Under Armour's CEO Hosts Investor Day Meeting (Transcript)

Under Armour, Inc. (NYSE:UA)

Investor Day Meeting

June 05, 2013 9:30 am ET

Executives
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Thomas D. Shaw - Director of Investor Relations

Kevin A. Plank - Founder, Chairman of the Board, Chief Executive Officer and President

Kip J. Fulks - Chief Operating officer

Henry B. Stafford - Senior Vice President of Apparel, Outdoor & Accessories

Leanne Fremar - Senior Vice President and Executive Creative Director for Women's

Gwyn Wiadro

Glenn Silbert

Josh Rattet

Jeanette Robertson

Dave Dombrow

Karl-Heinz Maurath - President of International

Kelly Cortina

Byron K. Adams - Chief Performance Officer and Independent Director

Brad Dickerson - Chief Financial Officer and Principal Accounting Officer

Analysts

Kate McShane - Citigroup Inc, Research Division

Robert F. Ohmes - BofA Merrill Lynch, Research Division

Matthew R. Boss - JP Morgan Chase & Co, Research Division

Sam Poser - Sterne Agee & Leach Inc., Research Division

Michael Binetti - UBS Investment Bank, Research Division

Faye I. Landes - Cowen and Company, LLC, Research Division

Brian McGough

Matthew McClintock - Barclays Capital, Research Division

Thomas D. Shaw

Oh, come on, it's okay, give it a little round of applause. Good morning, everyone. I'm Kevin Plank, Chairman and CEO of Under Armour. It is my pleasure to welcome you today to our house. You get a little sense and feeling that's what we call our brand voice, which certainly gives you the sense and the energy of what is Under Armour, which is a story that we're going to tell for you today. But probably most importantly, it's a lot easier when we let you feel it. So you're going to have a lot of that today as well.

We had a great time last night. I hope most of you had a chance to get out there. If you didn't make it, there are gift bags, gift cards in your bags if you need them, like you need them. But visit the store today before you leave, I can tell you it's a comprehensive part of the story that rounds everything out for us.

The heightened focus that you see when you walk into our store, you can tell the elements that are important to us, things like Women's and things like Footwear, make it unique experience for Under Armour that you probably never ever seen before.

And that's not surprising to us. I mean some of the comments that I heard last night in just talking to a few of you were, wow, Under Armour really looks good and kind of this exasperated surprised look. It's like how'd you think it was going to look. The color was impressive. The breadth of the offering you've never seen before. And all those things are frankly part of the story that we want to convey to our retail partners as much as anybody, to tell them how good we can look in their stores when they give us the opportunity.

All the way down to things like this is not how I pictured Baltimore. So today is one of those things, what we wanted to do is we wanted to blow your mind. And hopefully, we started that and we're going to finish that as the day progresses.

So again, to all of you, welcome to our house. And as you can see, we are building something certainly special and we are definitely not through.

So this morning, show of hands, yoga running, who is there? Omar, yoga, that's it. You're going to have to take our word for lots of these things. And if that's so, we'll go at him.

So 7 years as a public company. We've obviously -- we've got many friends in the room who we've gotten to know over the years. And we also have some friends in the room that don't know they're friends of ours yet that we're going to hopefully try to change that today.

And with that today, you're going to meet our management team and see some of the directors in our company that you'll interact throughout the day as well. Several that we have here. I saw Tony Deering and Tony, raise your hand, maybe if you're around. Buzzy Krongard our lead Director, Tom Sippel, on the other side, Doug Coltharp as well. And then our newest and latest and I'll say, guys, greatest addition to the board is Brenda Piper, who has been advising me on some of our marketing initiatives as well. So Brenda, welcome to all of you also.

We're going to be presenting from the stage here. And at the breaks, you're going to be encouraged to move around the building. What you see is we were in this facility the last time you were here. And what you see is basically, this is the semblance that we have of our product. We don't do trade shows too often. We don't play away games too often. We like to bring our accounts here and let them see and feel the breadth of our brand.

So what we ask you to do is work, engage with our team. And then of course, we remind you to be aware of what's on the screen earlier, our forward-looking statements, so take it easy on them with the Q&A and keep the questions, keep them all up.

Finally, don't be afraid to clap. We've got really tight information for you. People are putting a lot into it. But if you see something, let it go and feel it.

And enjoy the day. Put your Blackberrys away. You have plenty of time for those things later. But today, if you can focus, we'd greatly, greatly appreciate it. So again, we've got a lot of information to cover today, so let's get started.

As you could hear from the branding that we have all over, it's this word armored for growth. So today, we want to convince why we believe we are so well armored for growth for our company. I can say that with complete confidence because as a founder of this company, I know there's never been a time in our history where the brand and this team had been more prepared to grow.

The opportunities and the challenges that we have are certainly large and more complex than they've been in the past. But our team has never been more prepared. And as you're going to see today, our pipeline of innovation has never been better stocked.

We got tremendous runway in established businesses like Men's, and huge upside in Women's and Youth as you'll see that today as Henry takes you through that with our team.

We're just getting started in footwear with significant market share opportunities in virtually every category. With great opportunities to reach new athletes, we are expanding our distribution all over the world, but right here at home in the United States as well. We are aligned behind a strategy to establish Under Armour as a truly global athletic brand.

But most importantly, we have the team. The team, the team, the team. We have the team in place that understands both the opportunities and the responsibilities of expanding the base that we've built to date.

So as I said, we've got a lot that we want to show you today. So let me quickly walk you through the agenda that we're going to go through and how the day will progress.

So first up is going to be Kip Fulks following myself, our Chief Operating Officer and my original partner at Under Armour, who dates back to 1997 with me all the way to grandma's basement. Kip is going to walk you through how our design and innovation process drives our growth before coming back on stage to introduce our Footwear team. And a lot of that through the today, you'll understand and see why Kip is the one that we have from our company who's running these functions of our business.

After that, you're going to hear from Henry Stafford and our apparel team, including Glenn Silver, our Vice President of Men's and Youth, Gwyn Wiadro our Vice President of Women's and Leanne Fremar, our latest addition to our Women's team who joined us late last year from Theory as Senior Vice President and Executive Creative Director for Women's.

Kip is then going to come back up on stage and kick off the discussion around footwear, which I think a lot of you after last night in particular are pretty excited about. And the team's going to show you something we're really excited about in the technology front with the new product that we're going to be launching this fall and into next year in a big way. We'll break for lunch a little before noon. Again, we encourage you to get around, see the different rooms here in the Under Armour studios as we have them set out. And each 1 has a different story for you. And then we want to reassemble back here at 1:00 p.m. sharp when Charlie Maurath, our head of international is going to talk to you about the global opportunities we have and our plans to attack the balance of the world. And more importantly, the cadence at which we will do that.

After that, it's going to be our direct consumer team, with Henry showcasing for you the outland specialty discussion and Chip Adams on e-commerce and then Brad Dickerson, Baltimore, if not America, if not the world's favorite CEO is going to take you through what's it all going to mean in terms of our financials. If we haven't addressed everything by that time, we'll then have a Q&A session up here with Brad and Henry and Kip and myself to answer anything that you might have. So without it, let's get going.

We held our last Investor Day in June of 2011. So what's changed from that day? For one thing, we get to introduce ourselves as being from Baltimore and the home of the Super Bowl champion, Ravens, of course. We're very proud of that victory, very happy for the team who's actually at the White House today. We've also

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We said that we would double our revenues from 2010 to 2013. And in fact, we came in above that, with 2012 revenues reaching $1.8 billion and our forecast for 2013 taking us beyond the 2x milestone.

And while that revenue growth was strong, we believe it merely represents our foundation, the building blocks of what we see as a much larger and more diverse global brand. Because what's changed most in that time is frankly our reach. Our ability to speak to new consumers and bring them into our brand because we continue to deliver on that promise. So let's begin with consumer.

As I said, Under Armour started with a promise. So what was it? The promise simply was to make all

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A brand that was given permission to come off the field and into the other parts of their closet. A brand that brought the language of innovation, not the kind you read about in futures newsletters, but the kind that does practical things like keeping you warmer, cooler and dryer, helping athletes today. This is the foundation that we've built. A consumer who trusts us to ensure the performance is built into everything that we make. From that first 39 compression shirt to latest innovations you're going to see this morning, it's our universal guarantee of performance. It's this guaranty that's powered us to the 2 billion-plus dollars in revenues that we will hit in 2013, more than 2x what we did in 2010.

But growth for us is not a new concept. We've been a definition of a growth company since you first heard about us. Even before we sold our first share to the public, we've been about growth.

For Under Armour, it's always been about what's next and that's evident in how we've extended our reach to new consumers over time.

From a financial perspective, our growth story has delivered for our shareholders. Since our IPO in 2005 through 2012, we've grown to the 31% CAGR in both top and bottom line, 31%.

2005 was also the 10th anniversary of our brand's existence and revenues were $281 million. 5 years later in 2010, we surpassed the $1 billion mark. And this year, we are blowing past the $2 billion mark. And what we hope you take away from today's presentation is that the multiple engines that we feel that have fueled our growth to date are not only intact, but are all positioned to continue to grow and continue to deliver for this brand.

So let's talk to you about our growth drivers for a minute. Let me tell you the story of exactly how we expect to grow.

On a roadshow back in November 2005, we spoke about these 5 growth drivers that we've had. And frankly as you can tell, our message has remained very consistent. But let's look back at what it looked like in '05.

We talked about Men's apparel, a nice solid business for us. And frankly, where we were founded. Women's apparel. 4 years in, we are really just getting started in the business. Footwear. November 2005, we had yet to sell our first shoe. It wasn't until June of '06 when we released the market with football cleats.

International in 2005, we had a little bit in Japan and Canada, but not much elsewhere. And direct consumer consisted of 4 outlet stores and a small web business for us. That was a different company.

So 7-plus years of executing on this strategy that we promised you we would attack. 7-plus years of investment, 7-plus years of evolution and innovation, constantly adapting to a changing consumer, a changing marketplace and huge shifts in how consumers shop and get their information about the brands they love. 7-plus years where investors have trusted us to adapt to changes. We grew revenues nearly 8x since our IPO. So fast forward to 2013.

And the simple story is that our growth drivers have not changed since the time of that IPO in '05.

Men's apparel, women's apparel, footwear, international and direct-to-consumer, but the evolution certainly has.

Those growth drivers have helped us over deliver on the 20% to 25% top and bottom line growth that we've targeted since our IPO. They've accounted for nearly 85% of our growth since the beginning of 2011 and will continue to drive our growth for the foreseeable future.

We know that by now, some of you expected us to be hitting our heads in the ceiling of our existing distribution or maxing out on the ability to grow in core categories like Men's. But as the founder of this growth company, I believe our ability to overdeliver against these 5 drivers underscores the fact that even 7-plus years in as a public company, we are still just scratching the surface of the potential for our brand and we believe that and you'll see that today. I can say that confidently because of what you're going to see today.

On the whiteboards in my office are a number of phrases that I've either said or heard over the years. A couple of them are the ones that I heard, but now I tell people that I said. One that's been on those whiteboards from the beginning says that great brands are like great stories. With each chapter making sense, the one you just read and the one you are about to read. Today, you'll see the next chapter of Under Armour. A critical piece of our story where we will reach out to a new consumer in new geographies with new strategies, new innovation and new ways of selling and speaking to them. And while much will feel new, our book though will remain a very simple story of growth.

So let's frame out what our growth drivers look like. Beginning first of course with apparel. Apparel is our lifeblood. It's the core of what we do. The reason millions of consumers have come to trust the Under Armour logo and our promise

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And more importantly, we're going to do it in a category that we declared with the enemy on our roadshow, any of you who were there, more than 7 years ago. I showed up with this soaking wet cotton t-shirt in a bag and I slammed it on the table. And I declared, this is what athletes are wearing on their body. There must a better solution. That's a pretty good thud. That's a size XL standard 100% cotton gray t-shirt. Athletes don't wear that anymore because our brand has changed that cadence.

And you're going to see how our next platforms are being built around technologies like ColdGear Infrared. Platforms that we purposely start small, but have proven we can grow into $0.5 billion businesses as well. This relentless flow of true innovation is a primary reason we believe there's significant runway for our men's businesses, in both our existing and frankly new distribution.

Henry is also going to talk about the broader reach of our brand and how it's evolved in the past 2 years in both the product and distribution perspective. And what we need to do is to continue expanding our reach to new consumers.

Some of those new consumers are women and hopefully we attracted a few last night when they saw the breadth of our line in our Harbor East store.

Women's for us has been a powerful driver of our growth for Under Armour. Moving from $54 million in 2005 to where we see it approaching again the $0.5 billion mark this year. It frankly is our biggest product opportunity and one of which we've never been better poised frankly to take advantage. We've built a very large women's business and have done so through authenticity and focused distribution. But we know there's a consumer out there that we've not been addressing. And today, you're going to hear from Leanne Fremar who joined us last year from Theory and Gwyn Wiadro who's been driving our growth in Women's since 2009, which has been spectacular. They're going to take you through where we are in Women's and give you just a sample of some of the things we're going to do to bring the Under Armour brand to a new women's consumer. We've heard you. We've been listening and we're going to take action.

On the youth side, our opportunities are abundant. Now this is a selfish picture. This is my -- was my 9-year-old boy at his 10-year-old birthday party and this is 5 -- 9 of his friends who showed up for a game of flag football for their birthday party on Saturday. Half alter ego Superman, half alter ego Batman. And as you'll hear from Henry and Glenn the kids, they enjoy the Under Armour brand, let alone we put superhero figures on top of it too.

So this last piece of our apparel puzzle is youth, as we refer to it internally as next. We do that because we fully understand the power of our brand and our ability to engage a young athlete early on and keep them as an Under Armour brand loyalist.

There's a generation that's grown up with our brand and our focus is on ensuring that we stay true to our core. Today's youth consumer is

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We've heard a lot from you, particularly at the Brand House last night, as I mentioned in my opening remarks about how great our Footwear looked. That's exciting to us. But frankly our reaction to that is you haven't seen anything yet. We are truly just getting started with this opportunity.

We made tremendous progress since our first steps in the Footwear back in 2006. And when we look at the landscape in 2013, I think the most important takeaway is that we've learned what it means to truly be a footwear company, not an apparel brand who's making shoes, but a totally integrated footwear company. We've changed the voicemail Under Armour performance apparel, how I may help you? We've changed the signs, the welcome signs, welcome to Under Armour performance apparel. It is welcome to Under Armour performance. And whether it's apparel, whether it's Footwear, whether it's accessories, we service all those needs for the consumer.

One that's focused on building the platform for global growth in footwear. It's a footwear organization that's integrated with our apparel team, not just in creating head-to-toe looks for our consumer, but understanding the importance of fit and how we are making that part of our DNA in footwear as well.

And most importantly, a footwear organization is focused on delivering growth across all categories, genders and geographies. We've delivered a 44% CAGR in footwear since 2006. But again, that just feels like the tip of the iceberg for what the brand should look like. We'll deliver that growth and it will come by being great within every category where we compete. And I can promise you, we expect to compete in every category. Growth that will be driven by being an authentic performance brand and how we take that brand equity to a broader range of consumers over time. That means taking it to consumers outside of our home country and that means truly becoming global.

I spoke earlier of how we look at our brand story as chapters in a book. International will be our first chapter that will not be written solely in English, but in Spanish, Mandarin, Portuguese and many of the other languages spoken around the world. International is the biggest opportunity for the Under Armour brand. And because we believe we're now in position where our strategy is truly aligned with the size of that opportunity.

A critical part of that strategy is getting ourselves on the ground as local brands in most of these key markets. Over the next year alone, we'll be opening 10 more offices. And by the end of 2013, we'll actually have more offices outside the United States than here in the states. That is no longer a North American apparel company.

Our office in Panama, where our Latin America operations will be based, opened last month. We'll use that base for entry in the key markets in the other part of southern hemisphere. And you'll hear more about this, this afternoon. We're also opening in Manchester in the U.K. in Australia, in Germany later this year. And after lunch, you're going to hear from Charlie Maurath who joined the last fall from Adidas to drive our international business. Like many of our executive team that you'll hear from today, Charlie came to Under Armour for the opportunity to build the next great global athletic brand. He will talk to you about how we will get to profitable growth in the short term while ensuring we are investing truly for the long term. He is going to show you how we can invest in sports marketing assets around the globe and have them do more for Under Armour than they can for our competitors. And he's going to talk to you about how we will keep Under Armour true to our core and connect with athletes through an authentic position around training that is distinct from our global competitors.

We will forge our own path globally and not simply follow the same prescription used by others. Because the world is different these days, the impact of a rising middle class and tools like e-commerce, providing us with growth opportunities more diverse, but also more complex than that when the established global athletic brands we're making their inroads internationally.

Toward that end, Charlie is going to tell you about new leadership in Western Europe, in China. The strong growth trajectory will remain on in Japan. And those new partnerships and structures in 3 key markets in Latin America. The result will be that when you're down here for our Investor Day in 2015, you'll see an American brand that is making strides as a global company, with international revenues accounting for a meaningful higher percentage of our revenues than they do today.

