Under Armour, Inc. (UAA) Q4 2013 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Under Armour, Inc. Fourth Quarter Earnings Webcast and Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Tom Shaw, you may begin.

Thanks, and good morning to everyone joining us on today's fourth quarter conference call. During the course of this call, we will be making projections or other forward-looking statements regarding future events or the future financial performance of the company. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially. These risks and uncertainties are described in our press release and in the Risk Factors section of our filings with the SEC. The company assumes no obligation to update forward-looking statements to reflect events or circumstances after the date on which the statement was made or to reflect the occurrence of unanticipated events. Joining us on today's call will be Kevin Plank, Chairman and CEO; followed by Brad Dickerson, our Chief Financial Officer, who will discuss the company's financial performance for the fourth quarter and full year 2013, followed by an update to our 2014 outlook. After the prepared remarks, Kevin and Brad will be available for a Q&A session that will end at approximately 9:30 a.m. Finally, a replay of this teleconference will be available at our website at approximately 11:00 a.m. Eastern time today. And with that, I'll turn it over to Kevin Plank.

Thanks, Tom, and good morning to everyone, from the brand-new Under Armour office here at New York City that just opened earlier this month. It's great to have a presence here at our new space in Chelsea, and we're looking forward to the opening of our first store in Soho later this spring. So Under Armour is a growth company, and with growth comes change. We like to say that Under Armour is a different company every 6 months, so we thought we'd start today by listing a few game changers that took place since we last spoke. First, despite starting the season unranked, Auburn University had 2 of the greatest comebacks in college football history, on its way to playing in the BCS National Championship Game. Then, we announced partnerships to outfit 2 of the most prestigious collegiate sports programs in the United States, the University of Notre Dame and the United States Naval Academy. As someone here characterized it, we now have both God and country covered. Thirdly, we signed agreements to outfit 2 leading soccer clubs, Colo Colo in Chile and Cruz Azul in Mexico, as we lay the foundation for growth outside the United States in the world's biggest sports. Next, we signed our first ballerina. I can safely say those are 5 words I didn't picture myself saying on an earnings call when I started the business in '96. Misty Copeland of the American Ballet Theatre is a great illustration of how we will bring new dimensions to the Under Armour brand in 2014, as she helps us redefine what it means to be an athletic female. And finally, we made what we believe is a compelling first acquisition, MapMyFitness, which firmly positions us at the forefront of the exploding connected fitness movement. So a quarter with major new developments across our categories, geographies and business units. But fortunately, Q4 had a lot in common with the quarters that preceded it. It was our 15th consecutive quarter with net revenue growth of 20-plus percent and our 17th consecutive quarter with Apparel growth of 20-plus percent. As we said on our last call, our core North American Apparel business is strong, and that gives us the firepower to invest in growing new geographies with new categories and new consumers. So I just want to spend a minute this morning talking about an outstanding Q4 that capped an exceptional 2013, because it reinforces our strategy of investing in our growth drivers for the long term. I promised Brad I'd let him deliver most of the good news of the quarter, but I want to stress that the 35% top line growth we saw in Q4 was driven by strength across the board in all of our businesses. We certainly saw some benefit to our Fleece and ColdGear in the quarter from the weather, and Brad can talk to that in a bit, but the sales momentum was evident in both our wholesale and Direct-to-Consumer business with Apparel growing 35%; Footwear, 24%; and Accessories, 52%. That continued momentum in our North American Apparel business is a great testament to our ability to develop large-scale platforms around our relentless flow of innovation. For example, in the third quarter, we introduced our latest Apparel innovation, ColdGear Infrared, our industry-leading technology that provides warmth without the weight and enables us to exceed our consumers' expectations around cold weather protection. With a strong launch in 2013, including solid holiday sales across Men's and Women's wearing pieces, we will start to see even more meaningful volume for ColdGear Infrared in 2014. Our ability to expand platforms is a critical piece of how we are driving growth. In year 2, we'll bring the ColdGear Infrared into new categories much as we did with both Charged and Storm Cotton, which last year, in just year 3, topped $300 million in combined revenues. This category of Charged and Storm Cotton did not even exist before 2011, just 3 years ago. I mentioned the strength of our Apparel business was across-the-board, and I want to quickly cover Women's and Youth. Coming off of a year of outstanding results in Women's, we are extremely excited about what we planned for 2014. In addition to the great product that is in the pipeline and our improved presentation at retail, including our New York store that opens this spring here in Soho, we will be focusing our second Brand Holiday this year on Women's. One of the reasons we are so bullish on our Women's business is that there has been a quiet shift going on, where women are increasingly wearing "athletic product" outside of the gym. We think the reality is this shift is more permanent than some may expect, as our female consumer continues to embrace our technology innovation and increase focus on style. We are in a great position to continue to grow this business as we build a loyal base of athletes and are growing with her as she moves into new categories and end-users for Under Armour product. We had an extremely strong 2013 in Youth, or as we refer to them, Next. Our Youth business has exceeded all of our expectations, and we continue to see momentum across not just Apparel, but also Footwear and Accessories as well. For the year, Youth doubled the growth rate we saw in our Men's and Women's Apparel businesses. This broad-based strength gives us great confidence in our long-term future as we remain laser-focused on maintaining the strong relationship with our consumer as he and she move into new sports and new wearing opportunities as they grow up. All in all, it was an exceptionally strong year for our Apparel business in North America. We created a lot of excitement in the market with our Alter Ego and ColdGear Infrared innovations, and have unprecedented momentum in our core Apparel business as we enter 2014. On the Footwear side of the business, we also enter the new year with great momentum as we start telling the story of SpeedForm to consumers today with a presence some of you may have seen on your TV [ph] this morning. We will launch holiday 1 and tell the SpeedForm story with our largest events marketing execution to date, taking over Grand Central Station's Vanderbilt Hall starting today and lasting through Super Bowl Sunday night. The SpeedForm Apollo running shoe is the latest innovation from Under Armour Footwear, and it destroys the rules of footwear construction. We craft each of these lightweight shoes in a clothing factory to create the precision, feel, fit and comfort consumers have come to expect from our Apparel. And when the March issue of Runner's World magazine hits next week, the SpeedForm Apollo will be recognized by their editors as best debut in its spring shoe guide. The TV campaign starts February 22 but available on YouTube this afternoon, and we're incredibly excited to bring the level of innovation we've already brought to cleated to the running community starting with the SpeedForm Apollo. That focus on exceeding our consumers' expectations was part of the driving force behind our decision to purchase MapMyFitness in December. We have a very simple mission here at Under Armour, and it's to make all athletes better. The amount of information now available to athletes to help them achieve that has never been greater and also never more complex. With our acquisition of MapMyFitness and the leadership of its founder, Robin Thurston, we are now in great position to design open digital products to the athlete of tomorrow and provide solutions that will help people across the world lead healthier lifestyles. Because we think connected fitness is about more than a bracelet that enables you to tell your social media friends that you walk 1.2 miles today. It's about the opportunity to innovate technology in a seamless way that empowers the athlete individually benefit from the wealth of information that is going to be available to them. It's about waking up and knowing that even though you were thinking of running 3 miles this morning, your quality of sleep and other biometric measures suggest you'd get more benefit from running 4. We know that this world is still in a very early stage of development, and we believe the addition of Robin and his team of more than 60-plus engineers and developers meaningfully accelerates our profile in the digital space. We have been learning every single day since the acquisition in December. I don't want to get into the operational details at this point, but I can tell you the integration between our team in Baltimore and the MapMyFitness team in Austin has been rapid and productive, and each day brings new ideas and possibilities to what connected fitness will mean to Under Armour. So let me give you some scope on the size of the opportunity. MapMyFitness has built a community of over 21 million registered users. And during just the first week of January, we added more than 400,000 new users from the 1st to the 7th. Equally important is that this acquisition immediately brings us the talent we need to leapfrog into a leadership position in the world of connected fitness. We're incredibly excited to join forces with Robin and his team and believe we will drive the future performance innovation for the world's athletes. So what to watch for, for Under Armour in 2014 because, like I said at the top, we are a different company every 6 months. In the short term, you will continue to find us on the world stage of sport. For example, in golf this past weekend, at The Farmers Insurance Open in Torrey Pines, there were 3 different leaders at the end of rounds 2, 3 and 4, and each of them, Jordan Spieth, Gary Woodland and Scott Stallings were outfitted in Under Armour. And next week, when the Olympics open in Sochi, we'll unveil the culmination of our partnership with Lockheed Martin, the world's fastest speed skating suit, that will be worn by Shani Davis and other members of the U.S. speed skating team. We will also be on stage outfitting U.S. bobsled and the Canadian snowboard team, amongst others. In the longer term, our goal is to continue doing what we do, investing to ensure we are building the foundation for long-term growth while delivering results now. MapMyFitness, Notre Dame and Navy and partnerships with companies like Lockheed Martin are all part of that plan. We are well on track to meet the goals we set out at Investor Day in June 2013. But our ambition extends well beyond $4 billion in revenue by 2016, and our ambition is fueled by investments. Some large and immediately relevant, like Notre Dame, and others that are small now but could potentially ignite our business down the road, because for every Notre Dame or Navy deal, there's a much smaller investment we're making somewhere else in the business. It may be a logistics tool that you'll never hear about, a retail store in Mexico or an up-and-coming athlete who may one day become the next Stephen Curry or Tom Brady. When we invest well, we win. We believe our 2013 results are a great reflection of sound investments and solid execution. We are a growth company, one that's focused on our future but delivering results right now. With that, I'll turn it over to Brad. Brad?

