Nike FY 1Q18 Earnings Call Notes

Trevor Edwards

Continue to see incredible results in China

“Finally, in Greater China, we continue to see incredible results with revenue growing double digits for the quarter. The breadth and depth of our relationship with the Chinese consumer doesn’t just continue our success in this geography, it accelerates it.”

Andy Campion

Ramping up investment in digital capabilities

“Finally, as we target doubling our direct connection to consumers, we are ramping up investment in digital capabilities ranging from data science and analytics to machine learning to augmented reality to image recognition and personalization. We will continue to use our unrivalled resources to ensure that NIKE is built to win now and for the long-term.”

Accelerating direct to consumer business

“So our measure of success in North America in fiscal year 2018 will primarily center around accelerating our direct-to-consumer businesses, and also accelerating the work that we’re doing with our strategic partners to reshape the broader marketplace. But given all of these dynamics just one quarter into the year, it’s unclear and I wouldn’t say precisely where North America will end for the full fiscal year.”

Focus on increasing manufacturing speed

“But let me just say that the obsession or the fixation we’ve had on the opportunities around man rev continue to be a central point for us, but we are seeing the effect on the bottom line as well, product cost reductions, more efficiencies in manufacturing we’re taking that to scale, and then we’re seeing some of those really showing up in our cost reduction or product cost reductions as well. And then a lot of this has to do with our Speed initiative, our 2X Speed. So the investments we’re making in manufacturing revolution are really helping to support our Express Lane efforts. So there’s a cost benefit, but there’s also a speed to market benefit. And we’re looking at optimizing both directly and then obviously through our relationships with partners like Flex.”

Under Armour 2Q17 Earnings Call Notes

Kevin Plank – Chairman and Chief Executive Officer

Company is pivoting

“The landscape is evolving quickly. Therefore, we too must evolve quickly. This evolution requires a pivot, and we’re doing just that. We’re pivoting from a product company to a consumer-led and category-managed brand, from predominantly men’s to distinct collections for men, women and kids; from U.S. mostly apparel-centric to a global apparel, footwear, accessories portfolio; from mainly wholesale to a more balanced direct-to-consumer offering; from a historically top line driven P&L to return-focused more disciplined financial model; and ultimately pivoting from good to great operations. Once balanced, these pivots will work together to build a more efficient, thus more effective Under Armour.”

Engagement requires consistency and saturation

“On the marketing front, we’re also pivoting with respect to approach, construct and point of view. While the intersection of digital, social, and traditional continues to blur lines, success is now measured in terms of months, weeks and even days. Engagement and intimacy requires consistency, saturation and showing up whenever and wherever a consumer engages our brand.”

Brand built on performance and authenticity

“a brand that’s basically been built on performance and authenticity has become a bit of a cliché word, and a lot of people talk about going for authenticity and there are some companies that are just authentic. And we really view that as being a strength of our business and our brand.”

We remain a growth company

” I just wanted to tell you we enjoyed hyper-growth for several years, and I want to be clear that we still believe we remain a growth company. The restructuring plan that we spoke about is a demonstrative sign that we’re not standing still, but acting quickly to evolve Under Armour to become a stronger, faster and smarter company.”

Dave Bergman

Moving to a return focused company

Yeah. I’m sorry. I apologize. From that perspective, we are definitely evolving. It is a pivot for us. Not that top line is any less important, but there’s definitely a more significant focus on profitability and on return in investment in every way we look at our business and being much more strategic from that perspective.

Under Armour 1Q17 Earnings Call Notes

Kevin A. Plank – Under Armour, Inc.

13,000 points of distribution, competition has 23,000 points

“Yes. So as I mentioned a minute ago, we told you a while back that we had about 11,000 points of distribution, we were targeting roughly 13,000. So we’ve now hit that. As far as distribution goes, number one, it was important to me that when we announced expanded distribution that it was the same day that we announced being on Fifth Avenue and committing to building the greatest retail store in the world that will open in the middle of 2019.

So our commitment to being premium brand has never wavered or changed, but to compete at the levels where we want to run, we feel that we need to be the best and we feel like we need coverage and coverage is about some of the volumes that we can drive.

And again, where we talk about being in 13,000 points of distribution, it’s important to remind people that some of our key competition has more than 23,000 points of contribution in North America alone.”

We out of acquisition mode and into activation mode

“As far as additional distribution or anything there goes, we are completely, as I said, out of acquisition mode and in activation mode. The goal that we have is making all of our existing partners better, and this means doing a better job in the stores where we are. So you’re not going to hear of any additional big box opening happening in the United States for a very long period of time. We like the team that we have on the court. We like our distribution, and we think that we have a great, great opportunity there.”