We are committed to global. We are working like crazy to evolve ourselves to that point. And we very much like the direction we're headed.

Next is direct-to-consumer. You're going to hear the word platforms a lot today when our team speak. Mostly because the manner in which we've been able to take a single innovation and span it across multiple product categories has been a key component of our growth. Henry Stafford is going to talk about how we plan to continue expanding our reach to more athletes through strategic expansion with our existing partners. But we have an important weapon in the armory and that's our direct-to-consumer business.

Our growth in DTC over the past few years has been excellent, moving from 23% of sales in 2010 to nearly 29% last year. As investors in the industry you're very

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Compared to about 11% in existing wholesale distribution. While it's still early, but we're confident that when our consumer sees the full breadth of the brand presented in an elevated manner, we win.

There are more stores to come and Henry and the team are going to tell you about where that is heading.

So let's go into innovation. Our team is obsessed -- obsessed with understanding our consumers' needs and bringing to life innovation stories that frankly solve their problems.

And while we work with the best research partners in technology hotspots around the globe, we are geographically advantaged by being based right here in Baltimore as it locates us among partners as varied as NASA, DARPA, In-Q-Tel, DuPont and Vista, the Johns Hopkins applied physics Lab and Lockheed Martin just to name a few, all within a 50-mile radius of our headquarters. These research innovators and our relationships worldwide will enable us to leapfrog existing infrastructure and deliver next-generation product today.

What's our next great Under Armour product innovation going to come from and where? That's simple. The same place that our first innovation

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So knowing that all of our innovation is born on field. I want to spend a minute on the people who provide us with that first insight, the athlete.

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As you can see, we're excited about what brand holidays are going to mean for our company. Consolidating and taking a lot of noise or clutter that's spread out of the course of 12 months and consolidating into 2 or 3 or 4 major key events.

Our first one as I mentioned, kicked off in February, around a lot of hype and excitement in new product launches from new footwear and Armour 39 and our I will campaign. The second of which will be coming to market toward the end of -- back through the beginning of back-to-school season and then we'll have 1 final campaign that will kick off before the end of the year.

What you saw there though was Bryce Harper, 20 years old, Kemba Walker of Charlotte Bobcats, 22, Sloane Stephens, age 20, the rising star of American tennis who took out Serena Williams the Australia Open a few months back and Canelo Alvarez, age 22, newly crowned junior middleweight champion of the world, the pride of Mexico, a market where we're just getting our feet wet in 2011. And with assets like Canelo who's going to be fighting Floyd Mayweather on September 14 in what will be the fight of the year. Football teams like the 10-time champion Saluki and our new structure in Mexico that Charlie will share with you later today, we are in great position to have Mexico be one of our global leading markets in 2013 and beyond.

So while we continue to invest in our core sports with great athletes like Bryce Harper in baseball and Arian Foster in football, we are evolving our brand voice. Taking to the next level of Under Armour consumers through athletes like Sloane in Tennis and Canelo in boxing.

2 years ago, we just announced our partnership with Tottenham Hotspur, the English Premier League. The team had a great season in their first year wearing Under Armour kits with stars like EPL player of the year Gareth Bale and top American Clint Dempsey, helping introduce our brand to our next generation of brand loyalists.

It's the voice of next that will help us grow our global footprint by connecting with consumers through their sports, their athletes and their teams. And just as Tottenham has helped introduce Under Armour to the football fans around world, next year's Winter Olympics in Sochi and the 2016 Summer Olympics in Brazil will be key opportunities for us to bring our message to a global audience.

Next February, the U.S. speed skating team will step on to the ice in their Under Armour speed suits. Making athletes better. This is our wheelhouse. The place where we built our brand. I can't show you what we're working on, but we've been working closely with Lockheed Martin and the University of Maryland to ensure that with Shani Davis and his teammates on the starting line in Sochi, they'll be wearing the best possible equipment to help bring them home gold.

Our exposure at the next Winter Olympics doesn't stop at speedskating. We'll be outfitting U.S. Bobsled team, Canadian snowboard team, the Swedish and Austrian ski teams and a host of other athletes and teams. And our Olympic story will continue to get bigger in Brazil in 2016, as we'll be outfitting both the women's and men's U.S. Olympics gymnastics teams.

As I'm sure you're aware, the number of eyeballs watching gymnastics during the Olympics was enormous, with the women's portion pulling the highest viewership in prime time coverage in London in 2012. So I think our message around athletes is pretty clear. We will continue to focus on finding the next great athlete and ensuring that we stay relevant with our core consumer.

As I say that, I look out to the audience and I wonder are there any questions with that strategy?

Unknown Analyst

I have one.

Kevin A. Plank

I'm sorry, where is that?

Unknown Analyst

Here in the back.

Kevin A. Plank

Back. Could you please identify yourself?

Unknown Shareholder

I'm Tom from Boston. I've been a loyal shareholder for about 3 years now. How do you decide which athletes to use in your big, global marketing holiday campaigns? Are there open castings or can I try out for something like that?

Kevin A. Plank

Well, Tom, we keep representatives in each region. You can actually speak with them. That would work well. But ladies and gentlemen, Tom Brady, would you mind joining me onstage to help explaining some of this, please?

Tom Brady

Thank you. Thanks, man. Good to see you.

Kevin A. Plank

Welcome. Thanks for coming.

Tom Brady

Hi guys. How you doing?

Kevin A. Plank

We're good. I mean, so first of all, before I try and kick off with anything, there's a lot of people in here from New York or from Boston, anything that you would like to say to them? Start with Boston, let's be nice and then maybe a bit for our New York friends as well.

Tom Brady

Boston's strong. We've been through a lot this year. So, yes. It's been great to see the support of the community, really rally around something so tragic. But it's been home to me for 13 years and my family's there now and we feel like it's our home, and we're just proud really to represent the city and on the good days and the not-so-good days. But coming to Baltimore is certainly bittersweet. Other than you, it's not my favorite town. And New York would probably be a very close second. So...

Kevin A. Plank

Well, we'll move on from that, too. But I've got to say, rooting for you and watching you. So I mean, I imagine for you any year that you're not playing in the Super Bowl must feel like a long offseason. So what are you doing in the offseason? What happens other than coming in and it's different for us at the Under Armour Investor Day? It doesn't sound like good preparation for the year, Tom?

Tom Brady

No, but at this point, going into my 14th season, if you can believe that, it never stops. So much what these professionals do, what you do, it's a year-round business for me. And there's really no offseason at this point for many professional athletes because the competition is so tough. You lose a game at the end of the year and you're very disappointed. It's not the last game of the year, which is the Super Bowl, but it's highly competitive. And when you lose, you learn from the lessons that you've -- over the course of the season and you try to apply them as you move forward. I think we've done a good job with that this season as a team and it's important to move on. I think one thing I learned, actually I talked to a guy. He said, "Listen, after every bad play, you know, the clock's still ticking on next play so you've got 5 seconds to forget about that bad play. Deal with it emotionally and move on." This is after a game. You got 3 hours and after a season, you got 3 days because all those negative emotions affect all those subconscious cells in your body. And when they start heading in one direction, it's hard to turn them the other way. So I'm a pretty, pretty positive player and it's nice to be around positive people and certainly being around you, and this brand has been a great positive experience for me.

Kevin A. Plank

Well, let's talk to that for a second. So after 14 years and joining us 3.5 years ago I guess as long as it's been, what's different about the way you train today? And frankly, why Under Armour?

Tom Brady

Well, I looked around the locker room. I looked around the streets and I saw what the young kids were wearing and...

Kevin A. Plank

You're still a young kid, too.

Tom Brady

I know. I feel like a young kid, but you see the kids in high school in the Pop Warner games and what they're wearing is Under Armour. And the innovation that's taken place and really the way that I've been treated as an athlete, it's -- and I'm sure all of the athletes are treated this way. But there's nothing that Under Armour can't accomplish for an athlete and that's what I'm looking for. And that's the take that I have with my teammates. I'm trying to be the best that I can be for my teammates. Certainly, Under Armour is a part of my team and I'm able to try to come as best as I can to you guys.

Kevin A. Plank

Well, they all get special treatment, but you definitely get more special treatment than most. Are you used to that? You don't know the difference, but it's okay. But -- all right. So let's talk about one thing you did in the offseason, which is you did it last year for us and you did this Funny or Die commercial for us, which was pretty funny. And I don't know, maybe refresh some people's minds and show you the last. Anybody from Boston might have seen it, but it was the fastest commercial on -- or fastest segment on Funny or Die to declare Immortal status, which means get 1 million views. And something we did with Tom shows a little more of personality than somebody calling plays and taking calls from Coach Belichick. So without further ado...

[Presentation]

Kevin A. Plank

All right. So you've got a follow-up to that, that we're doing. You just shot that one. How did that go?

Tom Brady

Hopefully as good as the first one.

Kevin A. Plank

That kid was -- he's unbelievable, the actor.

Tom Brady

Yes, some of those takes, I mean, if they had the outtakes, that's really what I want to see. But I mean, the amount -- my head hurts so bad at the end of the day just from laughing so hard. And the guy that came in, "were you, fly from Boston?" Every time he did it, I started laughing. And the director was like, "Cut!" And I'm like, "I can't look at the guy." So it was -- I tell you, playing football is a hell lot easier than doing that though, from my standpoint.

Kevin A. Plank

Hurry up and wait. So God, it's obviously, as we mentioned, big crowd from the Northeast. A lot of big shots in here from Boston, too, and I can see it now standing at lunch over my tuna salad. Somebody walking up to me and saying, "You know, I know Brady. I just -- I know him. Tell Tom I said hi. Well, I know Mr. Kraft. And they'll probably be in the box at some point with Mr. Kraft." Any good like Belichick stories or anything you can -- help give them an "in" when they're talking to him?

Tom Brady

God, that's a great question. I'd be crucified by Belichick, if I -- if anything ever...

Kevin A. Plank

Nobody's going to say anything in here, right?

Tom Brady

No one, but there's no social media, right?

Kevin A. Plank

No. No question.

Tom Brady

So -- God, if I had some Belichick stories. I've got a lot of them. It's going to be in my book one day.

Kevin A. Plank

Okay, that's good. That's good. Well you've got a lot of -- a lot of people will be happy to buy your -- how about one last one from me then is, in a second here, I'm about to make predictions for the next 3 years for Under Armour. First of all, any predictions there? And secondly, any predictions for the Patriots?

Tom Brady

Well I'm team Under Armour so it's full steam ahead. And being around you and listening to your commitment not only today, but really over the course of our relationship, it's just very impressive. And it's -- and I think aligning with the right people and seeing the vision of people, that's what life is all about. And as I said, my commitment to you and your commitment to your athletes is what stands out the most. So I'm very appreciative about that. I know you're going to come through. For our team, I'm sure hoping we come through. But like I said, it's a very competitive business. And everything in the NFL is to bring the guys at the top back to the middle and the guys on the bottom up to the middle. And we've been on the top for a while and I hope we stay there. We got another shot at Baltimore this year. We play the Jets a few times so we've got tough competition. I'm excited for it. This is a really important part of the year for us to lay the foundation

[Audio Gap]

Kip J. Fulks

[Audio Gap]

team, but everybody down to the last player on the team, so really makes my job exciting, also really easy because they're so good.

One of the things that's important is we have to have integration. And so being a military brat, my brother was a Marine, my dad was a Marine and my grandfather was in the Air Force, I use every opportunity to do a plug for the military and I'd like to show you a little video.

[Presentation]

Kip J. Fulks

Great. It's not the most typical Chief Operating Officer presentation to dive into design and innovation and how innovation fuels our growth, but I really look at my job description as aligning all the pieces to get these innovations to the marketplace. That could be our own stores. That could be our key retailers, could be our web, global, really getting these products to marketplace is my job description. Peter Drucker has a famous quote, "Business only has 2 functions -- excuse me, and that's marketing and innovation." And really today, we're going to talk about looking at how we drive innovation. We have to have a sustained flow of product. It's constant newness to the floor. And in order to do that, we really have added discipline, process, engineering to our skill set over the last 2 years, where it's not a mistake that these products show up and when they show up. We've allowed our product and our operations teams to get alignment, to deliver high-quality product at great margins.

Matter of fact, over the last 2 years, we've increased our SKU productivity and still maintained the significant growth in apparel. So we're finding a better mousetrap. We feel like we're hitting our stride. This is a simple slide. We like to keep it simple at Under Armour. Innovation is fairly overused in the marketplace right now. But what the consumer really demands is the right designs at the right place at the right time. And we feel like we found a methodical way to constantly engineer this into our processes.

We look at innovation really through 2 lenses. But sometimes, they happen together. Sometimes they happen apart. Really, technical design and aesthetic design create higher ASPs and better margins for us. I'm going to kind of go into a couple examples today, and our Apparel and Footwear teams are going to give you some in-depth looks at some of the ways we brought these platforms to the market. But they all drive brand, they drive revenue and they drive gross margin, and it's what we predicated our entire company on over 17 years.

The first example I have today, really, was a 2-year project that we did with Joanna Scurr at the University of Portsmouth, which was we needed to resonate with female consumers. So we addressed some technical design needs to make a great fitting Sports Bra. It's elevated our business. In 2016, there will be over $140 million and really solidifying us as a real player in the women's sports bra industry, but it was through the relentless pursuit of innovation.

The next one is aesthetic design. I saw a lot of folks at the retail store last night looking at our Alter Ego. I have a 3-year-old son. He's wearing Alter Ego. This is a great way to take design and add it to our core business of Baselayer and get an amped-up look, an amped-up feel. But it's our traditional innovation that we've had for years and it was one of the fastest-selling items on ua.com. This is a product that we're super excited about going into back-to-school and the holiday season. But it's a great way to show the difference between technical design and aesthetic design, both delivering an innovation to consumer values and is willing to pay for. It's a great lift to our Baselayer business.

The next one, sometimes you hit the nail on the head. I think I've heard that statement a couple of times in previous slides already. And we have an item with Footwear that we hit that nail right on the head. We did both. We took technical design and a disruptive look in the marketplace.

Last year, we sold 20,000 units of a Highlight cleat and it evaporated overnight. We're going to sell over 5x as many this year at a price over $100. So we are commanding that we know how to deliver these products to the consumer and they're willing to pay for them. And now we're taking this platform of Highlight into new areas like baseball, lacrosse and soon into running. It's a great example of where we deliver both innovations at the same time and it creates a platform for us.

The next one is a little bit different. And I picked this example because Henry and the Apparel team are going to go a little bit more in detail about ColdGear Infrared. But we searched the globe to find a way to do -- put a lift on our traditional franchise business, ColdGear, and we found a ceramic powder that retain body heat. And this aesthetically has a print on the inside. But really, the feat here was supply chain manufacturing, customs regulations, printers around the world. We had to figure out how to get this to print on the inside of our garments. It's going to be offered in store July 1. In its first year, it's going to be over $100 million. It's just -- it resonates the need for the integration of the supply chain and the product operations that these innovations can't get to market by themselves. Henry and the team are going to go through it, but we're super excited about ColdGear Infrared for this back-to-school season.

The next -- before I talk about our next adventure, I really wanted to -- these all aren't by accident. Kevin alluded to our style number, 0039. It was our first shirt. A matter of fact, I remember writing that number on a number of boxes in grandma's basement. And it was exactly what we've talked about. It was technical design, aesthetic and disruptive. In 1996, you might remember, baggy was trending and we come out with a tight-fitting t-shirt. I remember getting calls from equipment managers telling us we were crazy, "Guys would never wear it." And then they're calling back the very next day, "Can I get more?" This is actually the way we've designed our entire company over the years. And I just want to connotate that it's not on accident. And really, my job is to ensure every season, we can do it over and over again.

But we're also excited about new markets. We are launching the first-ever electronic product with Armour39. I think you saw them working out in front of the store. I'm going to talk about a little bit, but we have a video to kick it off.

[Presentation]

Kip J. Fulks

So we first debuted this product at the NFL Combine 2 years ago. In the spring, we just launched it to retail. We sold out of our initial quantities. It's really for true athletes. It's a performance monitoring system. The great thing and Kevin mentioned it is at the end of every workout, you get a score, we call it the WILLpower, from 1 to 10. Every day, literally, you can see how you did and the athlete can drive to get better. I'm addicted to it. The product's phenomenal. We see the digital space as an enormous opportunity. Was it easy to get this product to market? No. Did we rally around it? Yes. Did we find ways to get it done? It's really impressive and super excited. I would love all of you to give it a shot. It has an app super easy to use on your phone, a strap and soon, a watch to come out with it. And we're super excited that we're entering a new space and we see this as the next frontier and really excited to be here today. You're going to see me again when I'm up here talking about Footwear. But I think I'd like to introduce my counterparts, Henry Stafford and the Apparel team. I just want to remind you, my job as Chief Operating Officer is to get these innovations to market, but these guys make it really, really fun to do it. So I want to invite Henry and his team up.