Thanks, Kevin. I would now like to spend some time discussing our fourth quarter and full year 2013 financial results, followed by our updated outlook for 2014. Our net revenues for the fourth quarter of 2013 increased 35% to $683 million, representing our fastest growth rate in the past 9 quarters. For the full year, net revenues increased 27% to $2.33 billion, which compares to our most recent full year guidance of $2.26 billion. Apparel grew 35% to $546 million during the quarter from $405 million in the prior year, representing the 17th straight quarter of at least 20% growth for our largest product category. As a reminder, we grew Apparel 25% in the fourth quarter of 2012 despite facing the headwinds of warm seasonal weather and poor service levels in key areas like Fleece. This year, we came into the quarter with a compelling lineup of product, including expanded Fleece and UA Tech offering, as well as our new ColdGear Infrared technology. This new product position -- positioning, combined with the tailwinds of cold weather and our ability to better service the business with higher fill rates, allowed us to more fully capitalize on the strong demand from our consumers. From a product category standpoint, training continues to drive much of our overall Apparel dollar growth. We also saw strong growth during the period in our running, hunting and mountain categories, in our Women's Studio line and across our Youth business. Our Direct-to-Consumer net revenues increased 36% for the quarter, representing approximately 39% of net revenue, which was the same mix as the prior-year period. In our retail business, we opened 5 new Factory House stores during the fourth quarter, increasing our North America Factory House store base to 117, up 15% from 102 locations at the end of last year's fourth quarter. In addition, we expanded 9 of our existing locations during the year, in part, to offer a broader product assortment in areas such as Footwear and Women's. Looking at our full-priced brand house stores, we opened our second location at Tysons Corner near Washington, D.C. in November. In E-Commerce, we believe many of the same factors that contributed to our strong Apparel growth also drove better-than-planned results in this channel. Fourth quarter Footwear net revenues increased 24% to $55 million from $45 million in the prior year, representing approximately 8% of net revenues for the period. Results for the quarter include the timing of Footwear liquidations, which were higher than planned. Given this action, we believe we are entering 2014 better positioned in the market for our new product offerings this spring. Our Accessories net revenues during the fourth quarter increased 52% to $65 million from $43 million in the prior year period, primarily driven by headwear and gloves. International net revenues increased 9% to $37 million in the fourth quarter and represented 5% of total net revenues. Moving on to margin. Fourth quarter gross margins expanded approximately 100 basis points to 51.3% compared to 50.3% in the prior year's quarter. We previously guided fourth quarter gross margins to decline year-over-year. On the positive side, we expected lower airfreight and a lower mix of excess at our Factory House channel. We expected these to be more than offset by the negative impacts of resourcing Fleece [ph], higher Canadian duties and currency impacts on our Japanese business. As the quarter concluded, we experienced minimal impact from both resourcing and Canadian duties. In addition, we drove improved profitability through higher service levels and better-than-planned performance across our Direct-to-Consumer channels. Looking at the year-over-year gross margin picture, the following factors contributed to the improvement during the quarter. First, our sales mix was favorable, partially offset by the higher Footwear liquidations in the quarter. These factors contributed to approximately 90 basis points of gross margin improvement. Second, the favorable airfreight expenses benefited gross margins by approximately 60 basis points. Partially offsetting these gains, the impact of foreign currency exchange rates negatively impacted gross margins by approximately 20 basis points. Selling, general and administrative expenses as a percentage of net revenue deleveraged 270 basis points to 36.9% in the fourth quarter of 2013 from 34.2% in the prior year's period. With our strong results for the quarter, we had higher-than-planned incentive compensation expenses. This includes approximately $11 million in equity incentive compensation, which we had forecasted in 2014. These higher incentive compensation expenses were a significant driver of the overall SG&A deleverage for the quarter. Further details around our 4 SG&A buckets are as follows. First, marketing costs decreased to 8.9% of net revenues for the quarter from 9.7% in the prior-year period, primarily driven by overall expense leverage given our strong top line performance. Second, selling costs increased to 11.6% of net revenues for the quarter from 10.7% in the prior-year period, primarily driven by the growth in our Direct-to-Consumer business. Third, product innovation and supply chain costs increased to 8.9% of net revenues for the quarter from 7.6% in the prior-year period, primarily driven by higher incentive compensation expenses and innovation investments. Finally, corporate services decreased (sic) [increased] to 7.5% of net revenues for the quarter from 6.2% in the prior-year period, primarily driven by higher incentive compensation expenses and approximately $2.5 million in closing costs for the MapMyFitness acquisition. Operating income for the fourth quarter increased 21% to $98 million compared with $82 million in the prior-year period. For the full year, operating income increased 27% to $265 million compared to our most recent full year guidance of $260 million. Operating margin contracted 170 basis points during the quarter to 14.4%, while holding flat for the full year at 11.4%. Our fourth quarter tax rate of 34% is favorable to the 37.1% rate last year, primarily driven by the timing of state tax credits, which were received in the fourth quarter of 2013 compared to the first quarter of 2012. Our full year effective tax rate of 