Lululemon 4Q16 Earnings Call Notes

Laurent Potdevin – Chief Executive Officer

Slowing sales due to merch issues

“The slowing sales trend early Q1 has most acutely impacted eCommerce. We have clearly identified the issues, an assortment lacking depth and color for spring compounded with visual merchandising that did not powerfully translate our design vision. With focused urgency our teams have been cross correcting the issues, with early indications reflecting an immediate and positive impact on performance. We will see more color in selected style as early as next week.”

Celeste Burgoyne

Co-located and locals

“So as we’ve spoken about with our real estate strategy, co-located and locals, both continue to be something that we see as really exciting opportunities from 2016 and into 2017 in areas we’re focusing really hard on and they both allow us to really capture traffic in the most relevant ways for those communities. Co-located, expanding our square footage, for example, Mall of America and Somerset, two key U.S. co-located stores in 2016, we’ve driven more traffic in those locations and have grown the Men’s business in particular from 50% to 70% through more dedicated square footage. And then locals has also allowed us to go into smaller communities in a really locally relevant way and the results have been something we’re really proud of. Bend, Oregon and Fort Collins also, for example, have been two of the four that we’re really excited about and we’ll continue to really put into that strategy into 2017.”

PVH 4Q16 Earnings Call Notes

Manny Chirico – Chairman and CEO

US is still challenged

“Sure, I guess I’d just take a step back more from a more micro and maybe more focusing on the short-term is as you would expect as we’re looking out at the U.S. retail landscape the U.S. market is continues to be almost challenged market. And because of that we are planning that business conservatively and based on current trends that we’re seeing in the market today.”

Growth for us is happening internationally

“The growth for us, I mean I’ve tried to cover in my opening comments is really happening internationally”

Retailers have kept inventory leaner

“Sure, I think there is always pockets, but right now I would say is I think the retailers have done a very good job in department store sector in particular about keeping inventories clear. We came out of the fourth quarter, I think they reacted strongly to some of the softer sales trends both from a tightening open to buy dollars and moving inventory out in the fourth quarter.”

Really keeping inventory lean

“The other pressure that’s coming from that sector is significant pressure is being put on inventory turn. So inventory open to buy dollars have been constructed. Whatever they’re planning be it flat sales or slightly negative comps sales, the buy plan is even lower than that. So I think that bodes well for gross margin as we go through the first quarter and into the second quarter of this year. And I think even the way they projected to buy third and fourth quarter has been very tight as well given the trends that are in the business.”

Retail space is much lower in Europe. Department stores in Europe are much more fragmented

“I think you know brick and mortar in general is under pressure, but I think one of the benefits that exist in Europe and in Asia even to a greater extent is the level of retail square footage on a per capita basis is just significantly lower, 50% lower than it is in the United States. So I think some of the challenges with — the challenges that we’re facing in brick and mortar in the United States has to do with there is too many stores. I don’t believe that issue to the level that it exist in the United States exist in Europe and in Asia.”

“So that’s point one, point two is the retail landscape particularly on the department store side and specialty multi-brand stores, it’s just much more fragmented than in the United States, the United States has gone through a tremendous consolidation in the department store sector where Europe have had minimal consolidation. There is no Pan European department store, it’s really regional department stores most times country specific, but sometimes regionally specific.”

Currency situation favorable in the UK

“So I think that’s the dynamic that changes, I think traffic trends are healthier obviously there. I think the currency situation particularly in the UK is very favorable and they are benefiting from a significant amount of European tourism into the UK as well as Asia and U.S. tourism into the UK. And I can say the same thing about Continental Europe where we are seeing from the credit card data that we look at every month that particularly Chinese stores given the euro’s lack of strength is also a place that there is a lot of tourism going on and a lot of shopping going on, so really benefiting from that.

Nike FY 3Q17 Earnings Call Notes

Mark Parker – President and CEO

Digital is the foundation fo the shopping experience

“The consumer has decided digital isn’t a just part of the shopping experience. Digital is the foundation of it. This and other factors have shifted consumer patterns, especially in North America, impacting traffic, the economics of brick-and-mortar retail and is driving a more promotional environment in the near term.”