Henry B. Stafford

Thank you, Kip. Thank you. How's everyone doing? Good. All right. We've got our product leadership team coming up here with me today. It's my pleasure to have the 3 most famous Michigan graduates up on this stage today. One obviously being Tom Brady, the second is Gwyn Wiadro and the third is myself. Earlier in the backroom, I was talking to Tom a little bit and we were -- I was to trying to reminisce about the parties we were at together, the mutual friends we had and he didn't quite remember. So maybe a different experience for me than him at the old school. But we're really excited and happy and proud to be here today.

We have an amazing team, an amazing team that's taking our business to the next level in apparel and that's what we're here to talk to you about right now. And I want to take the time and introduce our team. Because we have 3 leaders, 3 professionals and 3 individuals who are going to build this business and have built businesses for the years to come.

So first, I would like to introduce our Executive Creative Director of Women's, Leanne Fremar. Leanne, please tell the group a little bit about yourself.

Leanne Fremar

Thank you, Henry. Good morning, everyone. It's wonderful to be here. I'm a relatively new face at Under Armour, having joined in the fall. I bring with me 15 years of experience in the fashion business, having started my career at Ralph Lauren and then moving onto Gucci and then Gucci Group and PPR, and then spending the last 10 years at Theory and then Fast Retailing, building a brand from really just an idea into a $1 billion global business. So it's an honor to be a part of the Under Armour team and we've got incredible things to talk to you about today.

Henry B. Stafford

And yellow, of course, is your favorite color, right, Leanne?

Leanne Fremar

Yellow is my favorite color today. Although whatever the next trend color is, is really my favorite color.

Henry B. Stafford

Good stuff. Good stuff. Thank you. Next, I would like to introduce the individual who coined the phrase, "Women's will be as big as Men's one day." And that is Gwyn Wiadro, who is responsible for leading our Women's business to where it is today. And Gwyn is a true leader in leading the team. So Gwyn, please talk about your background.

Gwyn Wiadro

I never liked to correct my boss in a room full of people, but I think that I said, "Women's would be as big as Men's as soon as possible." So anyway, good morning, everybody. I saw all of you or most of you 2 years ago. It's nice to see you again. I started my career in women's apparel about 18 years ago and I've had amazing opportunities to drive businesses for great brands like Chanel, Lilly Pulitzer and The Gap. But I joined this great brand 4 years ago with a charge to drive the Women's business. You're going to hear a lot about that today. And really, I'm just incredibly excited and thrilled to be able to join forces with Leanne, and continue to drive revenue growth, profit, vision, aspiration and everything unexpected for the Women's business today and beyond.

Henry B. Stafford

You got it. You got it. And last but not least, I would like to introduce Glenn Silbert, our partner on our biggest business, and that's our Men's business. Glenn also runs our Accessories and Youth businesses and has done an amazing job in building these platforms for us. Glenn, take it away.

Glenn Silbert

Thanks. Well, I'm honored to be here and I'm honored to be sitting next to 2 people I'm gunning after, being bigger than me. So challenge taken, thank you. I'm honored to be leading an amazing team that's driving our Men's, Youth and Accessories business. I've been in Under Armour for about 3 years. Initially, heading up our Youth strategy and I have to say it's been an absolutely amazing ride.

Before Under Armour, I spent about 18 years in the apparel and accessories industry, with about 8 of those in the performance space working with Foot Locker Inc. If there's a key takeaway from my presentation today, it's that Men's and Youth are just getting started. And when you leave here today, you'll be convinced that we're growing and we're growing big.

Henry B. Stafford

You got it. We're excited to tell you where we're going and we have a great story. A story of momentum and a story of growth. The word you are going to hear a lot today is growth. You're going to hear from Charlie Maurath growth internationally. Kip and the Footwear team are going to go up here and talk about growth in Footwear. And Chip Adams will talk to you about growth online.

But perhaps the most positive indicator of the health of this brand is the continued growth we see in our Apparel business. We are armed for growth and we'll continue to drive our Apparel business to be #1 everywhere we sell. Right now, we are either #1 or #2 in the vast majority of our channels of distribution and we are on a quest to be #1 everywhere we sell.

2 years ago, I had the pleasure of walking you through our roadmap of growth from 2011 to 2013. We talked about how new innovations were going to be the engine for growth. We talked about our maniacal focus in developing our Women's and Youth categories. Well, today, I am proud to stand before you and tell you we have delivered on this roadmap

The Apparel business has grown by over 20% for 14 consecutive quarters. Our Men's business has doubled from 2010, approaching $1 billion through this year. Our Women's business has more than doubled in that time period, reaching over $0.5 billion this year.

Our Youth business has doubled in only 2 years to a size well over $200 million. The point I want to make today is we continue to see this level of growth in all 3 categories over the course of the next 3 years and beyond. We continue to see this rate going forward.

Here's the deal, folks. We are just getting started and that is the message we want to send to you today in our Apparel business. We have just scratched the surface of what is to come both domestically and globally. And for the next 30 minutes, this team is going to tell you how and why we are so very confident in this business.

We will talk to you about the relationship with athletes and the tireless research we do to connect with athletes, how this research leads to authenticity and innovation. And innovation leads to revenue-driving businesses and new business inventions. I said this 2 years ago, I say it today and I will say it 2 years from now, 4 years from now when we are doing each of these conferences, it is about innovation and new business platforms that we are going to continue to develop.

Later today, I will also get up and talk to you about another key strategy of ours for growth and that is by reaching more athletes. We have the ability to scale much more significantly in the years to come by reaching more athletes.

Our size is opportunity. In the coming years, we are going to put plans forward to sell our product in more places to reach more athletes. And again, this is both domestically and globally.

Okay. So let's talk further about our first strategy, innovation. Here, you have an image of who we call future girl. She's an athlete. She is an influencer, a beautiful individual, highlighting the future of innovation, the ability of a shirt to change color by the swipe of a finger.

Now, I will show you a video of another individual representing innovation, another beautiful person. a true influencer. Let's go to the video.

[Presentation]

Henry B. Stafford

[Audio Gap]

about a beautiful person or an influencer, but Cramer has one thing right, and we take it as a massive compliment. We are serial innovators. We are serial innovators. We are. That is what we do. That is how we breathe. We act on it every single day. An innovation leads to growth, which leads to revenue-driving platforms.

Let's take Storm. Kevin talked about it this morning. It all starts by working with athletes and ultimately solving a problem. The problem was and problem had been that athletes needed to be dry. We worked with our teams and outside firms to develop technologies to treat fabrics from allowing water to penetrate. This technology is what we call Storm.

In 2011, we launched this technology into our cotton fleece sweatshirts. It was narrowly focused and it was narrowly distributed to authenticate the technology. Consumers loved it and it quickly grew to a $50 million business.

In 2012, we expanded it into new fabrications and new categories such as golf, run, outerwear and beyond. And as you can see in 1 year, the business doubled.

But the key for us and the focus for you to take away is your 3, 4 and 5. We start to reach scale in the third year of a technology launch and years 4 and 5 will continue to grow. This is when an innovation turns into a platform and that word "platform" and a platform innovation is very important for you to take away.

As you can see, Storm will have grown from a start of $50 million to $225 million in 3 years. Storm is a good example of our focus. Developing innovations that will evolve into platforms. Innovations that in 5 years will grow to over $0.5 billion. Along with Storm, in 2011, we launched our Charged Cotton technology. Cotton allows us to access more of our athletes' closets while bringing the performance angle not seen in the market. Both the Storm and the Charged Cotton platform will reach $500 million by 2016.

The point I want to make that right now is that's not all. The key is our pipeline of innovation is full. We will continue to develop new platforms over the next 3 years, whether it be through ColdGear Infrared, the next generation of ColdGear. This launches later this fall and this will be our biggest innovation launch in the history of our brand. ColdGear Infrared will keep athletes warm and dry.

Scent Control, another innovation. This has revolutionized the hunt and outdoor space, which is a significant business of ours and is growing substantially.

ColdBlack, which keeps our athletes cool when the weather heats up, particularly in run and in golf.

The ArmourBra, which has connected deeply with women, and Gwyn and Leanne will talk soon about the importance of the bra business for us.

Another innovation, Armour Vent [ph], launching in spring 2014. This innovation will keep athletes at their best when others are hitting the wall. But what's on the screen behind me is not everything we have. You will continue to see new innovations launched in 2015 and 2016 that we are currently developing. We will launch new innovations every year and foster these innovations to become platforms of growth for Under Armour.

Okay. So technology and innovation will drive revenue for us now and in the future, but we are not stopping there. Our athletes want to look great.

Earlier, Kip mentioned design and I cannot stress enough for you today, we have and will continue to over index on the focus we put on the design and look of our product.

Our athletes want to look different. They want to stand out. They want to be noticed and you will see a maniacal focus on newness and newness in design that we bring to the market in the coming years.

Listen, here's how we see it. When you have innovation on one side and brilliant design on the other that mash up together is a beautiful thing and that is what we are focused on and that is what is going to drive our business in the coming years.

In addition, versatility in product is only going to be more important going forward. What do I mean by versatility? Something that can be worn in the gym or around town. You know it and you see it and we are going to capitalize on it.

Lastly, I want to comment about the history of this brand. When a consumer is pulling this brand into a category, it is a winning formula. Our athletes wanted us to make cleated footwear. They asked for it. Young kids were seeing their older brothers and wanted us to make clothes for them. Women demanded that we make product for them, whether it was in the studio, in the gym or on the track. And what I am telling you right now is that our athletes and consumers are asking us to make product for them on and off the field. And we are committed to providing them apparel all day long. This is an absolute revenue opportunity.

Over the past few years, we have significantly added to the leadership, talent and infrastructure to build or design capabilities. We will continue to build this capability to creatively drive our business. An example of this is our New York creative center that we are going to open in the fourth quarter of this year. Here, we will have the ability to build upon the great work that our design teams are driving in Baltimore. The addition of New York will enable us to add capability and very importantly, to continue to build our teams and attract creative talent.

We have also opened up an office on the West Coast this year. Again, our design and development capabilities are being furthered. This leads to an important initiative for us, which is getting product to market faster. We are and have been building capabilities around the world to use speed and our size as an advantage. An example of this are the development in technical design capabilities we have in our Hong Kong office. Our business today is currently benefiting from speed-to-market initiatives. You can look at our Studio business, our Alter Ego business that Glenn will talk about in a few moments. Our business is being driven by speed and you will continue to see that in the coming years. Our mission is a fast global product engine. So obviously, we are very excited about design, which is a great lead into a business that is maniacally focused on design. I would now like to bring our Women's leadership team up to talk to you about where they're taking our Women's business. Thank you.

Gwyn Wiadro

Okay. Welcome again. I am thrilled to be here. Thank you, Henry. When we met 2 years ago, we talked about how in Women's we were building the team and the product that would make us the driving force in the women's athletic apparel space. And based on the $250 million in revenue that we've added to the women's business since 2010, I feel highly confident to tell you that these boxes have been checked. And today, Leanne and I are here to share you the -- share the story of Women's, the Women's business from a great little idea in 2002 in a very male-focused company to a key component of future growth for the Under Armour brand. Rather than strive just to be a driving force, our goal is to reach $1 billion by 2016, become as big as Men's as fast as possible and to be the #1 women's athletic apparel brand in the world.

So I'll start with a little bit about how we built this great momentum, grew the business, took mind share, took market share and became #1 or #2 in every place that we show up. Then Leanne will walk you through how we plan on adding magic to our winning formula and why we are completely and totally armored for growth.

So a little bit of history. When we talk about how we built the Women's business, we talk about the phases of the Women's business. And so it's evolution. And Phase 1 was about finding our way and it represents the first $100 million. We leveraged the power of the brand, we drafted off the success of our Men's business, and certainly, as that first picture reminds us, we were serious and we were no-nonsense and we were in the game to win. It made complete sense at that time in the ark of our business to focus maniacally on that sharp point on-field athlete. And by delivering great technical product that completely exceeded her expectations and performance, she totally fell in love with us.

And then we moved to Phase 2. And during Phase 2, starting in at about 2009, we established our identity and we grew the business fourfold. So it's a busy phase. We evolved everything, everything about our point of view. We refuse to talk about product just in terms of the technical. We insisted that it be about the intersection of performance, beauty and style. Everything we approached, we looked at through a female-first filter. We expanded the definition of the athlete from that awesome team sports athlete to more broadly include yoga, boot camp, spin and all of her activities. And we knew that to truly resonate with her, we needed to win big in a category most important to her.

So I will take the ladies. But you will probably think that I'm going to say bottoms, but I am not. For the athletic female, it's her Sports Bra that is the most important piece of apparel she will choose. So while you take a look at what's amazing in front of you, I'll remind you. The last part time we talked, we talked about the launch of the ArmourBra the best bra for every athlete only from Under Armour. No longer a singular item now, the ArmourBra has evolved into a high-impact platform where a stable of bras that has created a halo effect for the entire category. This business, once less than 6% of our total, is tracking to exceed $140 million by 2016. So I just want to take a second to kind of walk you through what we've got here.

So the first thing you should notice is that there is no ArmourBra in the stage and that's on purpose. We told you about the ArmourBra, we launched the ArmourBra, we made magic happen with the ArmourBra, the customer has fallen in love and it continues to be a key driver for us at retail in all points of distribution as well as internationally, which has been an awesome addition to the story. And what we decided to do was, okay, great, chat [ph], technical, wired for sport, locked and loaded, ready to go, we get you. But then we wanted to broaden, how we talk to her in this really personal space. So we decided to have a little bit more fun and get a little bit more feminine, but never dialback on what we were going to deliver to her in terms of performance.

So this gets like go bra is a great example of that mashup Henry talked about, performance, beauty, style, technology. So absolutely a mid-impact bra but it's just a little more feminine and it celebrates a little bit more about what we know is important in fashion today in terms of day, shimmer and shine. And it shows that she's got the confidence to show up and be noticed. So we love this bra. Thank you.

So next, we call this internally the little sister of the ArmourBra. It's the Protegée. We love her as much as the ArmourBra. It is a serious on-field bra, it is a serious runner's bra. You are completely confident with absolutely no distraction when you suit up in this bra. What's great about this and the reason why she's a part of the ArmourBra platform is because it's still cup and band, so it's customizable in that way. But after pretty intensive market research, we learned that customers love the ability to get in and out of a bra really easily and a front zip absolutely achieved that. So we stood for it, and we brought it to market and it's been terrific ever since. Thank you.

Okay. So the softer side of bras. Right, so we talked about the high impact platform, the mid-impact platform and now, there's that everyday bra or that every activity bra, the one you just want to climb into and sort of forget. And I almost say like it's so comfortable, I could fall asleep in it. So our approach in low impact through seamless was to take a really young, fun, spirited look at how we do color and how we do little trims and details, but it's incredibly pure and simple and we did that on purpose. And what we are finding is that women are buying these in multiple, kind of like jellybeans because they're irresistible and the colors are amazing and the price is really sharp. And we love that because we love, like a shirt in the beginning, getting on the backs of every athlete possible. Thank you, Natalie.

Okay. So a little exploration here. So I was talking to you about pushing beyond the space that you expect to see from us in a highly technical sports bra. And I think that we've well pushed beyond that space when you look at what we call the sport plunge. So, again, we heard loud and clear from some of our customers that she really, really wanted to be noticed at the gym. Is this a running bra? Probably not. Do I want to see her in a marathon in this? Some of you might, I probably don't. But the point is that it gives you the support and the performance that you need for the right level of activity. And if you're this girl, you're going to be so excited that we gave it to you and actually we had the guts to do it first. So I love bringing the innerwear to the outerwear piece of the sport bra world and doing it in a way that nobody would expect. And by the way, we didn't just do it in black and white, we hit it really hard with amazing stripes, so it is completely undeniable. Thanks.

You guys have a good seat! Take care. Okay. And lastly, but not leastly, the workhorse bra is about a habit. So this is the bra that I like to say, a sort of a wonderful entry price point to the brand. It's also wonderful way to start a conversation for our retail partners because a lot of women don't understand what a right bra means. And it's our job to educate her that it's not okay to wear an intimates/bra to run just because she thinks it's okay. It's actually not, it's doing damage to you. I could go on, I won't bore you with the scientific details. But the point is, is that if we can kind of get her in a bra early and get her to fall in love with us and then take her through her life as her body changes, her sports change, her needs change, we think that, that's an incredible way to grow that kind of loyalty to the brand in this incredibly personal space. And by the way, if I haven't said it before, Men's can't play in this space. So ha-ha. So we do it first and we do it that best and we get her first. And we do it in a way that has a tremendous level of energy and fun and spirit. And again, a little bit of look at me, but not as look at me as the sport plunge. Thanks.

Thank you, ladies. Aren't you glad we have a Women's business? All right. So that brings us to where we are today. And so even as we track to $1 billion of retail this year, we are just scratching the surface of the potential for our brand in the Women's business. So to talk about this next incredibly exciting phase, when we become the absolute leader and influencer, I will turn it over to my amazing partner, Leanne Fremar. Thank you.

Leanne Fremar

Thank you. Okay. It's hard to follow that. I don't know. Thanks, Gwyn. What an amazing evolution of this business. And there's so much white space for us to define.