37.8% was higher than the 36.7% effective rate for 2012, primarily due to increased international investments driving reduced profitability overseas. Our net income in the fourth quarter increased 28% to $64 million compared with $50 million in the prior-year period. Fourth quarter diluted earnings per share increased 27% to $0.59 compared to $0.47 last year. Full year diluted earnings per share increased 24% to $1.50 compared to $1.21 in 2012. Now moving over to the balance sheet. Total cash and cash equivalents at year-end increased 2% to $347 million compared with $342 million at December 31, 2012. We funded the $150 million purchase of MapMyFitness in the fourth quarter with $50 million of cash and a $100 million draw from our $300 million revolving credit facility. Inventory at year-end increased 47% to $469 million compared to $319 million at December 31, 2012, reflecting the same factors we outlined during our third quarter conference call related to comparisons to our prior year supply chain delivery challenges. Our investment in capital expenditures was approximately $36 million for the fourth quarter and approximately $92 million for 2013. We are currently planning 2014 capital expenditures in the range of $140 million to $150 million, primarily driven by incremental investments to support our Direct-to-Consumer and International businesses as we further develop and expand our global office footprint. Now moving on to our updated outlook for 2014. Based on current visibility, we expect 2014 net revenues of $2.84 billion to $2.87 billion, representing growth of 22% to 23%, and 2014 operating income of $326 million to $329 million, representing growth of 23% to 24%. This expected growth is in line with the long-term growth rates laid out at our Investor Day last June. Below [ph] operating results, we anticipate higher interest expense in 2014, given the financing of the MapMyFitness acquisition, the full year effective tax rate of 39% and fully diluted weighted-average shares outstanding in the range of 109 million to 110 million. Given these full year parameters, we'd like to provide a few more details on how we currently see the quarterly change playing out. First, with net revenues. We currently anticipate the growth rate for the first half of the year to be above our expected full year growth rate. Factors driving this include our expected ability to continue servicing our business with higher fill rates, as well as accelerated Footwear growth. For the second half of the year, we will start to comp the improved service levels experienced in the second half of 2013. In addition, over the next few months, we will gain more visibility on fall-winter orders and our ability to execute on the planned international growth in the back half of the year. We will provide updates on our progress on future calls. Next on gross margins, where we expect modest gains throughout each quarter in 2014, inclusive of lapping onetime factors in 2013 such as the third quarter import duty impact. While we see numerous puts and takes in individual quarters, 4 factors are expected to be the common themes during the year. First, we expect ongoing supply chain efficiencies to be the primary driver to higher gross margins. Second, we expect minimal margin impact from our Direct-to-Consumer business given lower Factory House square footage growth year-over-year, as well as a similar mix of made-for product in our Factory House stores year-over-year. Third, our sales mix will be adversely impacted by our expected international growth, which includes a mix of lower margin distributor businesses. Finally, Footwear growth is expected to have a minimal impact to consolidated gross margins as the expected sales mix impact is now planned to be offset by improved Footwear product margin. Shifting to SG&A. As we mentioned, we recognized approximately $11 million in incentive compensation expense during the fourth quarter of 2013 that was originally forecasted in 2014. As a result, we are reallocating investments in 3 primary areas for 2014: marketing, international and MapMyFitness. In marketing, we expect to deleverage expenditures to approximately 11% of net revenues for the full year given some of the initiatives Kevin laid out before. From a timing perspective, we expect over 100 basis points of deleverage in the first quarter, primarily given our overall plans around activating our first Brand Holiday of the year. The marketing expense rate is planned to remain elevated in the second quarter before normalizing from a rate perspective during the second half of the year. International remains an important opportunity and priority, and we will continue to make the right level of investments to help realize our global potential, especially in Latin American markets that we are entering in 2014. MapMyFitness will also be a key area of investment as we look to build and further engage this community. As we have been emphasizing, our bottom line focus will remain on driving operating income dollar growth balanced with making the right investments to drive our long-term global success. Finally, some additional color on our inventory positioning. We expect the inventory growth rate to remain above the net revenues growth rate at the end of the first quarter given some of the same factors we outlined during this past quarter and including our positioning for elevated first half growth expectations. We do expect the spread between the inventory growth rate and the net revenues growth rate to narrow somewhat during the first quarter before returning to more in-line levels during the duration of the year. We remain encouraged with some of the early traction we are seeing from the recent investments across our supply chain organization. In conclusion, we had a great finish to 2013, with strong signs of continued brand momentum, improving supply chain efforts to better service this demand and improved foundations to support long-term global success. These factors give us the confidence in raising our 2014 top line outlook by over $100 million from our preliminary outlook last quarter, while also raising our 2014 operating income outlook by over $10 million. We'd now like to open the call to your questions. [Operator Instructions] Operator?

