Lead Director since May 2020. Dr. El-Erian served as CEO and Co-Chief Investment Officer of PIMCO, one of the world’s premier investment management firms, from December 2007 to March 2014. He currently serves as Chief Economic Advisor of Allianz, the corporate parent of PIMCO, a role he has held since March 2014, and is the President of Queens’ College, Cambridge. Dr. El-Erian joined PIMCO in 1999 as a senior member of the portfolio management and investment strategy group. In February 2006, he became president and CEO of Harvard Management Company, the entity responsible for managing the university’s endowment, before returning to PIMCO in 2007 to serve as co-CEO and co-CIO. From December 2012 to January 2017, he was chair of the U.S. President’s Global Economic Development Council. Previously, he was a managing director at Salomon Smith Barney/Citigroup in London and worked at the International Monetary Fund for 15 years, rising to the position of Deputy Director. He is a board member of the National Bureau of Economic Research serving on its Executive Committee, and chairs the Microsoft Investment Advisory Committee. Dr. El-Erian also serves as non-executive director of Barclays plc and is also a columnist for Bloomberg and a contributing editor at the Financial Times.
David W. Gibbs has been a director of Under Armour since September 2021. Mr. Gibbs serves as Chief Executive Officer of Yum! Brands, Inc. (“YUM”), a position he has held since January 2020, and has served as a member of YUM’s board of directors since November 2019. Before that, he served as President and Chief Operating Officer from August 2019 to December 2019, as President, Chief Financial Officer and Chief Operating Officer from January 2019 to August 2019 and as President and Chief Financial Officer from May 2016 to December 2018. Before these positions, he served as Chief Executive Officer of Pizza Hut Division from January 2015 to April 2016. From January 2014 to December 2014, Mr. Gibbs served as President of Pizza Hut U.S. Before these positions, Mr. Gibbs served as President and Chief Financial Officer of Yum! Restaurants International, Inc. (“YRI”) from May 2012 through December 2013. Mr. Gibbs served as Chief Financial Officer of YRI from January 2011 to April 2012. He served as Chief Financial Officer of Pizza Hut U.S. from September 2005 to December 2010. From March 2016 to January 2020, Mr. Gibbs served on the Board of Directors of Sally Beauty Holdings, Inc.
Karen W. Katz has been a director of Under Armour since October 2014. Ms. Katz served as President and CEO of Neiman Marcus Group LTD LLC, one of the world’s leading luxury and fashion retailers, from 2010 to February 2018. Having joined Neiman Marcus in 1985, Ms. Katz served in key executive and leadership roles in the company’s merchant, stores and eCommerce organizations as Executive Vice President—Stores, a member of the Office of the Chairman of Neiman Marcus Group, and President, Neiman Marcus Online, and President and CEO, Neiman Marcus Stores. Ms. Katz serves on the Board of Directors of Humana Inc. and is a member of its Nominating, Governance & Sustainability and Technology Committees, on the Board of Directors of Casper Sleep Inc. and is a member of its Compensation Committee and Chair of its Nominating and Governance Committee and on the Board of Directors of The RealReal, Inc.
Wes Moore has been a director of Under Armour since October 2020. Mr. Moore served as Chief Executive Officer of the Robin Hood Foundation, one of New York City’s largest poverty-fighting organizations, from April 2017 to May 2021. Before that, Mr. Moore founded and served as Chief Executive Officer of BridgeEdU, an innovative technology platform addressing the college completion and job placement crisis from July 2014 to February 2017 and served as its Chairman from June 2017 to June 2019, when it was acquired. Mr. Moore worked as an investment banker with Citigroup and served as a White House Fellow to Secretary of State Condoleezza Rice from 2006-2007. Mr. Moore is a decorated army combat veteran and a New York Times and Wall Street Journal bestselling author. Mr. Moore currently serves on the Board of Directors of Longview Acquisition Corp. and is a member of its Audit, Compensation and Nominating and Corporate Governance Committees, on the Board of Directors of Green Thumb Industries Inc. and is a member of its Audit and Compensation Committees and on the Board of Directors of IAC/INTERACTIVECORP.
Eric T. Olson has been a director of Under Armour since July 2012. Admiral Olson retired from the United States Navy in 2011 as an Admiral after 38 years of military service. He served in special operations units throughout his career, during which he earned a Master’s Degree in National Security Affairs and was awarded several decorations for leadership and valor including the Defense Distinguished Service Medal and the Silver Star. Admiral Olson’s career culminated as the head of the United States Special Operations Command from July 2007 to August 2011, where he was responsible for the mission readiness of all Army, Navy, Air Force, and Marine Corps special operations forces. In this capacity, he led over 60,000 people and managed an annual budget in excess of ten billion dollars. Admiral Olson served as Chief Executive Officer of HANS Premium Water, a clean water solution for homes, from June 2019 to May 2020. He has served as President and Managing Member of ETO Group, LLC since September 2011, supporting a wide range of private and public sector organizations. Admiral Olson also serves on the Board of Directors of Iridium Communications, Inc. and is a member of its Nominating and Corporate Governance committee. Admiral Olson also serves as Chairman Emeritus of the non-profit Special Operations Warrior Foundation.
Harvey L. Sanders has been a director of Under Armour since November 2004. Mr. Sanders is the former Chairman of the Board of Directors, Chief Executive Officer and President of Nautica Enterprises, Inc. He served as Chairman from 1993 to 2003 and as Chief Executive Officer and President from 1977 to 2003, until VF Corporation acquired Nautica Enterprises, Inc. in 2003. Mr. Sanders currently serves as a member of the Board of Directors for the Boomer Esiason Foundation for Cystic Fibrosis and the enCourageKids Foundation and as a member of the Board of Trustees of the University of Maryland College Park Foundation.