Being the leader and influencer in this space is not just an opportunity for the taking, but it's our right to own and lead. A lot of people asked me why I left such a coveted position in the fashion business to come and make gym clothes that sell at sporting goods stores. I smile politely and think to myself, wow, they really don't see what's coming, which is good, because I do.

I joined Under Armour because it's one of the fastest growing companies in America and because of its visionary leadership. But mostly, because performance apparel and what performance means to her will be the future of how she will dress.

We are in the very early days of a movement, a shift that will redefine what the generation of women will wear every day. And Under Armour's position to do it chicer, cooler, better and faster than anyone else. Better than our competitors and certainly better than the ones who have us in their blind side. Defining our consumer, knowing what's meaningful to her, anticipating her wants, understanding her needs, evolving her taste, is our business. Owning her trust in fit, fabric quality and durability is what we are thinking about and working on 24/7, 365.

Surprising and delighting her with hot pops of fashion, trend right product that remains true to sport and giving her the stable of chic classic basics that she can pair everything back to is how collections are being built.

These are the elements of what it takes to be a leader and an influencer in this space, and we're here today and it is just the beginning. Through design, performance, accessibility and interaction, we will strengthen the core and broaden our reach. We are armored for growth.

In design and performance, we are investing in a world class design team, one that will span between Baltimore and our new offices in New York City. We have recruited a diverse team of highly sought-after and talented designers to create trend leading and trend-right product that infuses novelty and newness into our already winning formula for marrying performance with product.

Accessibility. We are making our brand more accessible to her. You will hear my teammates speak about our expansion into retail, our enhanced storytelling through e-commerce platforms. And she will begin to find us in the places she loves to frequent, her favorite stores and her favorite studios. At each interaction, she will discover product that she didn't even realize we make. And in turn, it will become her go-to for her work out, but also for her daily life that surrounds it.

An interaction. We are doubling our investment in marketing to her. Launching global media campaigns, strengthening and growing our social and digital communities and activating an event -- through events in places as we know she is and wants to be and we are innovating.

Gwyn already spoke to you about our growth in bras. It's not our only growth story. Run and Studio are also growing platforms for our business, each projected to be $140 million by 2016. We are giving her product that gives her style with her performance and performance with her style. In run, we will be the category leader for the everyday runner, but also the elite fashion forward runner. In Studio, she is taking her workout outside of the gym and off the road to the yoga studio, the spin class, the cardio kickboxing class, the sculpt class, the boot camp and even the stand up paddle board and we have the perfect item and outfit for every occasion. And we will continue our dominance in training which completes the picture for this consumer and for the business. We will deliver the coolest killer key items that drive major volume and turn. By doing so, we would drive over $500 million in this category by 2016.

So this is actually one of the more fun parts of a presentation like this is when I get to talk about clothes because it's obviously what I love to do and something that I've spent a lot of time doing. And it really -- it's so rewarding to be able to be up here, talking to you about something I'm so proud of and passionate about and something that I love.

So here, we have sort of a great outfit that really talks about what's happening sort of in this run category in growth. So we're seeing the traditional runner, she loves her short, she loves her tank, she loves her sports bra. But we're also seeing that women, they're running on the street. You're outside, this is street style. And this is a fashion moment for you now. People are noticing you running by, looking fantastic. And we are making product that makes sure she feels great and looks great.

The capri is the new short. The crop top is the new bra and the jacket is amazing. It's great for your run, it's great for protection. It's also great when you're going to Starbucks. So we've got a lot of versatility in some of the product that we're building and we are really excited about it. Thank you so much, Kathy.

So again, for the everyday runner who wants a little bit of pop, we're bringing in hits like shimmer. We're bringing in some of our new technologies like Armour Vent. And again, we're bringing in some print and pattern that feels trend right, trend now, but not trend overwhelming. Thank you.

And with our Studio line, we've obviously -- for those of you who are at Harbor East last night, you got the chance to see something that is an incredible trend, it's something that we were right on top of, if not, head of, which is color and bottoms. The black bottom is great, you can wear it all day long but the color bottom is something that we're seeing -- is really meaningful to her now. And we are evolving that trend into Fall '13. And you'll see it as you walk around the studios for Spring '14. We're doing it in interesting ways at different price points.

What we're also seeing in Studio is that women are wearing this to work out and go to the gym, but they're also wearing this to pick up their kids at school, they're also wearing this to walk around the city, to go shopping, to run errands, to do things around house and she wants to look great and feel comfortable. And we're looking at an outfit here that obviously goes back to the traditional fashion colors of black and white. But for that woman that wants to feel a little bit chicer, a little bit more understated, we're delivering product for her, too. Thank you, Natalie.

And lastly, we have training. Our core business was built on -- with the spirit of the on-field athlete at heart and we know her, we love her and she wants to look cute. She wants to look fashionable. She doesn't necessarily want to look like a team athlete all the time. And so we are building product that she can put on, that she can play in and she can walk off the field and go hang out with her friends and have a coffee. Thank you. Or an iced tea.

So, thanks, girls -- or green juice, actually, I should say, which is what I really would like right now. So it's a lot to be excited about. And believe me, I am and we are. I really believe that our Women's business will be bigger than our Men's business and I really believe that what Gwyn is saying is right.

We are armored for the growth to get there.

And with that, I'll pass the floor over to Glenn, who will probably contradict what I just said but he will be talking about Men's and Youth.

Thank you.

Glenn Silbert

Thanks, Leanne. I thought we agreed to like, only one time you guys are going to throw that gauntlet down? And I think I've counted 4x in the last 20 minutes. So let's see what we can do about that.

All right. So my message today is that Men's will continue to lead and to be a high-growth business for Under Armour. We haven't even scratched the surface, whether that be in the overall market share of our core products or going deeper into key sports and new categories. The bottom line is that the opportunities are there and we are on the attack.

So let's start with the scoreboard. This year, Men's will close in on $1 billion in sales and we will continue to drive double-digit increases as we drive to $1.5 billion by 2016. Now this growth isn't just coming out of sporting goods and core categories. While our training and Baselayer businesses are strong as ever, we are growing in new spaces and new categories. Over the next few years the Men's team will focus on 3 things: number 1, to maintain a maniacal focus on the athlete; number 2, to drive to be the #1 global training brand; and 3, to expand our reach into categories and sports that provide us with long-term platforms for global growth.

So it all starts with one question: how we make all athletes better. Our brand was born on the field and authenticated by athletes. That formula hasn't changed. Moving forward, this will continue to be the driving force for all products that we bring to market. I've asked a few of our athletes to come out to show you just what I'm talking about.

So let's start with Gameday Armour. Here, it's all about protection without the weight. We challenged the old-school thinking that thickness and weight equaled protection. Our team has built a pad system that is so free, extremely lightweight and built to move with the athlete. Thanks, Dash.

All right. Let's move on to the NFL Combine. This event is the most important job interview for young football players with dreams of going pro, and Under Armour is the official outfitter. The product we will showcase for spring 2014 is sonically welded, meaning absolutely no distractions, ventilated with our new Armour Vent technology for incredible breathability and as you can see, will fit like a glove. Thanks, Oraine.

And last but not least, our Tottenham Hotspur kit. As Kevin said last year, we hit the biggest stage in the world of football with Tottenham Hotspur of the English premiership. Working with the players at their training facility, we developed a kit that is super lightweight, ventilated and fitted to perfection. In the first year of this partnership, the Spurs set a club record for point scoring in a single-season and qualified for the Europa League. Thanks, Travis. Thanks, guys.

So let's move into the next key initiative of our Men's business, to become the #1 global training brand. Under Armour is known as a great training brand and for the last 17 years, we have brought their favorite gear. The growth has been tremendous and we continue to bring new core essential products to market every season, but we are thinking much, much bigger about training.

We clearly see the opportunity to develop a broader and deeper relationship with our athletes. Their needs are 24/7 and we intend to be there.

So let's take a look at a few things. Let's start with core training. The renovation and design, we are informing a new look and setting a higher bar for performance. In spring 2014, we are launching Armour Vent. The new technology allows us to engineer the fabric, so ventilation is literally integrated into these garments.

Move on to combine training. Here, we're driving a pinnacle movement in training. The athlete is motivated by performance, is proud of what they can do and always looking to get better. It's been built with the fastest-drying fabrics that we've ever brought to market. And as you can see, we're also bringing a bold design aesthetic to the concept. Combine training is exploding with our key partners and we see this as a significant global platform for years to come. Thanks, Richard.

And finally, athletes aren't just wearing training products in the gym, the one product that can be more versatile with the same great performance benefits. Our elevated training line combine style, comfort and performance that will extend our reach outside of the gym. Thanks, Jason. Thanks, guys.

Lastly, I want to talk about developing new core businesses at Under Armour. In 2013, we had 2 categories in Men's that were over $100 million: training and Baselayer. By 2016, we will add 4 more categories to the roster: run, golf, underwear and outerwear. These have been high-growth businesses for us. But more importantly, we have been authenticating ourselves in these sports and end uses. It's not enough to just show up. It's about bringing performance, and our brand DNA to everything that we do. Strategically, these categories are extremely important for our international growth, whether it be the strength of our golf business in the MEA, the explosive growth we are seeing in running in South America, the excitement about our outerwear up in Canada. Where the overall global growth of our franchise underwear business, we are gaining serious footholds in these categories. Thanks, guys.

So before wrapping up Men's, there's one more thing I wanted to share. About a year ago, Kevin challenged the team to think differently about Baselayer and the original compression tee. He had a vision that bringing something completely unexpected to market would not only shock the consumer, but create a buzz to lift our entire business. So the team took the challenge and came back with Alter Ego.

We invited some of the most iconic and admired superheroes into the Under Armour family. The combination has been nothing short of explosive. This March, we launched online and with our key partners. And when I say this product blew out, I'm not doing it justice. As Kip said, in less than a month, we were sold out. And we saw our numbers that we have never seen before.

But the bigger story here that this has provided us with a new concept, one that we can build around bringing freshness and energy to the market for years to come. What do you guys think about this? Pretty cool, right? Very cool. And just a little shout out. In about 2 weeks, Man of Steel will be launching. It's the new Superman franchise. And Dash upfront there is wearing the actual shirt that the Man of Steel will be wearing. So exciting stuff we'll be launching on 6/14. Thanks, guys, appreciate it. No pictures please.

So as you can see, we have a lot to look forward to in Men's. We will continue to fixate on our athletes to make them better, we will become the #1 global training brand and we will aggressively expand our reach to more athletes and more sports.

So what's next? Youth. This is the most important consumer we will talk about today. They are literally the future or what's next for our brand. They will be the leaders on and off the field. Youth is part of our brand strategy and we have been -- we have an amazing team that is 100% dedicated to speaking to this consumer and building product for them.

Every year, we have new athletes entering into the space and we have pre-teens moving on to adult. The future value of building brand loyalty with the millions of kids we speak to is staggering. We have built tremendous momentum in youth and we are clearly winning. So let's take a look at the growth.

In 2013, we will grow our Youth business by over 50%. And we are well on our way to a $500 million business by 2016. So what does this mean? Well, basically, it means that we are by far and away, the #1 brand in boys. And this year, we're taking over the #1 spot in girls. And what really excites us about this is that we're not even scratching the surface. While we continue to grow in our existing space, we are seeing tremendous success in new distribution. So coming out of our spring 2014 sales meeting, I have to say I'm more confident than ever of high how we can take this.

Now it would be easy for us just to ride this wave, but that isn't Under Armour way. This consumer is so important to us that we wanted to take a deeper dive into who they are and what motivates them. We felt that they needed their own voice, both internally and externally. So we came up with UA Next.

I'll let the video speak for itself.

[Presentation]

Pretty powerful, right? So our kids, as we really took a deep dive, they're aspirational, they're irreverent, they're confident. And most importantly, they're all about team. We launched UA Next at retail this spring and I've been very pleased with how it's being received. So what will the team be focused on as we continue to recruit the future or next for the Under Armour brand over the next 3 years? Number 1, as always, innovation. We are building specific innovation and product stories for our kids, whether it be the UPF 50+ sun protection story or the chest protector in baseball or fun technologies like product that changes color when exposed to the elements, we will continue to put both performance and protection at the forefront of what we do.

Number 2, team sports. We are on a mission to be the head-to-toe brand in baseball, softball, soccer, basketball, lacrosse, basically any participation sport that Under Armour can make a difference.

Number 3 is girls. Now, I have 3 daughters at home so I have to make sure I get this one right. I hear about it all the time. 2 years ago this business was 5% of our Youth total. This year, it will be 20%. And over the next 3 years, our Girls business will triple.

Number 4, driving franchise, building key items. These are the items that mom and dad literally have to beg their kids to allow them to wash because they wear them everywhere and all the time. Not only are they huge volume drivers for our brand, but they get our brand out there in a bold way in front of millions of people.

So it's pretty clear that we are serious about these kids. And as a side note, we're having a blast doing it. We truly don't see the limits of where we can take this business.

I want to thank you for your time and I'd like to hand it back over to Kip Fulks, our Chief Operating Officer, and the Footwear leadership team who will take you through some exciting growth strategies. Thanks.

Kip J. Fulks

Good job, Glenn.

Glenn Silbert

Thank you, Sir.

Kip J. Fulks

Back up on stage. Great job, Henry and the team. I thought it was important to bring some of the key leadership up in Footwear but also talk about my engagement in Footwear.

As you can see, the Apparel team is well taken care of. They have plenty of strategies to drive growth. And Kevin and I came to agreement where I had take more of the hands-on approach in Footwear, really getting deep with our team. One of the things that impressed me the most was that depth of talent we have, the partnerships we have. Standing next to me is Josh Rattet, who runs our Team business.

It's been exciting to be a part of the Footwear team, even though for 1.5 years it's reported to me directly. In the last 4 to 6 months, it's kind of been day in and day out in the trenches, and I'm glad to be a part of the team, but also help driving kind of the next vision for Footwear at Under Armour.

A little bit of the agenda that I wanted to go over is where we've been since 2011 to 2013, what I think and what the team thinks and what Under Armour thinks it takes to win in this category, we have to do it in a unique way. And I think you've heard a lot about innovation. It's the common theme today. But it really is relentless pursuit of innovation that's going to continue to drive Footwear.

The next slide is really about showing what we've done since 2011 to '13. And Josh and the team have silently taken 10 points of the market share in our cleated business. We've touched on Highlight. We're going to touch it again. But every product at our sporting goods distribution is on fire, and we're super excited about what is going to happen with back-to-school this year.

In running, we have 60% more consumers wearing running shoes. It's tremendous. Our Youth business has doubled.

Let's take a look at where it stacks up going from 2010 to 2016. We expect to nearly triple our Footwear business. The equation for getting this right, I'm not going to -- I like to keep it simple. I'm not going to over complicate it. It's really about the right price points with the right product and a relentless flow of great design and innovation. Those are kind of the numbers, but there's a little bit more behind the scenes on what it takes to win here, and I want to go into it a little bit more in depth.

We need to stay true to our brand, but we need to build capabilities. We have a great team, but we're not satisfied with the team we have. We're going to continue to go out and recruit. Our design talent is phenomenal. I've been impressed with Dave's design and his team's design ability, but I've been even more impressed with their ability to recruit, attracting great design talent to come to Under Armour.

Part of that design talent is weighed by engineering technical design. This is a craftsmanship. There's no schools in the United States that teach how to build shoes. This is a true dying art. We have to attract and keep and develop engineering talent in Footwear. And I'm pleased to announce that we've opened an office at Portland that Henry mentioned. We'll probably have over 20 people by the end of 2014. It's a design and engineering excellence. We're super excited. It adds another dimension to our business.

I don't want to skip over, though, that we've added a VP of Sales in Footwear, too. We're really excited about Kevin and his leadership coming from Adidas, just being able to talk to the retailers, being able to drive our products. So we're looking at every level to bolster our team. Even though we feel like we have a great team, we know that Footwear is our destiny to be a head-to-toe brand.

Manufacturing kind is like where the rubber hits the road. You've got to have the partnerships. Some of the largest and best manufacturers in the world are Footwear manufacturers, with the Pou Chen Group, with Wai Wai. And we have a corporate relationship with them at the very top. Kevin and I actually traveled overseas and met with the top leadership of Pou Chen. We really are looking at what we've done in Apparel, which is integrating our supply chains with the Footwear manufacturing. But in some cases, we've decided to convince other folks that aren't Footwear manufacturers to get into Footwear and really leveraging what we know in Apparel into Footwear, and Dave's going to touch on something special today. But we're excited about building the team, looking at engineering and craftsmanship from a new lens and partnering with the right manufacturers.

But there's a little bit more of what it takes to win. We have to leverage our DNA. We have to obsess over fabrics, over textiles, over fit and function. That is our DNA. You've seen where we've dominated for years in the Apparel space. We have to take those learnings and apply them to Footwear. We're just starting to hit our stride. We believe we're getting ready to and continue to take our DNA and build it into platforms in the Footwear.