[Operator Instructions] Our first question comes from the line of Omar Saad of ISI Group.

Two questions. Firstly, real quick, do you guys have a sense for how much the cold weather contributed to that really big sales acceleration in the fourth quarter? And then I have a follow-up on DTC.

Sure, Omar. On the cold weather question, we had talked last year, last year, we had a warm winter in the fourth quarter and we still grew 25%. And we've been talking about that the impact of weather is less and less in our organization as our product line evolves. So 5, 6, 7 years ago, cold weather would have had a significant impact, either upside or downside, in our business. But our products have evolved so much, and it's much more diversified now, especially with our Fleece offering, that cold weather has a little bit less of an impact than it did 6, 7 years ago. So just as a warm winter in Q4 last year didn't have a huge downside to us because we grew 25%, it didn't have a huge upside to us in our 35% either. That being the case though, we definitely realize that there's some tailwind to weather, and it makes our results a little bit better across our channels, wholesale and DTC. So there was definitely an upside. Quantifying the upside to the fourth quarter is a little tough to do when you're growing 35%, but you could easily say maybe a couple of percentage points of was due to cold weather.

Brad, that's really helpful. And then, Kevin, DTC, it looks like it approached 40% on the business in the fourth quarter. That's pretty amazing from where you were 5, 6 years ago. Can you talk about what you're learning, maybe from the Tysons Corner store, the Baltimore store? You're in New York, you're coming into the New York downtown. Is the product different than what you're offering at wholesale? Is it more premium? And the way you flow in product to generate more newness and innovation, can you maybe talk about some of the strategies around the new full-price stores?

Yes, well, we're celebrating our 1-year anniversary of opening the brand house in Baltimore, and we opened it in a place that wasn't exactly a retail destination and just see what we could learn. We -- I think the learnings of the last 12 months have told us a few things. Number one, that we got a premium brand that there is a position that the consumer is looking for. There is product that we offer in the brand that maybe they haven't found in an easier basis at retail. I think the #1 goal that we have with this was making it a more compelling experience for our customer base and having our wholesale distribution as well recognized, that we could be much bigger and broader than maybe they positioned us and sort of putting us in a bit of a box in some of the retails that we've had before. Great examples of that, I think, is the way we've been able to obviously expand Men's, but Women's is probably the biggest thing, the openness of color. Things like our StudioLux line is where customers are coming from all over the country, in fact [ph], all over the world, and saying, "Wow, this is a full-line brand" versus maybe just seeing a few items, which is I think we've gotten pinned into that in the past. So Tysons is something where we then said, it was just something in our backyard. We expanded at Tysons. We're seeing similar results there. We're outpacing the way that perform at the stores. And so it's doing incredibly well. And we're going to learn a lot when we come up to New York City. And I think it will be refreshing because there's not [ph] a people in this market that I don't believe have gotten a great Under Armour experience walking into some of our stores here. So I'd say that as a challenge to our wholesale partners and also as an opportunity for ourselves. And so having retail gives us the ability to be strategic and be thoughtful, and I think we're learning. There's no plan in place right now to say we're looking to roll out 25 or 50 or 100 units. I think we're going to take them one store at a time. We're going to look for key markets where we can be strategic, places that we want to enter, and we're going to continue to learn. So I think we have the ability to change the model as to how people have done it in the past, a, not being just a retailer, not just being a wholesaler but there's a great balance in the middle, and ideally, we're inspiring our wholesale distribution to take on more comprehensive Under Armour presentation in their own stores.

International maybe for one of these new stores?

Yes. No, it's the same thing. You look at markets that we have around the globe and just take China for instance. We've got 13 stores total in 2013. We'll be growing over 50 stores by the end of 2014 as well. We're adding over 40 stores globally outside the United States as well. So we -- this really has served as much a sort of a brand marker and not something that's just domestic. It absolutely has as much to do with our global footprint and our global growth as anything. So ideally, what you'll see is consistency. You'll see a consistent message from what you find in Baltimore to Tysons to New York, and then what you find in Mexico City or in Shanghai or any place else where we're opening an Under Armour brand now.

And our next question comes from the line of Jim Duffy of Stifel. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: Kevin, people really seem to like your brand.

We'll take it. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: I'm intrigued by your Women's Brand Holiday. Are you willing to share a preview of the direction and timing for that? Then I have a follow-up on MapMyFitness.

We're just getting going with launching Holiday One this afternoon, so we're pretty focused on what Footwear is going to be. So if you don't mind, I'm going to turn that into, I think, more of a Footwear approach than anything. The answer, though, briefly, I think Women's deserves it. We don't give a lot of credit for our Women's business today. Even still, yet it's approaching over $500 million. We crossed $500 million in 2013, and our Women's business is really beginning to take hold with us as a company. We find out again that when we do innovate, we win. And our Women's business is no different than that. And so, I think it's earned the right and it's earned the focus that you're going to see of a committed organization that has 3 massive events a year, and Women's is going to have a second event during the back-to-school campaign. So that's going to be a big deal for us. Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division: Great, look forward to that. MapMyFitness, a great category. Heretofore, they've had a device-agnostic approach. Looking forward, how are you and Robin thinking about evolving that Switzerland position? Will there be a more brand-exclusive approach at some point in the future?