2x increases in innovation, speed and direct contact

“To see consumers rising expectations, we’re driving fundamental change in three core areas of our business, through the innovation that inspires them, the supply chain that delivers it quickly and in the marketplace, where we connect personally, with consumers. And while we continue to see great success against all three areas, we committed to doubling our impact in each of them. We call it our triple double. So what do I mean by that? In products, we’re doubling our cadence and scale of innovation through performance and sports style. Throughout our supply chain, we are doubling our speed, from product insight to delivery to the consumer, and in the marketplace, we’re doubling our direct connections with consumers through digital membership and personalization. To win now and create the future, we’re obsessing these three areas, 2X innovation, 2X speed and 2X direct”

The retail landscape is not in a steady state

“The retail landscape is particularly in the U.S. is not – is in a steady state. I think that’s obvious, undergoing some significant shifts. And those shifts really create some big opportunities and some challenges at the same time. I think the important thing to point out is that these changes are really being driven by the consumer, and consumer demand at the same time remains quite strong. But we know that consumer expectations are quite high in terms of product, the type of product they want, the innovation, the style. They want the product fast, they want it easy, they want personal service. So these are all things that are driving some of these shifts in the marketplace. And that’s why we’re focused on doubling the output or the cadence of innovation or speed to market so we can be that much more responsive to consumer needs, deliver innovation more quickly, and then doubling our direct connection, to consumers in the marketplace, using or leveraging the power of digital.”

Perry Ellis 4Q16 Earnings Call Notes

Oscar Feldenkreis – President & CEO

George Feldenkreis

Reduced retail space is a positive

“Generally speaking, we believe that the new reduced retail space in America is a positive development in the long run, especially in light of the way which retail is moving these days and the demographic implication of generation Z, generation Y versus generation X. This alphabets of generations are really creating a no-paradigm which manufactures [indiscernible] have to learn to navigate if they want to succeed.”

C&D malls are going to close

” But in the final analysis, depending on what is the traffic in the center as some of the centers also are closing the big anchored tenant, it will act like everybody in that center. We have to be very careful now in omitting in retail, especially with some of the — the trend is now that A&B super centers are going to be open and the CMDs are not. If you happen to be in a center that’s not A&B, you have a very large percentage of probability that you will not be making money and if you’re in A&B, the more developers are trying to balance their loss of income by increasing their rents on the A&B. That’s why so many specialty store business are going out of business”

Customers are getting more and more used to buying digitally

“you see what Amazon is doing by not showing a sample of anything they sell, the consumer is now getting more and more used but on a digital way.”

DSW 4Q16 Earnings Call Notes

Debbie Ferrie

Weather impact

“The warm weather at the beginning of the quarter stimulate sales of fashion boots, athletic and casual footwear. With the onset of cold weather in December our merchandizing and marketing strategy created a stronger than expected demand in boots which allow our team to deploy some pre-buys we’d allocated for next year. With the strong results from our cold weather business coupled with our decision to chase a number of fashion styles early in the third quarter we beat our bid forecast for the season. This Spring we’ve positioned inventories appropriately, with transitional merchandize and a sandal assortments that we will carry in our warm doors all year round.”

Partnership with Under Armour

” I am particularly excited to announce our brand partnership with Under Armor this year. The influence of athletic also carried to our men’s business, but overall results have been below planned. We are aggressively managing our assortment of core items while increasing the freshness within men’s dress and casual with relevant sport influenced fashion…We’re very pleased to announce our new partnership with Under Armor and we are developing, it’s a collaboration where we are developing unique product and it will be unique product for DSW with their design team.”

Roger Rawlins

Approaching real estate with a digital lens first

“Yes, I can take the real estate question. So Jeff one of the things that we continually talk about is, we are looking at our business as a digital business and with the digital business you have to place warehouses close to your consumer and with our 500 warehouses we have today, we’re within 20 minutes of 70% of the U.S. population. So when we’re looking to build out a new warehouse we’re trying to figure out, how can we get closer to that customer, so that someday we can meet that demand of the customer of delivery within whatever short period of time we want to deliver upon. So I will tell you that’s the lens we are using in making these decisions. We also are testing a lot of new fixturing that we think dramatically changes the interior of our warehouses and the customer experience we can create, but also how many units we could place in a warehouse that is closer to the consumers. So I think there is some really cool things and the opportunities we have in our warehouse network that’s I wouldn’t give our the full number right now because frankly it might be more with our smaller boxes and those are things we’re working through, but we are approaching it with a digital lens first, that’s how I will describe it.”

Fossil 4Q16 Earnings Call Notes

Kosta N. Kartsotis

We were advantaged now we’re disadvantaged

“To step back for a second, as you know, the global watch market has experienced significant disruption over the last couple of years. Prior to that, we were clearly positioned as the competitively advantaged leader in a growing category. However, with the introduction of technology into wrist devices, traditional watches came under pressure and we were disadvantaged. We didn’t have the technology capabilities to compete with smartwatches, leading to a decline in our addressable market.”