We have to be known for precision fit. We have to be known for the way the shoe feels. One of the important things we need to do is take what we did in Apparel, with HeatGear and ColdGear. We have to build these platforms and be known when the consumer walks into the retailers already knowing what they want to buy from us. We have it in Highlight we have it in Spine. Spine is in our third season. It's a lightweight structure technology. It feels great, but we're going to make it feel even better in spring '14 and beyond.

We have to kind of look at the landscape and understand that we have to have differentiation. We're going to have to stand out. It really is the pipeline of innovations that we've been working on, the ones that are in the marketplace today and the ones that are getting ready to unveil. This is what's going to lift, but it all has to be done through the lens of our traditional DNA. And that this really obsessing around what does the athlete need to perform better. And one of the people that does that the best, honestly, Josh and the team, sports team, working with guys like Tom Brady to ensure they have the great product on field.

I'd like to introduce Josh or Ted from the Team Sports Group.

Josh Rattet

Thank you. Good morning, everybody. How's everybody doing? Good? Well, I get the pleasure to talk to you about sports that are the core to this brand and the core to the DNA. I've made a joke a lot over the years that we've got a lot of product managers in football and a lot of product managers in baseball. And I assure you that this team that we've assembled, and a lot of them are sitting in the room, are the best in the business.

When we spoke to you 2 years ago, we talked a lot about our how we would define what cleat is and how we're marching towards market dominance. Fast forward 2 years later and there's a ton of exciting things to talk to you about, momentum to report on and how we really are armored for growth. I want to emphasize that we build authenticity and credibility on field and on court, and we do it through the categories of team sports.

I'd like to kick things off with a short video that shows the inspiration behind our game changing cleat to Highlight.

[Presentation]

Kip J. Fulks

Pretty good video, right? So as you saw from that video, we set out to change the way kids dress on the playing field. We hit lightning in a bottle, that season with Kent Newton debuting that cleat on the highest stage in his chase to the Rookie of the Year award. There's so much anticipation and pent-up demand going into football season that the product essentially evaporated in the marketplace.

In 2013, the Highlight is a platform that we grew 5x, and it's a 32-plus colors to really entice that team kit. Anecdotally, we're off to a really good start this football season as well. The Highlight cleat is the #1 football at Eastbay, and is resonating with that Alpha Male Speed kit that we still covet.

For everyone that doesn't know Eastbay, this is the catalog that distributes to over 3 million kids every catalog. It was Under Armour's first customer, the bible for the team athlete, reaching millions of high-end of kids every single month. This is a big deal.

One of the most telling stories that I'd like to tell you about came from the elite level high school back in South Carolina, back in 2001, before we even launch the product. The star running back was hampered with a injury all season long. His ankle was severely hurt and he couldn't lace up and play. We overnighted him a pair of the Highlights on Thursday for a Friday night game. He laced them up for the first time an hour before the game, proceeded to lead the team to victory, playing the entire game, rushed for over 300 yards and 3 touchdowns. The quote that came out of this was that, "You've changed my expectations for what a football cleat is." And that's what we're here to do.

We also leverage this platform into baseball and lacrosse. Bryce Harper, the most exciting young phenom in the major leagues, debuted this unconventional baseball cleat, wearing pants up to raise the premium awareness of our brand for the first time to show our capability that we can connect with that high-end consumer and sell a $100-plus metal baseball product.

We've got a ton of momentum. We had a fantastic baseball season. We took additional market share again this season and had the #1 cleat for the majority of the season in 4 of the top 6 cleats all season long. In addition, sandals and slides, which is a category that my team works on, we had the #1 slide brand at Dick's Sporting Goods currently.

So we've experienced a tremendous amount of growth in football and the baseball categories in the last few years. We have proven that we can -- when we push the envelope, combine compelling and relevant innovation with a great look, like we did with the Highlight franchise, we win.

We'll continue to push this new product stories into 2014 and raise the bar even further and continue to redefine consumer expectations.

Again, I just want to emphasize, it is critical that we gain credibility and authenticity on field and on court. We win with team sports and are naturally getting pulled in to categories that we can dominate in.

My team is extending our focus and dedication to include basketball footwear. We will apply the same tenacity, the same persistence, the same best practices that you saw from us in our quest for market dominance into cleats into basketball. We are really excited for this challenge. There's an appetite and thirst from our brand from the team athlete in the channels we already are successful in. This represents a tremendous growth opportunity for us.

There is $600 million worth of performance basketball done alone. This is an opportunity where we're just going to attack aggressively over the next few years. As we maximize efficiencies across all of Team Sports, we will fully exploit our opportunity with the team basketball consumer, through innovative product stories, in the right channels, at the right price points and set ourselves up to be a pinnacle performance basketball brand.

I'm hoping when we're here 2 years from now -- actually, I promise you 2 years from now, we're going to have a lot of really exciting things to talk about basketball.

And at the forefront of our strategy is growth in all of Team Sports categories will be this maniacal focus of innovation and redefining expectations. As this brand is founded on the principles of making the athlete better, we are in a persistent pursuit for constant flow of meaningful innovations, innovations that protect, innovations that maximize performance, and ultimately, that are accessible to all athletes.

As an example, looking at the rise of injuries across football, Churchill [ph] was a hot topic at the NFL level and below. We sought to better understand the injury. And as a result, our latest technology is known as V56. This technology is engineered to limit hyperextension beyond critical angles, thus protecting the athlete without limiting performance. At this past year's NFL Combine, this was endorsed by both the Foot and Ankle and the competition committees as something that's revolutionary. Going forward, this will be a platform we will leverage into other categories as well.

In the end, we have a business to run, and as Kip mentioned, we have successfully told our product stories and the innovation stories at retail, with our athletes, and we win championships and awards with our sports and marketing athletes. A testament to this is the fact that the guy that you just saw, the best football player on the planet, he entrusts us to help make him perform better and to stay safe on the field.

We talked to you 2 years ago about 2 million cleats, 2 million athletes that voted for our brand. We've doubled that in 2 years. That means we have put over 3, 4 million pairs of cleats out in the marketplace. Our ultimate goal is to continually shock and awe the consumer every season as we close the gap towards #1. We are a definite clear #2 in U.S. wholesale in football and baseball. We are setting the cadence for the industry to follow. By 2016, we are looking to be the market leader in this space, and we are armored to grow considerably.

Like Henry has said to you guys earlier, this brand was founded on the playing fields and core to our DNA. It is critical that we win on field and win on court to solidify our authenticity. While Team Sports will continue to grow and be a focal point of our Footwear trajectory, the foundation and trust that we have built with these athletes is essential. It's essential as we continue to build loyalty with this athlete and make that transition from winning on-field to off-field that much easier.

With that said, I would like to pass it over and introduce my counterpart, Jeanette Robertson, to talk about our Running and Next categories. Thank you very much.

Jeanette Robertson

Thank you, Josh. Welcome again to our house. For those of you I have not had the opportunity to meet last night, I'm Jeanette Robertson, and I lead our Women's and Next Youth Footwear categories, and I have the great pleasure to be with you today to talk to you about our Running category.

So I definitely was not here 2 years ago with you when the team talked about our Running category, but I am delighted to be here today to continue that conversation that we began with you. In 2011, we were here to unveil our direction, our brand DNA and the unique point of view that we were going to take in attacking the what is known as a very crowded athletic footwear market.

In 2011, our focus was on repositioning, rebuilding and relaunching our category. As Kip mentioned earlier, from 2011 until 2013, we now have over 60% more consumers wearing our running shoes. And that's huge for us. And in the Under Armour fashion, we will not stop there.

To date, we have made great strides, not only in getting consumers attention, which is huge for us, but also at retail. In the channels that we play, we have been surpassing our competitors, and it's a really exciting point for us. We have a very unique point of view, an extremely highly demanded brand and an extremely experienced industry team of people who are very passionate about making us wins in this category.

So what are our plans to continue that momentum that we have begun? Our first plan -- we're planning to leverage our wins and continue to grow in this category in the future. Our goal in Running is to be among the top 3 brands in sporting goods by 2016. And I know you're thinking that's a big goal, but we definitely feel we have a solid plan to help get us there. We're going to gain credibility with our core authentic consumer. We're going to expand our product lines to continue to evolve the solutions in meeting the needs of -- the unmet needs of our athlete. We're going to build platforms, so continuing with success that we're having with Spine. And fourth, we're going to fuel the growth of our Youth business. That consumer is our present and our future, and we will keep a maniacal focus in that area.

So let's just jump into the plan. So first, I talked about gaining credibility. And we both know for long-term growth in the Running category, we definitely need to address the specific needs of this high-end, technical runner who is very demanding and looking for product that's going to help them perform better. This consumer we call our avid runner. So if you think of someone like Chris McCormack, who is a multiple winner in the Ironman, this is the consumer that we're targeting to achieve here. This consumer is seeking product that truly embodies precision fit, something that you continuously hear about from our brand. They're looking for the absence of sensation and something that's very lightweight, while becoming an extension of their body. Success and driving products for this consumer is essential for the growth of our business in run specialty, in our international markets.

Later, Dave will introduce our newest technology and innovation for this consumer. And without stealing his thunder, I do -- we're really excited to talk about Chris McCormack winning the remaining challenge recently in Italy wearing our lace innovation. So it's super exciting for us, and we know that we're off to a great start.

Next, we're going to focus on our 360 athlete. So this is the consumer who actually lives and breathes our brand. We will win, obviously, both with the avid and 360 athlete. However, for our growth and generating market share and revenue, this is going to be the largest area of opportunity for us within athletic specialty and sporting goods.

We're going to leverage our learnings with successful products such as Spine. We're going to continue to find solutions for their evolving needs through different executions and infusing pinnacle levels of innovation. We will continue to focus on precision fit. However, this consumer needs a bit more lightweight structure and support in their products than our avid consumer.

So you're familiar with -- you obviously saw Tom earlier and the other athletes in our line up. We know better than anyone here at Under Armour running that our athletes run to train, to improve and to be ready to compete in their sports.

Third, you've heard Henry mention this, you've heard Gwyn, you've heard everyone talk about platforms and how it's been a crucial point in building our success at Under Armour. And in Footwear, we're going to leverage that as well.

How do we plan to continue to offer the look and feel that our consumer have identified with Under Armour running? We're going to continue to focus on the platform of Spine and using that as a base to continue to build multiple products to fit that consumers' needs. Nothing demonstrates the success for having more than the current Spine denim that's in the marketplace. We've currently surpassed some of our competitors in the channel that we are selling, and we're already a top seller in the marketplace. So it's a great base point for us to start.

Every season, you will continue to see that we will take this product to another level with lighter, faster and evolving other levels of innovation.

Over the next 24 months, you will see a relentless flow of product in these platforms.

So let's switch gears a little bit. You've continued to hear about how Youth is the fastest-growing category for our brand, and who is better positioned than us to meet the Footwear needs of this future athlete? Nobody. We definitely are armored for growth in Youth.

In Team Sports and in Running, we are currently outpacing our competitors in the retail channels where we do best. And in a category that hasn't seen a lot of innovation, Under Armour is taking the lead in fueling innovation to this consumer. They no longer want to be thought of as little ones, as youth as you saw in that video. They, too, are very savvy and looking for that innovation. So if you think about how we've taken that approach with the Highlight cleat, with Spine and with future technologies, we will continue to differentiate that way in this area.

We really believe the energy of our brand is very similar to the energy and desire to win that our consumer in this area embodies. And that's swag is exactly why the consumer is choosing our products over others. Our kid truly believes that our products help them perform better on and off the fields. We really create and invoke an emotional connection with that consumer.

So let me tell you, as Kip mentioned, I've been doing this for over 10 years, selling products to all of our key retailers, and the response that we've received from our last sell-in for spring '14 has been tremendous. We can't make enough shoes to fill the needs of what consumers and retailers are looking for. It is phenomenal. The response that we're getting, our business has already grown over 100%, and we truly believe that this is a huge opportunity for Under Armour moving forward.

In athletic specialty and sporting goods, where we're currently selling, we will be among the top 2 leaders in Youth Footwear by 2016, and we feel very confident that we will reach that goal. This is huge, but we definitely think with the right prices, the right products and continuous infused innovation, we can hit that goal.

This consumer, as you know, is our present and our future, and we will remain laser-focused on being their brand of choice, growing with these athletes and continuing to fuel that pipeline. We are armored for growth in Youth.

So next up, to present our latest innovation, let me turn it over to our brand no-longer-secret, creative genius, Dave Dombrow.

Dave Dombrow

Thank you, Jeanette. I like creative genius. That's nice of you to say. All right. Let's get to my notes here. All right. Well, it's good to see all of you again.

Today, I have the pleasure of talking about our latest innovation platform, SpeedForm. And if anything, you've heard the word obsession so much. I think they stole it from me, because if anything was ever an obsession, this is it. We obsessed over this platform day in, day out, constant. And in some ways, I really feel like this is the product -- I want everybody to hear this. This is the product that we were born to make at UA. I mean, I really feel that in my core, in my gut, and I think you will, too, once you see this.

So I've always said, anybody who knows me, that we want to leverage our Apparel DNA and we want to own fit. But what does that mean? i ask all you, guys. What does that mean when we say own fit? It's just words, right? How do you own fit if you're making stuff like everybody else in the same place, doing the same things, day in and day out. You probably don't, right? So we're going to take a different approach, right?

So let us go to UA. I'm you guys have heard it before. You, guys, are well-versed with us. Smart enough to be naive enough, to not know what we can't accomplish. Okay? Now, in this case, we had to be smart enough to leave this behind. Okay? And that is a big step. We've got to leave that Footwear factory behind.

So we looked at things that embody performance fit. Things like an F1 seat, right? It's molded to the individual driver, right? All about this custom fit. We look at things like a rock climber, right? Part of the climbing equipment, it's part of the climber, it's all about being one. Okay?

We look at things like cycling. I'm an amateur cyclist at best, but I'm sure there's some cyclist in here. It's all about the fitting, right? That's the key to cycling, how the rider and the bike are one. I'd like to say fit or die, right? Innovation or die. If it doesn't fit, you're going to die. That is how serious we were taking this. So that led us to the ultimate in that, which is the Apollo space suite. Okay? And your thinking Apollo space suit, not a big deal. What's the connection here?

Well, I think the stars aligned here. Stars aligned, something serendipitous happened because at this point, huge turning point for us, right? We're looking at this and we're doing our research and it's like all of these proposals are coming into NASA, right? And it's like, the Navy, did they win the contract? No. Did the Army win it? No. Okay, the Air Force. No, of course, it's the Air Force. No. The Air Force didn't win it at all either, right? And here's the great part, it was actually Playtex, makers of intimate apparel and bras. Wait a second. Did you say bras? And that's really got us thinking. Now we're talking about bras, and I think you're going to see the connection here, where I'm going. Okay?

We make a lot of stuff at bra factories here at Under Armour. In fact, when you work with the best manufacturers in the world, period, together, could be focus on precision manufacturing and reinvent fit? Right? That's a big statement. Could we do it? Remember, we've left that Footwear factory behind. Okay. So that being said, we'll start talking about things. Could we create the first ever seamless heel cup, right? Completely seamless from heel all the way to the toe. Never been done? Maybe we could, maybe we can't, probably, we could.

Could it be anatomical, right? Could this thing wrap around your foot in a new way, guide your fit, completely new way of how it interacts with your foot? Maybe. New manufacturing might lead us there. Could it be ultrasonically put together like high-performance apparel? Maybe. Ultrasonic? There aren't ultrasonic seam in anything at footwear factories. Oh, yes, but we're not footwear factory anymore, right? So that's not a problem. So maybe it could.

Ladies and gentlemen, introducing our latest platform, SpeedForm. And there it is. Inspired by spacesuits. Built at a bra factory. Nothing has ever fit like this. I promise, it couldn't -- it's never been done. I'm going to say it again. It's never been done. It's a big, big, big deal. Okay? And I don't -- I want you guys -- the major takeaway from my short speech here. We reinvented and can play [ph] a new way of manufacturing footwear. Okay? Never been done. This is what fast feels like at UA. This is a big deal. This is news, and I want you to watch this. Thank you.

[Presentation]

I want to thank the team. I want to thank everybody. We're super excited to be a part of today. We wanted to leave you with a few notes. That's what fast feels like. I think you're going to have an opportunity to try on a few shoes. Please take the chance. It feels great. I'd like to call Tom Shaw up to the stage. Thank you very much.

Thomas D. Shaw

Hey, guys. Great to have you on [ph] today. And also, thanks for those who are joining us on the webcast today. I can't leave those guys out. I'm Tom Shaw, Director of Investor Relations. Most of you know me. And I'm not nearly as exciting as the other Tom that was up here earlier, so bear with me. We'll get through this quick.

Just a couple of quick details for the rest of the day here. We're running a tad behind, so we're going to have a really quick, kind of a working session here for lunch. Not too dissimilar from what we did 2 years ago. Lunch is going to be served right across the hall. And I think more importantly for you guys, as Kevin mentioned earlier, this is the time to explore our showroom. So we're going to open everything up and this is your opportunity to experience everything that we have coming to markets, not only this fall but into next spring. Great team to pry and find matters.[ph] They'll be there as well, they can answer any questions for you and give you all the great details.