Yes. No, I don't see that. If I could, let me take a minute and just tell you about MapMyFitness and the way that we've approached the category. We haven't had a chance, I think, to speak to the market about what our mindset was when we made the acquisition back in December. So first of all, as a great brand, which I think we're continuing to underscore, [indiscernible] mentioned at the top of the Q&A as well, again, is that we've got a chance to go in a lot of different directions and a lot of different categories. And so, the most difficult thing we have is editing where do we want to go. A while ago, we identified Connected Fitness as the future of sport, a place where frankly, Under Armour has to be because we see the commitment from our consumer to want to be there also. Measurement and information, it's critical to making athletes better, which is our core mission statement. So it was important enough [ph], and we looked at the space and we spent some time looking at the categories. But I'll be honest, I was a user of the MapMyFitness app for more than 2 years, so I was incredibly familiar with it. And Robin and I have had a few conversations just about entering the space, and I just gave them feedback and comments mostly just as a consumer, but then also putting my Under Armour hat and thinking, "Wow, what would this mean for us?" We looked at 3 basic criteria when we decided, are we going to pick a partner here? Are we going to make an acquisition or are we going to try to go it alone? And frankly, we've almost been doing that with our Armour39 product that we launched back in January of 2011 at the NFL Combine. What was important to us was community size, the openness, the platform. To reference specifically your questions, so absolutely not. We want to be agnostic, and we want to be open to all. And then third and most importantly to us is leadership. With 21 million registered users today, MapMyFitness is an incredible asset, MapMyRun, MapMyRide. And more importantly, I mentioned that stat during my script, in the first week of January, they added an additional 400,000 users, which is up -- really, I think was up over 80% to 100% from the prior year. So we're beginning to see this accelerator that's happening. Secondly, being a platform that works with more than 400 different devices, I'm not sure that Under Armour wants to bet on the hardware side of this world. I think there's too much innovation, there's too many players. I'm not sure who's going to win, and we're not willing to throw our hat in the ring there either. And we've done it with Armour39. We think we can -- we think we have the best product there. We think we can be incredibly competitive. But from a wearables standpoint, we'd rather sit back, and we'd rather find out who the winners are going to be, and then we'll -- we could partner with them. And more importantly, we can get the trust from our consumer to make the appropriate recommendations about whoever best in class without having a jilted interest of it being ourselves. And third and most importantly, bringing Robert on. We've struggled with this, Gary [ph]. I don't think [ph] struggling would have to be a fair word, but we've looked at how can we become more relevant in digital as a whole. And going, frankly, from the word digital to the world's connected fitness is an area that now we have a leader in Robin Thurston, who's one of the founders of this industry, who's going to be driving the digital Connected Fitness space for Under Armour as a whole and bringing with him a team of more than 60 now, just with the hirings in the last 2 months, more than 70 different engineers and developers that we have on the team down in Austin, we're going to keep that headquarters there. We're going to build that technology base for us, and it's something that we think gives us great legs to grow on. Understanding the athlete of -- we've got a user base now of more than 20 million people that understands the habits, the routine. It's amazing when you balance the fact that when someone goes for a run, some people go for 2 miles and some people go for 4 miles. But when you aggregate 20 million people and find out the average run is 3.1 miles, it's one of those things that's saying how can we learn information from that. And probably the last thing I'd say about this space, globally, this thing is only in English today. And so, one of the approaches that Robin and the team have -- and I was doing a tour through Latin America, actually, as we're going and finishing the acquisition. And it was amazing just sitting in Brazil and dropping Robin an email and saying, "How many in Brazil?" And it's 100,000 in Brazil." And the site's not even translated into Portuguese, let alone Spanish. 2 million in U.K, 600,000 in Australia of all places, 50,000 in Mexico. So we're quickly going down the road of translation, quickly going to use this to help us with our international growth and footprint also. So we're incredibly excited about the deal, everything. And first blush [ph] and again [ph], we're are still on honeymoon stage, but everything's going incredibly well, and we're really optimistic at what this is gaining [ph] for Under Armour in the future.

Our next question comes from Robbie Ohmes of Bank of America Merrill Lynch.

I have one question. I was hoping that we could get you to sort of elaborate on Under Armour's dot-com strategy and maybe start with I think with the fourth quarter of last year, you guys had a few website transition issues, some weak conversion rates. Can you maybe start by talking about how your website business has been in the fourth quarter and then how you foresee it in 2014? And also, maybe help us understand maybe a little bit more how Under Armour thinks as a brand about the growth of its website versus the growth of Under Armour on other websites like the dot-com-only players like Amazon as well as some of your key partners like Dick's Sporting Goods. I think it'd be helpful for all of us.

Robbie, this is Brad. I'll jump on the front half of that question, if you don't mind, on the dot-com kind of numbers in Q4 and how it relates to '14. So yes, you're right, we had some challenges last year on conversion and all that kind of common metrics on the E-Commerce side last year versus this year. We saw some pretty significant improvements. So that's really a testament to the E-Commerce team during the course of the year getting the site where it needs to be, getting ready for obviously the heavy traffic we expect in Q4. Q4, obviously, is a huge part of the year for us in the E-Commerce side. So we saw pretty much across-the-board that key metrics around traffic, conversion, average order value are really looking in our favor in Q4 year-over-year. That was part of the obvious upside to the fourth quarter. Again, going back to my comment before, we -- a couple of comments before, we serviced our business much better year-over-year. There's no doubt the E-Commerce business benefited from that. We talked a little bit about the tailwind of weather, which we think obviously helped a little bit also. And then I think just in general for our brand, this is an E-Commerce statement, it's also a statement for overall brand, is looking back 90 days, we performed much better in the fourth quarter in a full price -- at full price for our brand compared to what was a very heavily promotional environment, too. So coming out of that, beyond our expectations, that also helped the E-Commerce side in the fourth quarter. Looking at 2014, this is also, I've got to comment, E-Commerce also the rest of our business, as we roll out of this great fourth quarter we just had, looking at it, and we're really a couple of weeks into this kind of gathering of data, looking at it and saying what does it mean for Q4 next year and the back half of the year. Again, E-Commerce is heavily weighted towards the fourth quarter, so our teams are still kind of working through that, what's the right level of expectation in the fourth quarter for us coming off this great fourth quarter this year. But the good news here is that the metrics, again, conversion, traffic conversion, average order value, all seem to be working in the right direction for us year-over-year. But with Jason LaRose on board now, our new leader, we are really focused not just on the good results we're having right now but what do we do in 2015 and beyond to keep this momentum going. And maybe I'll let Kevin jump on top of that one.