Kors exceeded expectations

“What we learned is, first of all, Kors by far exceeded expectations at full-price. We weren’t even testing prices on Kors, because we were chasing inventory and are still chasing inventory to a certain extent right now. So complete blowout at that price and what we perceived is a huge amount of demand out there, very significant for overall smartwatches, as well as hybrids.”

Traditional watches continue to be soft

“On traditional watches in the fourth quarter, the traditional watches continue to be soft. But what we said earlier, on the brands that have wearables, so mostly Fossil and Kors, we were able to offset most of the decline with wearable sales. So that’s where we are on that.”

Dennis Secor

Operating margins have declined by 11 points

“To begin, I want to first review the recent changes in our model. Between 2014 and 2016, currency has eroded our sales by $250 million and our operating income by $150 million. In that same period, operating margins have declined by roughly 11 points, from 16% in 2014 to 2016’s 5%, which excludes restructuring charges. Roughly four of those points reflect the negative impact of currency.”

Sold 1.5m wearables in 2016

“For 2016, we sold more than 1.5 million wearables devices and generated sales of almost $170 million. The majority of those sales were fourth quarter smartwatch sales for Fossil and Michael Kors. We did roll out more brands in a more limited way late last year for a total of eight brands, and we’re excited to build on the momentum for 2017.”

Gregory A. McKelvey – Fossil Group, Inc.

We think we understand pricing sweet spots

And I’ll just add, now that we understand sweet spot price points that drive real volume, we then translate that onto the supply side of our business. So we’ve got technology costs in components and manufacturing that were negotiated and really reflect the low volume we had prior to Q4 last year. We’ve also completed an extensive benchmarking study. So we understand where those costs will go as we get scale and are able to drive to increasing levels of automation with all our major component suppliers, and just also just generate the benefits of scale.

Under Armour 4Q16 Earnings Call Notes

Under Armour (UA) Q4 2016 Results

Kevin Plank

CFO leaving

“In addition to our earnings results this morning, we also announced that Chip Molloy has decided to leave Under Armour for personal reasons. With this marking Chip’s last call, I’d like to say thank you and wish him well in his future endeavors. Chip will continue to serve in an advisory role for a period of time.”

Traffic decline caused more promotions

“So first, I’d like to explain a few things. What happened, what we learned, and what we’re doing about it? So let’s start with what happened. In the fourth quarter, slower traffic caused significant promotional activities earlier, deeper and broader than expected. This commoditized some of our more basic core product that had previously sold through for us in years past. This, in addition to higher demand for more lifestyle silhouettes caused us to be out of balance with our assortment. So we lost top line volume as we work to adapt through our mix and pricing.”

We’re in a constant state of evolution

“Being a growth company means that we’re in a constant state of evolution. In 2017, we will remain on offense by continuing to invest in our fastest-growing businesses and leveraging our unique strengths and competitive advantages, and we have a lot of advantages: innovative product, brand strength, a broad base of premium sports marketing assets, unparalleled consumer connections and a strong, strong management team. Staying on offense, however, does not mean growth at any cost. It means striking an appropriate and responsible balance for the health of the brand in the near and long term.”

Need to make UA simple

” In my office here in Baltimore, I keep white boards. I use them as a way of organizing my thoughts, ideas, business plans and strategies. And recently with all the things written on them, I cleaned them all off, and I wrote just one phrase: make UA simple. And that’s just it. As we pass through $5 billion on our way to $10 billion, we must get better, faster and smarter at what we do, why we do it and how we do it. And in a way, that is simple and humble.”

The fact is that the consumer expects more today

“The fact of the matter though is that the consumer, they expect more today. They expect speed and convenience and best price and value, and they expect it the next day. So that choice of newness and customization is something that we need to react to and do a better job of. This idea though is we think that the cycle that we’re living in from retail and inventing the next big thing, it’s going to come from much closer to the concentric circle versus something built frankly off of a product that has to be hot, or an athlete or a celebrity, or a product that just happens to be about innovation.”

We’ll always have a wholesale aspect to our business

“So, I don’t think any of these things – I think the way that we’re viewing it is, of course, we like controlling our destiny, but we began as a wholesaler, and we’ll always have a wholesale aspect to our business with the best partners out there that continue to prioritize us and put us and present us in a way which we think tells and helps explain the great products that we have and doesn’t just differentiate us by price.”