Also, as Kip mentioned, we have our shoe bar that is going to be opened up with SpeedForm. So please try it on. We'd love to hear your feedback. We think this is a pretty powerful product in the marketplace.

We'll round people up about 12:55, and try to get started as close to 1:00 p.m. as possible with a short video, followed by Charlie's presentation on International. If you have [ph] logistical questions around transportation, please come to me. We plan on ending the day right at 3:00 p.m. after Q&A. If we couldn't get anything, we'll just settle [ph] for you guys through the afternoon.

So that's it. Enjoy. And we'll see everybody back in an hour. Thanks.

[Break]

Kevin A. Plank

Thanks everybody, thanks for [ph] a great morning session and we wanted to kick off the afternoon with that video. It's something that we actually did as a

[Audio Gap]

inside voice for our team earlier this year. And getting to this point as we're looking at where the brand has gotten to, there's times when you need to take a stop, you need to pull everything together and define who you are. So the purpose of that video is to hopefully try to take the first 17 years and not get caught up with constantly patting ourselves in the back, take credit for it, celebrate it, give people the credit where credit's due. But as we said, it's time for us to grab it. It's time for us to look about moving forward. So today, as you've heard, it's all about moving, forward with some of our teams. The first way we tried that was we wanted to freeze everyone in here out and we're selling sweatshirts outside. $250 a piece for the sweatshirts, you can use your gift cards toward the purchase if you'd like, and the price may go up if we get to an auction status. We've got the temperature under control here today. But probably, that may be a mistake, because things are about to heat up here.

I've got the great pleasure of kicking off the afternoon where you're going to hear from International, then a bit of our direct-to-consumer channel. And then finally, we're going to wrap it up with Brad in giving you the financials and some of the finer details that will help within the models as you look at them.

But first up, it's my great pleasure to introduce Charlie Maurath. So Charlie is someone who joined our company not too long ago, within the last year. And I'd tell you, the ability within a category or I'd say more of a movement for our company, there's probably none bigger than the reliance that we have on taking our brand global. Everything that we talk about, the product categories, men's apparel, women's apparel, youth, Footwear, et cetera, it all comes down to how do we get this message outside of United States.

As you know, we've got less than 10% of our sales happening [ph] from there today, but it is our commitment to be a global brand. And our definition of being a global brand is one that means that more than half of our revenue should come from outside of our home country. We're committed to making that happen, but we also understand that, that's going to take some time. So the good news is that we've got these engines here in the U.S., a business that we believe has plenty of leg room and ability and runway for us to continue to grow. We'll continue to maximize and make that happen. But most importantly, we're very fortunate today to have a leader like we have on board with Charlie Maurath.

So let me just read a couple of things -- of some of Charlie's background. I mean, he's a vet who comes to us with more than 22 years experience, working formerly at Adidas. Where Charlie ran all the Americas. He was the SVP and Head of Latin America. He spent 8 years while at Adidas, running that Latin American business and taking them from $200 million to over $1.7 billion before joining Under Armour, and of course, doing all of that profitably. And you will hear that deliberately from Charlie as well. Four years at headquarter in Germany, managing distributors in Europe and Africa. Built the subsidiary in Thailand from scratch, living in Asia for 5 years. Headed the Nordic region in Europe for 5 years. And also, he loves sport and understood sports. So the opportunity for Charlie to have that opportunity to join our company was something that was very big and I think he recognize the momentum of what Under Armour had in front of it. So we're very lucky to have Charlie sitting at our executive table and helping us manage this brand, from not only being a company of products and innovation, which of course, is important and terrific stories. And telling those stories in North America, but taking that story globally. Ladies and gentlemen, Charlie Maurath. Charlie?

Karl-Heinz Maurath

Thanks, Kevin, for the warm words. I think I feel already a little bit warmer now already. And thanks for all of you for giving me the opportunity to present to you the international expansion plans for the coming years. And I want to say that, up front, for your patience in listening to my presentation in English with a strong German accent.

For me, its a privilege to work for a fast-growing company such as Under Armour and to be part of the international expansion. A company that is fast-growing and where I can combine my passion for sport -- with my passion for sport with my daily work. However, we are also working in an industry that is fast and very competitive. Only the one that is more innovative, faster and better than the other will succeed and ultimately win.

Welcome to Brazil and welcome to Rio de Janeiro, the sport capital of the world from 2014 to 2016, hosting World Cup 2014, Copa America 2015 and Rio de Janeiro 2016 Olympics. Brazil and the world of sports have some exciting times ahead and Under Armour will be part of it.

This is to let you know that Under Armour will open its own subsidiary in Brazil to be ready for these mega events. You will hear more about this later in my presentation.

Talking about sport and our industry. So what's the size of price? The international sporting goods market for branded apparel and footwear amounts today for more than USD 200 billion. Out of this, North America represents more than 30% of the branded sporting goods markets, where Under Armour sells, roughly today, over USD 5 per capita.

Europe. Europe accounts for more than 25% of the global sporting goods market, followed by China, Japan, the Middle East and Latin America, and the rest of the world that represents approximately 40%. With the exception of Japan, Under Armour's market share outside of North America is still insignificant. To give you some perspective, in Europe and China, Under Armour today sells less than $0.10 [ph] and less than $0.01 [ph] per capita, respectively in China, versus USD 5 in North America, or in other words, there are huge, huge opportunities for Under Armour out there.

Let us talk about global sporting goods market and some high-level common consumer trends by differentiating between mature and emerging markets. In an emerging markets such as Brazil, Mexico and Turkey, we foresee a fast-growing middle class with young and affluent consumers that are influenced by Western lifestyle and international brands.

Before 2020, more than 1 billion additional new consumer will start purchasing branded sporting goods as they enter into the emerging middle-class. Already today, key industry lead -- key industry players generate more than 70% of the global profits in these emerging markets. And this development will continue.

Then we have the mature markets such as Europe, Japan and to a certain degree, the U.S. where we'll face a stagnating spending power and an aging population.

Please pay attention to this slide. No offense but Kevin and Kip no longer belong to our young target consumer group any longer. Growth will come from the new mobile generation as well as from older ones, such as Kevin and Kip, who wants to live an active lifestyle.

So Under Armour's international strategy for the coming years has 5 building blocks of success: Its the brand, it's people, it's the operating model, infrastructure and international expansion. Our presentation today will focus on our brand as well as our international expansion strategy.

So how do we want to position Under Armour outside of North America? Big question, because our brand awareness today is not the same. We will -- we will position Under Armour internationally as the sport performance brand that stands for innovation and for training for sports. It is important to highlight that footwear plays a key role in our international expansion strategy. Our priorities will focus on Men's and Women's training, running and Baselayer.

We will sharpen our brand profile internationally by becoming more consumer-centric in everything we do. We will angle Under Armour with our target consumer and increase brand awareness by prioritizing consumer connection points, with the focus on retail, digital and grassroot activation.

Another important element for expanding and building the brand internationally is a balanced rollout of controlled retail space. I think it's based on what you have seen last night at Harbor East. We will roll out retail specialty around the world with that concept. This allows us to tell great stories to our target consumer rather than selling single products. This includes: Rollout of shop-and-shops, the launch of a strong Under Armour franchise model and expansion of a limited amount of own retail stores in clearly selected markets.

In mature and developed markets, we will focus on key account marketing, our key account management and strategic account marketing. Here, in my opinion, we can learn and replicate a successful business model that already works well in North America with key accounts such as Dick's in the U.S. and SportChek in Canada.

Our international expansion strategy focus on countries that deliver both, fast top and fast bottom line growth. So how is this strategy

[Audio Gap]

should build? The international sporting goods market, if you look at it with a helicopter view, outside of North America, is estimated to be around 100 -- more than $130 billion. Out of this, the top 10 international markets outside of North America represents roughly 60% of the market. Then the next 14 markets, international markets, account for more than USD 1 billion each.

Our international expansion strategy is built to focus on the 3 biggest markets in Asia, Europe and Latin America. In Asia, it's China, Korea and Japan. In Europe it's U.K., France and Germany. In Latin America, it's Mexico -- Mexico, Brazil and Argentina. And we have an opportunistic approach on the next 14 markets that each represent over $1 billion.

Our planning foresees a cumulative annual growth rate by market between 20% to 60% over the next 3 years. As part of the new international expansion plan, we have also established a new regional set-up for Under Armour. Going forward, Under Armour International will work with 4 regions outside of North America: It's Asia, it's Western Europe, it's Latin America, and what we call new markets.

So let us talk about the plans. So what are our plans in Europe? And what have we done so far? With Matt Shearer, we have -- with Matt Shearer, we have put a new European leader in place that has worked for more than 10 years with Under Armour and that has established, very successfully, Under Armour subsidiary in Canada. In addition to Matt, our new head of sales in Europe brings close to 20 years of European sporting goods know-how, and our new head of marketing in Europe has more than 20 years of experience building brands in the region.

We have started to retake control of distribution in key European markets. To control Under Armour brand and Under Armour brand's destination, we will gradually convert from the current ancient models to our own sales force in U.K., in France and in Germany. And in line with this, we have opened, and Kevin talked about it, an Under Armour U.K. sales office in Manchester City to be closer to the consumer and our key customer in this very important European market.

Talking about Asia. Having lived and built a brand successful in Asia, I am excited to talk about our initiatives in Greater China with Kevin Eskridge, our new leader. Before Kevin Eskridge moved to Shanghai to lead the region, he was heading very successful the outdoor business unit for more than 4 years. Just to add on this one, every year, he has been growing the outdoor business by 35%. Before that, he worked for over 10 years in the fashion industry. Kevin and his new management team have worked out a midterm strategy for the coming years. Our planning for China foresees the opening of all retail stores, you have seen some pictures today already, in key cities such as Beijing and Shanghai, as well as partnerships with strong retailers to rollout franchise stores in clearly selected regions.

Additionally, we have recently signed a multi-year exclusive partnership with the biggest retailer, Starlike, [ph] in Taiwan, starting spring/summer 2014.

Japan. Japan has not much to add to this slide, as our business and partnership in Japan is extremely strong, and we will see continued double-digit growth in the years to come. We are very happy with our long-term exclusive partnership with Dome in Japan. Today -- my German accent is coming through. Okay. Today, Dome is at the stage in the similar size as Under Armour was in North America in 2005. And of course, we would love to see similar progress in North America in the future. Dome continues to strongly build the Under Armour brand and our business in Japan, outperforming both the market and it's competition.

New markets, or what I call our opportunistic approach, or Under Armour's opportunities going forward. I am proud to announce that we are in process to build up Under Armour's own subsidiary in Sydney, Australia.

[Audio Gap]

Transitioning from our existing distributor play card, [ph] we will start with our own subsidiary in January 2014. In addition we are in conversations with Rebel Sports about the long-term ecstasy of strategic partnerships. Rebels sport today -- or Rebel sport is the biggest sporting goods retailer in Australia today. We will strategically build up on Under Armour retail and franchise stores in key Australian cities going forward. Over the next few months, we will evaluate, in addition to Australia, partnerships for the Middle East and Southeast Asia.

Latin America. A region that I know very well and where I have built a strong network and working relationships over my last 10 years. It's a region that is close to my heart and where the sporting goods market will continue to grow. As a first step, we have established our Under Armour regional office for Latin America in Panama. The management team of our regional office will be responsible to support the business and the growth of the markets across this region. And in the last the days, just recently, we agreed with our partner in Mexico, Rc Operadora, to transition the existing distribution business and management team into a wholly-owned Under Armour subsidiary that will start in January 2014. You have seen Canela, [ph] the business, and you have seen and heard about Toluca, [ph] the business in Mexico is growing very fast and we are glad that our partner and the complete team in Mexico will join the Under Armour family.

Coming back to the beginning of our presentation. Starting spring/summer 2014, Under Armour will have its own subsidiary in Brazil, an important market where we have not been present so far. For our start in Brazil, we have hired the most experienced management team in this market. Out of the top 4 senior managers, 3 have a consolidated sporting goods industry background of more than 55 years. And to be quite honest, I don't know any one of our competitor in Brazil that has a management team that has close to that experience. The hiring of this experienced and confident team in Brazil has been critical to successfully manage this complex market that offers lots of opportunities. At the moment, we are in process to build up the organization, processes, system, as well as a new office and distribution center to start business during the second quarter of 2014.

We will be ready. If I'm honest, not really for World Cup 2014 any longer, but for Copa America 2015 and Rio de Janeiro and the Olympics in 2016.

Chile. I am proud to announce another opening of an Under Armour subsidiary for the second half of 2014, Under Armour Chile. For those of you who have followed, this is the fourth subsidiary that announced during my presentation.

This subsidiary will start its operation in 2014 with the jersey launch of Colo-Colo. Colo-Colo, for those who know Latin America, is the biggest football club in Chile that we have recently signed. As part of our market entry and attack strategy into Chile and knowing the Chilean passion for football, Colo-Colo will give us an ideal -- will give us an ideal platform and towards the trade, a great leverage when entering this interesting and fast-moving market. After we have established this subsidiary, our expansion plan foresees that Under Armour Chile will take over responsibility for Argentina, Peru, Paraguay, Uruguay and Bolivia, the South of Latin America.

Starting end of 2013, we will have a new head of Under Armour in Chile in place that has more than 20 years of sporting goods experience in Chile, Argentina and Brazil.

Now, let's talk about the financial ambitions. So our financial ambitions are clear. Under Armour international will grow from today, only 6% to 12% of total revenues from 2013 to 2016. I know, for you, this doesn't sound like a lot. But I can tell you, it requires, in the next 3 years, massive growth considering that Under Armour in North America continues growing by more than 20%.

I think the next slide is even more interesting, or the next part of this slide, because, however, in looking at the units, our international business, in reality, is much bigger. It represents 17%, or respectively, 24%, of Under Armour's total units. So our international business, in reality, is bigger. Or looking from a different or investor's point of view, this will give us a huge opportunity in the future to convert some of the license and distributors to wholly-owned Under Armour subsidiaries and respectively grow and accelerate Under Armour's growth internationally.

Okay. In summary, Under Armour International has a -- their plan of success. In 2013, we organize. In 2014, we optimize. In 2015, we accelerate. And in 2016, we attack. Simple and easy for each of you to remember.

So what will we do very shortly? In 2013, we have established our strategic business plan for 2013 to 2016.

In 2014, we will put together -- we will put support function in place and open, as mentioned already, 4 new Under Armour subsidiaries. In 2015, we will focus on markets that drive both fast top and fast bottom line growth. And in 2016, our mantra will be, be faster, be better. And we will leverage what we have put in place, and we will enter into new markets.

So for today, this is the end, the end of my presentation, but the beginning of some hard work and what I call exciting times ahead of Under Armour International. Ladies and gentlemen, thank you for listening, and please let me introduce Henry Stafford and his team that is leading Direct-to-Consumer business, Kelly and Chip. Thank you very much.

Henry B. Stafford

Yes, first -- yes.

Hello again, everyone. I love Charlie's presentation because he says the word growth about 100 times. And we talked about it today. Growth, growth, growth. And growth the right way is what we are stressing. And now, we want to talk to you about another key strategy, another key growth strategy of ours, which is reaching more athletes. I'm up here with Chip Adams and Kelly Cortina, and we're going to spend a few minutes to talk to you about this initiative of reaching more athletes.

Kelly is the retail leader of our retail business, covering both our specialty business as well as our Factory House business. And it's a great time to present this business, particularly after last night and the feedback we had from you all, but, most importantly, the feedback we've had for the past 4 months from our consumers and our athletes.

Chip Adams, our Chief Performance Officer, is up here, and he's going to talk about the charge that he's leading on our website.

There are 2 aspects of reaching more athletes, which we will discuss. First is increasing our penetration in our current distribution, which I will talk about more in a second. And secondly, Chip and Kelly will take you through how we will continue to significantly grow our Direct-to-Consumer business.

All right. So let's talk a little bit about how we are going to increase our penetration in our current distribution. There are 2 things to focus on. First, category expansion. You heard the teams talk about it today. Whether it's footwear, studio, running, youth, men's underwear, you name it, category expansion in our current channels of distribution will significantly increase our penetration incremental revenue. We will drive the expansion of those categories in our current channels, and that will be incremental to our wholesale business.

Second, and this is very important, we will invest in our wholesale shopping experience. What do I mean by investing in our experience? The ability to present key categories, more breadth of assortment more color and, very importantly, more newness and more fashion. Above, you can see an image of our Dick's Sporting Goods All-American shop. By the end of this year, we will have over 300 All-American shops with Dick's Sporting Goods. When we spoke 2 years ago, we didn't have any All-American shops with Dick's Sporting Goods.

When you add on our other partners, by the end of this year we will have over 800 shop-in-shops with our wholesale partners in North America. Our brand will continue to show up big at wholesale.

In addition, from 2014 to 2016, we will more than double our amount of shop-in-shops across our North American distribution. And I want to point out it is an investment that is showing an amazing ROI.