Yes, I think the best place to start with this, and Brad just hit on it, is leadership, plain and simple. The addition -- it's unfortunate that I think we've gotten a bit of a reputation about executives in our team, but we don't get [ph] the press release 2 times, the ones that are doing so well for us. So we made 2 key additions last year. We had several but 2 I'll highlight is on the Direct-to-Consumer side. Number one, Susie McCabe running our retail division, who came to us from Polo, Ralph Lauren; And then Jason LaRose, who's heading up E-Commerce. And so, again, while they're both in that 120-, 160-day opening window, I think the leadership changes are something that's been incredibly significant. And you're going to see that as we begin to, I think, grasp the fact that this community is growing in an amazingly fast way. Mobile for us today is 40% of our business, to ua.com, and I think if go back 2 or 3 years, it was like 3%. So we're quickly, I think, modifying and adjusting ourselves to a mobile world and what that means. And also, what Jason is doing is building out our International E-Commerce team. He's taken some of our best and brightest talent that we have in the company and focusing them on our International E-Commerce and doing that for Charlie Maurath and what we're doing on a global basis. I don't know if the model's been written as to how we're supposed to go about being a global company. And so, getting translation, becoming local in markets. And again, this is much bigger than just putting a site up in German. I mean, the supply chain, the logistics, all the components, we -- the system side of it. Another thing to call out on the leadership side, we just hired a new CIO, a gentleman named Chris Gates, who joins us from GE Lighting, and Chris is one of those guys who's going to help us understand the global footprint because when I -- again, when I say website, it's so much more than just having a site that translates in a local language. And so, we feel like we're just getting started here. We feel that E-Com, it's not earth shattering by any stretch. It, obviously, is the future. And it means that we don't feel that we have to go to a market and open 3,000 stores in order to be relevant there, it's that we can use the Web as something to be thoughtful and strategic with it and also to test grounds and to find out how developed we are. And so, we're going to have a little bit of balance. It's something that consumers can walk into stores and feel and touch. And then we're also going to understand that Black Friday wasn't about jumping into a crowded mall as much this year. There were a lot of people who stayed home and shopped on their laptops this year. So I think we're open to all those things. I think our partners, at the same time, Robbie, to sort of address that, are looking at it the same way. We've got a few key partners. I think this space is still evolving in a really fast way when you think about the pure players that are out there also. Our partners and Dick's is -- were looking for ways, particularly the MapMyFitness acquisition also, is Robin and his team are looking and how can we help the category and what can we do for Dick's Sporting Goods, how can we drive Foot Locker and Macy's and how can we help our key partners, some of the traffic that we can drive and some of the use that we'll be seeing from traffic coming through ua.com or the MapMyFitness platform.

Our next question comes from the line of Lindsay Drucker Mann of Goldman Sachs.

Brad, I wanted to ask you just a couple of questions. Number one, if you could help maybe put some numbers around the improvement in fill rates, when that started to happen, how much better you guys have gotten and whether you think there's more to go? And then secondly, if you could talk just a little bit about more broadly on the supply chain where you talked about strides that you've made and how encouraged you feel about the go-forward, just some of the specific areas where you've see an improvement in metrics that they have?

Sure. On the fill rates side, yes, definitely saw improvements coming into the back half of the year, especially, as we worked through some of the issues that we had last year in the back half of the year. So fill rates in general were improving as we worked through the back half of the year. In the fourth quarter, in general, if you looked at kind of our normal fill rate by cancel date, we were probably in about the mid-80s in the fourth quarter last year, and this year we're much closer to the mid-90s. So like I said in my prepared remarks, definitely a tailwind there and help from our supply chain side of servicing the business much better year over year. We do see those fill rates stabilizing here as we get into the front half of the year. As I've always said, the supply chain is a very complex area. There's always going to be challenges here and there. But in general, we see fill rates stabilizing in the front half of the year and again comping -- again, we were improving our fill rates last year in the front half of the year. But really, more towards the back half of the year is where they kicked in. So we'll see a little bit of a benefit from that in the front half of the year, too, as we work through the first 6 months of 2014. In general, supply chain, a lot of things here. It's people, it's process, it's systems. A lot of additional leadership coming on board. Since Jim Hardy came on board 2 years ago, he's bringing additional leaders, putting people in the right places. That helps, again, getting more discipline and processes around how we buy inventory and how we demand -- how we forecast the demand of revenues going forward. We talked a lot about in our Investor Day and in previous earnings calls around the 3-year planning process and the huge benefit that should have to our supply chain longer term as we can get out ahead of our design development time frame and we'll be able to predict capacity more efficiently and the timing of the need of demand also. So those will be things that -- the 3-year planning process is rolling into its second year right now. You should start to see some benefit of that as we probably start working towards the back half of this year but even more so in 2015. We did talk about some system changes we've done on the supply planning side last year, the demand planning side this year and with the regional [ph] agility planning systems. We're seeing some of the benefits of the supply system we put in place last year. We're still working through implementation on the demand side this year. So again, we should start to see more benefit to get to the back half of this year and into '15. So overall, I'd say a little ahead of schedule. Still have some challenges to work through, and Jim would be the first one to admit that, I'm sure. But we're really pleased with where we are right now compared to where we were about 18 months ago and definitely on track to be ahead of where we thought we'd be over the course of the next couple of years.

And also, just jumping on the end of that, and look we had a banner quarter, and hats off really to our entire team. But I think it's important as we call out things, and Jim Hardy is now 2 years in the job and Chris Gates, who just got here 5 minutes ago, and the foundation that was laid by the balance of our team and guys like Jody Giles and Mike Fafaul that really laid the foundation for our organization to run forward like this. So any way, I just want to give a great shout out to those guys and the entire supply chain team, who has built and put this -- made this kind of opportunity available to us.