So let's talk about distribution. I want to be very clear on our plans for distribution. And the numbers Kevin talked about were $4 billion, and the numbers you will see in the next presentation from Brad, I want to stress that there are no material plans to increase our distribution at wholesale. However, as always, we are an opportunistic brand, and we will continue to research where our athletes want to shop, and we will always explore partnerships to reach more athletes. Our distribution will be driven where our athletes want to find us, and that is exciting to be able to control our destiny in that manner.

Let's shift gears now. Our number one strategy to reach new athletes is to grow our Direct-to-Consumer business. We are bullish on our Direct-to-Consumer business because, number one, no one can tell our story like we can; number 2, we are a brand that sets trends; and number 3, and incredibly importantly, we will teach athletes how to dress head to toe, and there is no better place to do that than in our own stores and on our own website.

Kelly Cortina is going to come up, and she's going to talk about our specialty business, how we see this as a true growth vehicle that will drive revenue and profitability.

Most of you saw our Brand House last night, the innovative shopping experience that we will drive and continue to drive, the ability to tell our story head to toe, a much greater breadth of product that we typically offer in our wholesale partners. Kelly will talk to you about our plans for our new store opening this year as well as how we plan on scaling this business in the coming years.

Finally, Kelly will talk to you about our Factory House business, the investments we are making there in terms of our product offering, our infrastructure, the selling experience, as well as the plans to double our square footage in the next 3 years. That's right. In our Factory House, we are going to increase our square footage primarily by working with our landlords to make our current stores bigger. And these stores are currently incredibly efficient.

After that, Chip will come up and talk about our business digitally and on the web, the multichannel approach we are taking, the shopping experience and our plans to take that to the next level.

I would now like to bring Kelly up to discuss how we will innovate and reach more athletes through retail. Thank you.

Kelly Cortina

Thank you, Henry. Good afternoon. I'm thrilled to be speaking with you all today. I've been a part of this great brand for the last 8 years. I've seen this brand evolve and grow in many ways, and I'm proud to tell you that the passion and the entrepreneurial approach to everything we do is alive and well today as it was the first day I started.

After 7 years in product creation, I jumped at the chance to join the retail team last year, which appealed to my retail roots with Abercrombie & Fitch, another strong and influential brand. I'm very well acquainted with the brand millstones presented earlier today, and I'm delighted to stand here today to share our vision for Under Armour retail, a major growth initiative for this company.

In the next few minutes, I will give you all insights to the steps we are taking to build our specialty and Factory House distribution. I always like to give perspective, where we were, where we are and where we're going. So let's talk about where we've been and how we've grown since your last visit to Baltimore.

We've seen continued success year-after-year, posting very strong comps. Not only are we seeing growth in core businesses such as Men's, but we are also seeing growth in our youngest brand platforms, Women's, Footwear and Youth. We have grown growth through innovation by redefining the UA retail shopping and brand experience in both specialty and Factory House; we have driven growth through innovation by designing and opening the first ever Brand House in our proud hometown of Baltimore; and we have driven growth through innovation by making key investments to our retail organization in the areas of talent, product, systems and operations.

We've also grown through reaching more athletes. In total, we are reaching 14 million more athletes annually since the last time we spoke. And we've added 32 Factory House stores, and we've almost doubled our number of stores in California. Over the next 3 years, retail will innovate faster, spread our reach farther and grow the business bigger than ever before. And it all starts with specialty.

Under Armour specialty stores will always be the most current and best expression of our brands. They will introduce what is next in apparel, accessories and footwear. The message I want you to leave with today is that Under Armour is committed to a clear vision for specialty retail that embraces our ambitions as a growth brand.

The UA Brand House concept is founded on 3 things: innovation, specialization and localization. As you experienced last night and as illustrated in some of these images, we have transformed the UA shopping and brand experience into a replicable model that embodies our DNA as a brand.

The Brand House delivers pinnacle, innovative and localized products every 6 to 8 weeks. In fact, the product you saw last night was just set last week as part of our June 1 summer set. Already customers are rushing to the store to check out new colors, prints and graphics in Men's, Women's and Youth.

You may have noticed swimwear, a newer product category for us, which is creating a lot of buzz. You could not have missed our commitment to innovation, as demonstrated with the Armour39 station out in front and our footwear storytelling. And I know you all noticed our superhero Alter Ego statement of Men's and Boys' mannequins. I think we all saw empowering athletes is a lot of fun.

Retail is where all of the product vision comes to life. We are teaching athletes how to dress head to toe, and we are getting traction with the 25- to 40-year-old athlete.

Additionally, the Brand House connects our headquarters teams with athletes, which keeps us current and it inspires us to innovate. As you observed last night, our teammates are specialists and they are truly the trusted resource for athletes. In fact, our store teammates download our merchant teams daily on product feedback and customer requests. Also our digital marketing calendar alerts customers with things like run clubs, workout Wednesdays, athlete appearances, just to name a few things. The Brand House is also a forum to learn fast.

As mentioned by Henry, the -- this destination improves our partnerships with wholesale to fulfill our brand vision at retail. Through visits and tours, we are better able to inform wholesale partners on trend and merchandising vision.

Establishing a new distribution does not happen overnight. We are being thoughtful and calculated with our approach in the next 18 to 24 months to ensure we build a sustainable model. As many of you know, we are underpenetrated in key markets like New York, L.A., Chicago, home to some of you. Our strategy is to target high streets and premium malls, which fill in the gaps across these influential markets. As a result, we'll be reaching new athletes between the ages of 25 and 40 who have limited access to our current distribution. This strategy will give us greater access to key influencers, heightening brand awareness and global exposure through these markets.

Over the next 18 months, we will continue to test and learn as we grow to 6 stores. And we will strategically expand from Baltimore. Our focus in the near future will be on the East Coast and on New York. However, we will always be opportunistic with our real estate approach.

Ultimately, we are positioning ourselves for a strategic and profitable rollout by 2016. And as many of you asked last night, what's your next step? We have an exclusive update for you today.

I am very proud to announce that we are moving beyond the comfort of our own backyard. We will be opening our second Brand House in November of this year at Tysons Corner. We will scale our high street model to Tysons corner to ensure we best approach a premium mall location. The store will maintain all Brand House design principles, the specialized shopping experience and our customer service model.

Product categories like Footwear and Women's will continue to be a focus, but the approach to marketing and localization will be new ones to a broader demographic with unique shopping patterns.

As you all know, Tysons Corner is one of the top 10 shopping centers in the U.S. And it's a great partner. It's home to several first-to-market new concept stores such as Microsoft, Apple, Madewell, L.L.Bean and American Girl. But what you may not know is that this is prime real estate. There will be a new Metro stop from D.C. and Dulles, which will drop customers off near our store, and our reach will continue to expand. So in 6 short months, we will have a new home and we'll be reaching many more consumers, which ultimately will make both our athletes and our brand better.

I'll transition now to our more established retail channel, Factory House. Specialty clearly brings new opportunities, but what you must know today is that the low-hanging fruit in our Factory House channel will drive significant growth over the next 3 years. We have room to grow, and our landlords want us to grow. And we are working together to make sure UA reaches more athletes with less risk.

A few details I want to make sure you hear today. With the evolution of our brand, we have seen tremendous category growth, and we need additional selling space. So we are aggressively expanding our door size, and the good news is that it will not negatively affect dollars per square foot. In the past, we relied on new doors to fill growth, whereas now, as you can see, we are focusing on expanding the size of existing doors.

In 2016, 1/3 of our growth will come from existing doors and proven markets. We will upsize 50% of our doors by 2016. And as Henry mentioned, we will be doubling our total square footage across our fleet from 500,000 square feet earlier this year to over 1 million square feet in 2016. We will also still target new territories, new geographies, so there isn't any cannibalization with existing doors. But the message for you all today is that the Factory House will continue to grow.

In addition, we are making our footprint more efficient and productive through 4 key investments. In the past 12 months, we have invested in leadership. We have added 5 executives with industry experience to lead and build our team for future growth. Two, we've invested in systems. We are investing in our infrastructure, which will pay off dividends in 2015 and beyond. Three, we are focused on elevated products. We have made significant improvements in planning as an organization over the last couple of years, and we are still targeting between 70% and 75% of made-for-outlet product penetration with the potential for that to grow. And we've built a flexible model that will allow us to answer organizational needs. Four, operations. We are hyper-focused on speed to market. And through maximizing real estate and updating our store fixture design, we are increasing selling floor capacity by 20%. This team is very focused.

In conclusion, the message today is that between our Factory House and specialty channels, we are armored for growth in DTC. Thank you.

I will now pass off to Chip Adams, our Chief Performance Officer and leader of our e-commerce business.

Byron K. Adams

Thank you, Kelly. Hi again. My name is Chip Adams, and I've been involved with the company actually for the last 10 years, first as the institutional investor prior to the company going public in 2003 and board member and, most recently, about 18 months ago, coming back to Baltimore to work with the management team and the company as a full-time member of the team. And I heard Leanne talk about it being an honor, I heard Charlie talk about it being a privilege and I'll just give you 30 seconds on how I feel about that.

Sam, you said at lunch we had a great group of investors talking about the thread of Under Armour, making all athletes better. Well, from Kevin and Kip, the founders, down to our 22- to 23-year-old rookies, making all athletes better translates into making all products better. And it translates into making our process better from supply chain to IT. It translates into making each the meeting better, and it translates into these 23-year-old kids, to the senior executives wanting to make themselves and ourselves better every day. I'll say for me, that is why it's an honor and a privilege, because it's making athletes and ourselves better every day. And it is a real honor and privilege to be here.

Let's talk a little bit about e-commerce since e-commerce is -- been reporting to me for the last few months.

E-commerce is and will continue to be an extremely important growth driver for the company. You can see on the chart between 2010 and 2013 that we'll grow about 35% compounded annually. Now we also know that e-commerce as an industry continues to grow as a percentage of retail sales. We know that mobile is becoming a preferred device. We know that kids are driving everything social from Pinterest and Facebook to Twitter. I can tell you from firsthand experience the technology that allows people to shop and share so that others can vote on their shopping experience or that kids might five, can shop and share their shopping cart so that I can vote on their shopping experience and then maybe pay for their shopping experience, there is a lot of technology that is driving e-commerce today.

The point is that our vision at Under Armour is not to take advantage of these trends. It is to drive these trends because we are a growth company, we are an innovator and we will innovate to drive the most innovative experience for our customers to experience our site.

What are the pillars of driving revenue and profit growth and driving traffic and driving community? There are 2 things. We've talked a lot today about innovation. And innovation means 2 things to me. It means capturing the innovation that our -- of our products by staying close to the people who develop them. But it also means innovating in the way we tell our compelling stories on the site. So innovation, capturing and telling is a key part of how we're going to drive our business.

The second is integration. You heard about innovation from Kip. You heard Henry, Leanne, Gwyn and Glenn all talk about our products. The integration of our e-commerce team, the people who translate that, need to and are now sitting close to all of the leaders of product and marketing because that's where the soul, that's where the ideas, that's where the language of those innovation is born. It's also born in the store in Harbor East. It's born in the people who sell. So how we integrate this e-commerce engine, the people, to capture the spirit of each of the products is critical to our success. So innovation and integration.

And when you look at the slide, Henry talks about expanding the reach of our community. The growth in revenues is one thing. Look at the growth in the number of athletes. 40 million athletes represents 40 million unique visitors to our site in 2013. And we expect that by 2016, the number of unique athlete customers visiting our site will be approaching 100 million.

Let's talk about the business model that get us there. You can think of e-commerce and you all follow e-commerce in a very simple way. You can drive traffic, bring visitors to the site. You take those visitors, and with compelling copy, imagery and product, you convert visitors into buyers, and you then convert those buyers into buying more of what they want, not pushing the product but creating a place where they want to buy more product. So traffic, conversion, average order value.

Let us talk first about traffic. And I'm going to use the February, March, innovation brand holiday, our corporate marketing holiday, to talk a little bit about how we integrated and innovated to drive traffic.

First, we had product stories. The Armour39 was one. Spine Venom was another. The third was the I WILL campaign and galvanizing around the I WILL campaign. So the company had galvanized around these 3 ideas.

E-commerce took Armour39 and explained to people in a way we could only do either in our store or on our site why willpower and measuring your willpower in a workout is more important than measuring heart rate. And our ability to translate Armour39 into the benefit to the consumer is what drove compelling conversion and compelling traffic. And this is the homepage. It also is the email. And what you see is how strong is your willpower with the call to action for people to try to understand it.

The results of this campaign of integrating the marketing was that we drove over 1 million additional visitors to our site in the first quarter than we did in 2012, for the first quarter. And that was 20% higher, 20% to 25% higher than the plan for that same period. So driving traffic was a very successful effort of both innovation and the integration of the teams.

Conversion. Conversion is a function of a few things, having great product stories to tell but also how we tell those stories, again how the merchants then talk to the e-commerce team to talk about how we compel people to feel what it means to have Spine Venom, what it means to have our ColdGear, what it means to have the Armour39.

And the way we describe those products and the way the power of those products comes across is what turns visitors into buyers. The other piece of this, which has been something we've been improving every year but has been a significant improvement this year, is having inventory, every size for our most popular products. And a great example of that, you've seen Alter Ego. I'm going to show it to you again. But you look at the homepage and the web version of this to transform yourself with that imagery causes people to want to click on Alter Ego to go deeper to understand what is Alter Ego all about. The product was compelling. The story was compelling. The conversion was compelling. Alter Ego, this one product, became the #1-selling product for the entire first quarter of 2013 that was only sold for the month of March.

Overall, the other thing about conversion before I move on is that conversion for us, this inventory and fulfillment and part of the -- what we've used in terms of technology and execution, we've now moved to have over 95% of our most popular styles in everybody's size. And that's -- that was 85%, 82% last year. So just that simple movement of 82% to 95% inventory on the most popular sizes also drives significant conversion.

I'm just going to move to average order value. Average order value is traditionally not a metric that moves. If you know e-commerce, you know from year-to-year 20 to 30 million customers, the average amount people buy stays about the same. And at Under Armour, over the last 6 months, there has been a dramatic increase in the average order value. Why is that?

Let me show you the bottoms bar feature that our Women's merchant team and our e-commerce team came together to do to create an average order value that was significantly higher than historically.

On the top, you look at the colors, you look at the picture, you look at the imagery, a far different image than you might have seen in the last couple of years about women and Under Armour and online. So compelling imagery.

You look at the women's bottoms style guide and you look at the simplicity of that style guide, which -- what did it do? It drove women to the style they wanted for that particular occasion. There's no more randomness in that. And by driving people to what they wanted, it actually drove them to a higher priced item because that was the one that actually fit their occasion.

And lastly, shop the look. It's something that Kevin has been talking about for the last 2 years. Henry has been talking about it for a long time. Under Armour needs to tell people what to wear. Dictate? No. Tell them what to wear. They can buy what they want, but we have a point of view. And this shop the look caused our women buyers to not only buy the bottoms but to buy the top and to buy the accessories. And the combination of the imagery, the simplicity and tell people what to wear increased our average order value not just for the Women's but for the entire e-commerce by over 12% in the first quarter and year-to-date. It's an extraordinary improvement in average order value.

So again, when you just come down to it, you're bringing people to the site, you're converting them and you're driving more dollars because you are presenting a more compelling case for each product.

So what about the future? If 2013 was all about execution, bringing our teams together, integration and understanding the innovation and how to use it, 2014 to '16 is inspiring Under Armour athlete customers every day. Well, what does that mean? It means taking a site that is a very good, strong shopping site and making underarmour.com an iconic brand experience. What does that mean? It means videos that are the right videos to explain our products, the short videos. It means longer videos that can drive the passion of our brand for our new product introductions. It means places to go where our kids can upload their own pictures when the next is showing their new ideas and they're wearing their Alter Ego. It's engaging our customer in a more than a commerce site, but an iconic branding site, number one.

Two, dramatically expand the UA community globally. As I said, 40 million people will visit our site this year. But 40 million people really represents -- and the e-commerce revenues is about 9% of e-commerce -- of Under Armour business is done online.

If you think of the best catalog retailers, they can be closer to 35% to 40% because of their history of developing files and customers. We see no reason why we can't take the passion of our customer and to find ways to get those 40 million people to visit, to become a significantly greater part of the UA community.

Serving our most loyal customers, the passion of this brand, the passion people have for wearing it, what the logo means, we do not yet have a loyalty program commensurate with the passion of our brand. By the middle of 2014, we will have a loyalty program that not only rewards our most loyal customers, but involves our most loyal customers in getting the word out.

And lastly, omni channel. People all are talking about omni channel, Kelly, we're working together with Henry in our own store to make sure that if you're in the store, you're never -- we're never out of stock. If it's not in the rack, it can be at your house in the next morning at 10:00 or it could be picked up at the store. There are many ways to engage omni channel. We're going to start with our own retail and then we're going to be working with our partners in wholesale to ensure that any customer walking in is never out of Under Armour.

So again, the long-term vision for e-commerce, today, it is a strong site, it integrates the company well, it's 9% of revenues. As we look forward to say, could it be 25% of revenues like it is at some of the more -- the catalog retailers, we see absolutely no reason that we can't have e-commerce be a substantial higher percentage of sales in the future as we go forward. Thank you, very much.