Our next question comes from the line of Camilo Lyon of Canaccord.

Kevin, you talked about some pretty great innovations over the last year, SpeedForm Apollo, ColdGear Infrared. I wanted to hear your thoughts on zippers.

Right. You must have been out at the outdoor retail event.

I was, yes.

Look, I think it's -- speaking about product, one thing that we found is that when we innovate, that we win. You're seeing it happen on the Apparel side. You're not beginning, but you're continuing to see it happen on the Footwear side, but that's the kind of volumes that we've approached on Apparel. What we found out from 2013 was that things like introducing ColdGear Infrared, and we thought that we'd see really large gains in that product coming in 2014 and that has big plans and had a lot to do with the growth that we saw in 2013, and beginning with the fact the product just works. And it's -- this ceramic print that we have, and there's a lot more technical that goes into it than just that, but it's a terrific product that is great. Charged and Storm Cotton I mentioned on the -- in my script earlier. It didn't exist before 2011. Today, it will be over $300 million business. The things like Alter Ego that we got up and down just inside of a year, so introducing this new category of novelty for us where it's not just going to be how many Batman and Superman shirts we sell this year. We still see a growing and good business there, but introducing this idea that the consumer wants a new story from us and a way to introduce these technical products in new ways that's beyond just the fit, fabric and function, but it's doing it in a fun way. And so I think it's important that the brands have fun, and I think we're demonstrating our ability to do that. As you mentioned as well, Camilo, it's going into things like MagZip. It's the simplest innovations that we have. And you got to go -- there's a great quote that's out there that says, "Whoever invents the next white t-shirt wins." I felt like that's what was did in 1996. Was it earth shattering? Was it groundbreaking? It was so simple and so subtle. And so we're doing that every place where we can find innovation. Several years ago, we set a challenge for our innovation team, our commercialization team to build a better zipper. And no more the zippers, when you sit down, the bottom pops and you can't find, when you're wearing a big pair of gloves, you can't zip it because the male and female are too small. So we made something called MagZip, which is the first one-arm zipper. And it came from an innovation from someone that we found up living in the Northeast whose father had lost use of an arm and all of a sudden recognized that -- and he lived by himself and so is there a better way to make a zipper. And so we're putting that innovation, and into more than 400,000 jackets. And so a couple of stories you learn there is great. First of all, our consumer wins because you've got a better zipper and nobody has ever thought about innovating that. And that's what Under Armour's doing. There is no level. So we'll be innovating at the high end with things like Armour39 and MapMyFitness and at the simple end [ph] with things like -- with MagZip. And also, the partner, the entrepreneur wins. And we're setting an example for every entrepreneur out there in the world to know if you have a great idea, bring it to Under Armour because we're humble enough to know that we don't have all the great ideas, and we want to encourage that to be this open place, this open source where people are bringing them. And we do a great job as editors of curating for the general population of what should be out there. I'll probably -- if you don't mind, I'll take a minute on the Footwear side as we're running out of time here. But I believe we're innovating. When we innovate, we win. You're seeing that happen with SpeedForm Apollo. As I mentioned, we've got a large media event this afternoon at Grand Central Station where did a takeover. And we're seeing the same thing. We did it with Highlight Cleat, and I think really a breakthrough product for us. It showed us that we could be the #1 item of footwear in the market when it comes to something as close to our backyard as the sport of football. But then we also have products that we're updating and getting better. The Anatomix Spawn, which is something we're the fourth leading vote getter for the NBA All-Star team with Stephen Curry who wore that specific basketball shoe on the court this year. So this isn't some code that we're not capable of cracking, it's just a matter of time. And it's happening, and we see the brand moving in the right direction. Finally [ph], Evo is another great product we have right now. And then, of course, the Cadillac that we're really excited about is the SpeedForm Evo. And you've heard me say before that Under Armour hasn't built its defining product yet. This may very well be our next defining product. And I'm not ready to claim that it is, but it has that type of potential. The first shoe built completely in a clothing factory made with that idea and focused on fit, form and function. And it's something that we've got the kudos from people like Competitor magazine rating it best innovation, to Runner's World having that as its best introduction as well, so -- or as the best debut product that they'll have. So we feel like we're really beginning to balance our brand out, apparel, Footwear, and bringing the pieces together. And we know it's going to take time, but we're very encouraged by what we saw in 2013 and the results that we were able to post, that the brand has ever been in better position. We've never been better positioned with kids, which is something we haven't talked about on the call. But there is a -- it seems like there's a real accelerator behind the brand right now. It's something that gives us tremendous excitement and momentum leading in 2014.

That's great. And then just my follow-up for Brad. Just more on the numbers and on ASP front. With all this innovation, we'll take the MagZip as an example, what kind of price increases would you expect to see on a ColdGear Infrared jacket and just generally on ASPs into next year with all of this innovation coming into the product line?

Yes, it's tough to say in general. But I think ASPs, we've seen pretty consistently over the last few quarters be a couple of percentage points, kind of mid-single-digits up overall. In general, I think that's, again, being driven a lot by innovation and products like ColdGear Infrared. Obviously, our growth story is unit growth, but ASPs are definitely helping us a little bit, too, again more defined towards the innovation and new products we're putting out there in the marketplace. So as far as ColdGear next -- ColdGear Infrared next year, sure we'll look at the price points as we grow that product line. We're still working on final price points for fall/winter to some degree, but you could definitely see an increase in price points of around 10% or so maybe on the ColdGear Infrared side.

Best of luck. And Kevin, I love the Colo-Colo jerseys.

Thanks very much.

And our next question comes from the line of Eric Tracy of Janney Capital.

Great quarter, great year. Kevin, I guess if I could for you, maybe just tee you up a little bit more on the international front, provide sort of a learning from Charlie and his team, where we sort of stand. I know it's not going to inflect materially here over the next 12 months, but any update on the international front would be great.

Yes, thanks very much, Eric. First of all, we're learning a lot. I think we had a great quarter but there are still a lot of things that we are just beginning to get going in. And especially when you look at the international front. We're in different stages of growth in really all parts of the world, from the U.S., to Japan, to Europe, to China. But we're incredibly encouraged, I think. We're confident that the brand does translate. And as long as we execute and we do the things that we're supposed to do, we've got a real chance to live and fulfill that mission of being a true global brand where someday, more than half of our revenues will come from outside of our home country. So first of all, from a leadership standpoint, Charlie's doing really well for us and building out his team. And I think as we're as at about the 18-month mark with Charlie being on board, he might have broken the record and he's definitely, a Chairman [ph] flyer for United or anybody else. So he's been running all over the world, I think doing a great job there. And basically, though, we're in a position to do all of this, though, because of the strength of the core business, obviously. We use that statement that what's happening in North America for us, that our North American growth and cash creation are going to be the engines that feed our global ambitions for us as a company. If you look across the globe, though, let's just start with Latin America, which is where Charlie really came from, and we really put an emphasis on in his first chapter here at Under Armour. Under Armour Mexico [ph] was an acquisition that we just transitioned successfully beginning in 2014 and really highlighted by the new specialty store that we opened in Mexico City. And again, it's exceeding all the expectations that we had, but again another learning for us of what could be in the Mexican market for us. Brazil, probably top of mind for everyone, but we have a March launch planned for Brazil. We're really going into the [indiscernible] market in time for World Cup and in time, obviously, for the Olympics in '16. But we have an incredibly professional team there. We're starting a premium distribution with Centauro [ph] in places like [indiscernible]. More than 70 shop-in-shops that we'll have at the time of -- by the middle of 2014. Chile as well, Camilo just mentioned the Colo-Colo launch that we had, probably the largest -- one of the largest soccer teams in Chile and really, I think, puts us on the map as we'll continue to attract and go after big assets, big important assets all over the globe. But Latin America, obviously, where global football is something that we can double down. Europe, if I could, it really feels like a tipping point is close. We're really proud of the team, what they've done and the work that's happened in Europe. We'll be crossing $100 million this year for the first time, which is a massive, massive undertaking. And so, as we sit here 8 years in, we're very proud of that team. And more importantly, we're just as believer in what the opportunity in the future looks like. Tottenham, our EPL club there, also is doing well, sitting in fifth place. Tough loss yesterday, but they'll be back to fight another day. And then finally, rounding out in Asia, our partners in Japan are continuing to do incredibly well. The currency exchange hurt us a little bit there from a -- showing up on a growth standpoint. But the brand is getting stronger and our leadership team there is just terrific. Moving down is -- into China. As I mentioned earlier, 13 total stores in '13, growing to more than 50 stores by the end of '14 as well, primarily utilizing a franchise model for that. And then we also did this big experience store in China, which just goes to say is that when we invest there and we invest in the right things and smart things, that we have a chance to win. And so, not a lot of update on the international front, but we feel really good about our Investor Day targets of moving from 6% to 7% of business to more than 12% by 2016. So we'll continue to hold strong and live up to that.

Really helpful. And let me just -- a second question here. A bit more structural for -- Kevin, for you, and for Brad, in terms of the top line. It seems like cold weather didn't really have a major catalyst in 4Q. Fill rates are moving meaningfully higher. The strength in the core Apparel in North America, layering in Footwear, DTC is still strong. What am I missing? Or what is the potential kind of roadblock in terms of really inflecting to a higher growth rate over the next 12, 24 months? I'm just trying to reconcile the 35% there versus kind of pulling back. I understand you guys want to be conservative, but is there something that's sort of prohibiting from that growth rate to inflect a little bit more aggressively?

Yes. Let me -- and I know -- I'm going to let Brad answer this, but I just want to be clear as well, is that no question, a great quarter. I heard years ago was that when the weather gets cold, I think we all get a little bit smarter in our industry. So it definitely had an effect. But I think, to Brad's point, there's a lot more to it. So I'm going to let Brad dig deeper on that.

Yes, Eric, if you look at the front half versus back half, so we've talked about some of the things working in our favor in the front half, again comping some -- a little bit tougher supply chain challenges last year and feeling better about that this year. We also talked about, obviously, our Footwear business and a lot of that growth coming out of the first half of the year. We feel pretty good about that. Obviously, visibility for the front half of the year for us is very, very strong at this point, obviously. The back half of the year, the visibility gets a little bit more tougher for us, especially in the fourth quarter. Again, we're just coming out of this really strong fourth quarter of 35% growth, and what does that mean to our Q4 forecast for next year in our DTC business and our wholesale business. So teams are working through that right now. So there's -- but we'll get more visibility to orders in the fourth quarter. As we work through the first quarter of this year, that'll also be a great data point for us on the next earnings call. So we should have a better idea of what that back half of the year looks like, specifically in our DTC and the wholesale businesses in the fourth quarter. Also, we talked about International growth expansion. It's weighted towards the back half of the year for a lot of the reasons Kevin talked about and the markets we're entering towards the back half of the year. And the realization is, is that we obviously are planning to execute flawlessly in going into these markets, but we want to be cautious because we are entering some new markets for us. So just give ourselves a little bit of room here in the back half of the year, if there's any execution challenges on launching some markets, which is always a very, very complex process in itself. So that's kind of what you're seeing, good visibility front half, a little less visibility in the back half. We have to work through Q4 orders with our customers during the first quarter. And now DTC teams need to work through just what is the cold weather impact from Q4 this year, how much of that do we want to build into next year's forecast, again what is the overall strength of the fourth quarter this year relate to the fourth quarter of next year. So as I said in my prepared remarks, as we get towards the next earnings call, we should have a lot more visibility into the back half of the year.

All right, Operator, given the time, we're going to conclude the call. But we really want to thank everybody for joining us today. We look forward to reporting to you our first quarter 2014 results, which tentatively has been scheduled for Thursday, April 24, at 8:30 a.m. Eastern Time. Thanks again, and goodbye.

We have one final [indiscernible], we've got a tradition with this, but this year the prediction will be Broncos 38, Seahawks 28. All right. We'll see who'll win. But have a great holiday, everybody. Thanks very much. Bye-bye.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude today's program. You may all disconnect. Have a great day, everyone.