And now I'd like to introduce Brad Dickerson, our CFO to wrap it up.

Brad Dickerson

Thanks, Chip. Thanks, Kevin, also for that most unique way to introduce me earlier today, which I think inadvertently gave me a promotion, but I wasn't quite sure. But Chip just took away that promotion in less than 5 hours. So that was the shortest tenure of a CFO ever, it's okay.

Good afternoon, everybody. Down to the last presentation here before we leave some time for some questions. Our teams have walked you through updates pertaining to our 5 growth drivers today. So let's take a look at what it all means from a financial perspective.

We always start this conversation with a little perspective on where we've come from and our visibility in the current year, our scoreboard. Our company generated $281 million in net revenues during our IPO year of 2005, and we crossed the $1 billion mark in 2010. Hitting this level set the basis for our financial targets at our last Investor Day in June 2011, where we indicated that we would double that 2010 level to $2.13 billion. Based on the midpoint of our existing 2013 guidance, we remain well on track to surpassing that goal at $2.22 billion, going to CAGR of 29% since our IPO and 28% since 2010.

On the profit side, we more than tripled our operating income from $36 million in 2005 to $112 million in 2010, while establishing a 2013 target of $255 million at the last Investor Day.

At the midpoint of our 2013 guidance of $256 million to $258 million, we expect to deliver on that target. Importantly, we are achieving our recent operating income goals at a higher CAGR than sales or nearly 32% over the past 3 years.

You've heard all the previous presenters discuss 2016 targets and you're wondering why 2016 is the year we chose. The reasoning behind this is that we -- it ties directly to a new internal process we have around planning our business. This process, nicknamed internally 3YP for three-year planning, is an alignment across all functions of our business from strategic planning, to finance, to product sales and marketing, followed by supply chain, IT and all other back-office functions. This process is a top down and bottoms up approach at looking at our business, defining our expectations and most importantly, aligning resources for 3 years out beyond the current year. We felt that linking our Investor Day discussion with this internal process was an obvious approach.

So what will Under Armour look like from a financial perspective through 2016? Starting with the top line. As Kevin mentioned earlier today, we expect to reach $4 billion net revenues in 2016, representing nearly a 22% CAGR from 2013 and continuing to deliver our long-term objective of 20% to 25% growth. With this target, we wanted to provide a little more insight than usual on what factors have been driving our business, and how that composition is expected to change over the next few years.

First, looking at our product categories. Men's apparel, Women's apparel, Youth apparel, footwear and accessories. In 2010, our business was largely dominated by Men's apparel, which accounted for over 60% of apparel sales and 53% of our total business. While the 3-year CAGR for Men's apparel is expected to remain over 20% through 2013, several factors impacted the overall mix of the category. First, we have seen growth of closer to 30% from Women's apparel, Youth apparel and footwear. And second, we brought our hats and bags business in house in 2011, which brought the accessories category from 4% of total revenues to 10% in 2013.

As we move to 2016, consider the opportunities that our apparel team highlighted earlier today. We see the opportunity for 10 platform categories, each surpassing $100 million of revenue. Even with Men's posting an expected strong double-digit growth, Women's and Youth are expected to continue to outpace with Women's increasing to 24% of total net revenues and Youth 12%.

New innovations like Charged Cotton, STORM and infrared will enhance many of these categories and could each factor into $500 million of product and importantly, none of these innovations existed in 2010.

So our 2016 growth algorithm consists of healthy growth remaining in Men's Apparel, continued outperformance in both Women's and Youth, footwear targeting $600 million to nearly 15% of our total business, and accessories and licensing growing roughly in line with our overall results.

Looking at how our business is evolving and the expected 2016 product mix compared to 2010, you see Men's apparel going from 53% of our total business to 39%. This is due to other categories outpacing Men's, even though the expectation is that Men's will have very healthy double-digit growth in the period.

Women's apparel is expected to increase from 22% to 24% of total net revenues. And looking at just the apparel business by itself, Women's will go from 27% of total apparel in 2010 to 33% expected in 2016. Youth will grow from 9% of our net revenues in 2010 to an expected 12% in 2016. Again, looking just at the apparel part of our business, Youth will represent approximately 11% -- represented 11% of our business in 2010, and is expected to be 16% of our apparel business in 2016.

Footwear growth from 2010 to '16 is expected to outpace our overall business and increase from 12% of net revenues to 15% in 2016.

Now looking at a similar analysis within our sales channels. We have broken down our business here into our top 3 North America wholesale accounts, all other North America wholesale accounts, total Direct-to-Consumer business and international.

In 2010, our total North America wholesale business drove over 70% of net revenues with our top 3 accounts contributing 31% to the total, Direct-to-Consumer, 23%; and International, 6%.

As we move through 2013, the most significant change has come from our Direct-to-Consumer business, which expand to approximately 29% in 2013, led by Factory House Fleece that is expanding from 54 doors to approximately 112 by the end of this year. From there, expectation through 2016 is that international will show the most meaningful mix change, doubling from 6% to 12%, as Charlie said earlier, and led by many of the initiatives he and his team are implementing.

What we feel is just as important and perhaps still underappreciated is that we expect double-digit growth continuing within our top 3 accounts, supporting our belief that we have ample runway in what we believe to be our most -- what many believe to be our most mature distribution.

Looking at the broader time horizon of 2010 through 2016, you see that Direct-to-Consumer grows from 23% of our total net revenues to an expected 31%, international to the previously mentioned 12%, all while our top 3 and all other North America wholesale continue to post impressively strong double-digit growth.

Moving on to gross margins. Many of you heard and discussed our belief that we should be a 50% gross margin company, leaving just over 200-basis-point gap from where we closed in 2012. We see 4 large factors that are expected to dictate our progress over the next several years.

Two consistent and opposing forces, we have continuously discussed have been our higher margin DTC business and a lower margin, footwear business. This story should hold true going forward although at a slightly different flavor.

In DTC, the overall sales mix should be modestly positive as the channel approaches 31% of net revenues. We also expect the channel to become more profitable, overall, as e-commerce growth outpaces Factory House growth and the made for mix at outlets normalizes in the 70% range.

Specialty growth should also become a positive factor, though the magnitude will likely to be limited given these stores remain a small piece of our revenue picture over the next several years during our testing phase.

Footwear margins currently are holding in the low-30% range and will remain well below the overall company even as the category scales. As we stated in the past, we have the ability to mitigate the expected footwear sales impact and gradually improve footwear profitability as we build scale, build supply chain efficiencies and gain momentum in non-cleated categories, particularly running.

The ultimate impact of our international efforts on gross margin is difficult to pinpoint given it will dependent on how we establish, grow or change business models in each country or region.

Charlie walked you through some of our current strategies to bring our brands and more consumers globally, some involving the establishment of our own subsidiaries in places like Brazil and Mexico, while others include new or expanded distributor models.

Assuming no other significant changes to existing licensing or distributor models, we expect core international gross margins will improve, given some of the subsidiary additions. However, even considering these gains, consolidated international gross margins will remain below domestic levels given the mixture of noncontrolled distribution models.

Factoring the higher growth levels expected in the upcoming year, as we expect international's net impact to gross margins to be slightly dilutive through 2016.

On the supply chain side, we are targeting improvements to overall gross margins, supply chain itself is a big topic, so let's take a few minutes to discuss some relevant topics here.

Obviously, on the supply chain side, Chip and Jim Hardy and their team are the experts here, so I'm taking a little bit of liberty just to go through some of the top initiatives they have, and I'm really proud of some of the improvements they're making in the supply chain overall. It's an area we need to continue to develop core competencies in people, process and systems in order to get ahead of our global growth ambitions. However, our efforts to build a world-class supply chain will not come without some of the underlying challenges such as wage inflation, particularly in Asia, in expanding international business, continuing needs for IT infrastructure enhancements and integration, the ongoing need for supply chain talent acquisition and the overall challenge of supporting a brand growing at plus-20% annually.

Our focus will continue to be the balance needed in 3 key objectives: The balance of effectively meeting demand while efficiently managing supply; the balance of improving costs and margins while keeping our high-quality standards; and the balance of building a longer-term effective supply chain while managing SG&A and CapEx in the near term.

There are numerous initiatives and projects the supply chain team is and will be undertaking to meet these objectives. Four key objectives that will have some of the largest impact are presented here on the screen. We are enhancing our demand and supply planning system with the implementation of Logility. This system will provide the ability to buy through changing forecast requirements and provide better visibility to vendor projections. In addition, we'll be able to direct inventory to a multi-node DC network to better allow for regional distribution.

Our global distribution house footprint initiative will enable us to build scale and leverage cost over the longer run. This will enable us to invest at the right level for growth closer to needs and also give us the ability to utilize satellite DHS or 3 PLs to optimize our regional market growth.

Utilizing the visibility we will get from our 3-year planning process, we can plan capacity and onboard new quality vendors to support anticipated growth in an effective manner. Through multi-echelon planning, we will be able to optimize our grades, trim and yarn commitments to significantly reduce lead times, while also optimizing for the next levels of finished goods inventory across our network.

So what does all this mean? We'll improve fill rates from a current level in the low-80s to a targeted 95%, which in turn will help maximize revenues relative to existing demand along with supporting our changing channel mix and international expansion. We will continue to stabilize our inventory turns at a rate of 3x in the near-term. Upon seeing success in our fill rate goal, we will then target slow improvements to our inventory turns, aiming to grow inventory at or below revenue growth, while maintaining high quality of inventory.

It is important to note that our expectations to get to the higher end of our turn target of 3.3x will be dependent on us continuing to see success in the achievement of the fill rate goals throughout the next 3 years. Direct supply chain impact to margins should be favorable by approximately 25 basis points each year as cost savings, strategic pricing and design dynamics more than offset general inflation expectations.

We will continue to build the foundation and infrastructure needed in people, process and systems to support well beyond the expected $4 billion 2016 business by improving speed to market, using technology as a weapon and focusing on quality. We have a lot of work to do to accomplish these supply chain goals, but we are confident and kept Jim and the team that we are putting the right pieces in place for success.

This success will be instrumental in dictating our gross margin path over the next few years and building off the 48% or so base we have seen in the past couple of years. Combining all gross margin factors I just discussed, we currently expect to get approximately halfway to our longer-term 50% gross margin target by 2016.

Now turning to the investment side of our business and SG&A. Continuing to make the right investments is paramount to our long-term goal of success and delivering the type of top line results you come to expect from Under Armour. As you probably know, marketing expenses for Under Armour consist of 3 primary buckets: Media, sports marketing and retail marketing.

We will continue to balance these dollars against relevant opportunities in the market. Media, we'll continue to center on the brand holidays that Kevin discussed this morning, clustering our expenditures to be more impactful on the global stage. Sports marketing, we'll continue to balance our heritage of making $1 spend like 3, while continue to achieve our larger -- continuing to activate our larger assets like [indiscernible], while also adding new strategic assets as the [indiscernible] deal in Chile, as Charlie has talked about earlier.

Retail marketing ensures we are telling the best possible stories around our product, our innovation and our athletes. And we'll continue to invest to elevate our consumer-facing proposition with our great partners. While we remain nimble to take advantage of opportunistic brand enhancers, we generally expect that marketing will grow in the same range as our net revenue growth through 2016, remaining near the 11.2% of net revenues level in 2012.

Selling expenses are primarily tied to our efforts in the Direct-to-Consumer channels, Factory House, specialty and e-commerce. Factory House is transitioning from a unit growth story to a footage growth story as we migrate the fleet to larger footprints in the upcoming years.

Specialty will be in test mode the next few years as we dial in a model or models that potentially can be deployed on a broader global basis longer-term. E-commerce investment will also continue to help unlock the potential of this channel, another important vehicle to building a brand globally.

We generally expect growth in selling expenses to track to our overall growth trends in our Direct-to-Consumer business. Product innovation and supply chain, a broad category of expenses and one that is expected to be the primary area of deleverage across our SG&A spectrum in the near term. Just as our success story today is being driven by some of the investments we outlined at our last Investor Day, the building blocks to our growth through 2016 and beyond need to be established well in advance.

As you hopefully have seen today, a key area of investment will be around innovation, whether it's fostering external relationships with great local companies like Lockheed Martin, building processes where we are viewed as a key resource for entrepreneurs or magnifying our internal efforts to help build that defining product that we believe is still out there.

Two other broad areas will also be in focus, creative talent and infrastructure. We are increasingly looking to attract talent in areas that are already hot beds for given categories, while establishing a physical presence in those markets. The focus on these global investments will be on attracting design talent, engineers, R&D experts across all of our product lines.

Our infrastructure investments will center around our global expansion as we work to align offices, IT, supply chain and other functions. Some of these initial investments will precede corresponding revenue streams, though in the case of international, it may prove to be additive to contribution margins toward the tail end of our 2016 window.

We will also need to be cognizant of supporting our existing domestic business is it approaches $3.5 billion in 2016, and see the necessary need for added distribution capacity.

Finally on corporate expenses, the consistent theme of leverage we articulated in the past will continue as most of our back office functions and related costs will grow at a slower pace than our top line. However, this leveraging corporate is not expected to offset some of the other aforementioned investments and we expect overall SG&A to moderately deleverage through 2016.

Wrapping it all together in the P&L, our financial goals are to reach $4 billion in net revenues by 2016, this would mean generating nearly as much incremental top line between 2014 and '16 as the company amassed in total in 2012. Pretty impressive stat and we feel like we're just getting started.

From a bottom-line perspective, we are targeting an operating income in 2016 of $480 million. What this means is that we remained focused on getting better, growing operating income faster than top line without cheating the critical investments needed to support our long-term global endeavors. Our top line CAGR of nearly 22% and our operating income CAGR of 23% remain well within our long-term target range of 20% to 25%.

Taking a quick look at several items outside of the P&L, inventory turns, capital expenditures and cash. Regarding inventory turns, while our turns have been a bit more volatile than the annual snapshot here would indicate. As I stated previously, we are working to stabilize and start improving turns up to a potential rate of 3.3x. Again, any improvement we make, we'll need to balance the needs and challenges of building our global footprint and achieving our previously outlined fill rate goals. We will target 3.5% to 4% of net revenues for capital expenditures as we continue to support our topline growth, begin building a global retail footprint, enhance distribution and logistics and invest in how we look to the consumer with our great wholesale partners.

Finally, our cash position will continue to grow and we currently see cash levels of approximately $700 million by 2016, compared to $342 million last year and just over $200 million in 2010. This obviously assumes the general operating capital targets I just outlined with no significant uses from nonoperating cash items.

So let's wrap up the presentation for today. I'd like to thank you for your patience and attention today. As you can see, all the management team here at Under Armour is extremely excited at our abundant opportunities through 2016. And perhaps, equally important, our ability to keep laying the foundation for longer-term growth beyond 2016.

I'd now like to welcome back up Kevin, Kip and Henry. We'll be happy to start taking some of your questions. Kevin, Kip and Henry?

Question-and-Answer Session

Kevin A. Plank

[indiscernible] we've got microphones in the audience so we'll do about 20 minutes of Q&A and have a little wrap up and then get everybody out of here. Good day, all right in the front, let's fire away, leave the pleasantries for later. Go ahead.

Kate McShane - Citigroup Inc, Research Division

Kate McShane, Citigroup. My question really is around the CAGR that you told us today. It seems like the $4 billion number, I'm calculating a 20% CAGR over the next 3 years, which is very impressive, but seems to be at the lower end of your 20% to 25% long-term range and certainly below the 28% you've done the last 3 years. So I wondered if you could highlight at all, where you could be at being conservative with this new target?

Brad Dickerson

Well, I mean, I think it's important to note that some of the areas that we're looking at growing the next few years are coming from areas that maybe traditionally weren't big growth areas for us. So a lot of the team's time and effort really in the international front and footwear front here in the next 3 years are going to be really critically important to us not just through 2016 but also beyond 2016. Also, areas like specialty retail. So some of these areas are important longer-term growth drivers for us that we're going to put a lot of time and energy around in the near term. Again, not necessarily saying that these are huge part of our growth the next 3 years, although they are an important part of our growth. They're more foundation laying for maybe longer term beyond 2016. So I think it's an important balance here of saying there's a lot of things that we could do, whether it be top line or bottom line to maybe have the top line look at a faster pace of growth or the bottom line maybe look at a faster pace of growth. But I think it's really important that we balance the time we need, the resources we need to not only deliver on 2016 but probably more importantly deliver on beyond 2016. So a lot of us is just about pacing ourselves and doing the right things for the long-term not just the next 3 years.

Kevin A. Plank

it's clear and whatever Brad did say on SG&A earlier as well. I think we'll probably take a couple of pennies and put it toward our HSBA systems here, [indiscernible] systems to make sure we got a good environment. So beyond that, no -- I think we're very bullish about our growth. We believe in the company, we believe in the growth engines. We've been fortunate that we've got this sort of five-pronged approach, Men's apparel, Women's apparel, footwear, international and direct-to-consumer. And fortunately, we felt growth really not driving just from one, but from all of them. And to be fair, we've had some that we've been investing in, maybe longer than any of us would like, but just understanding that's the business. I don't think there's not a book written on exactly how to do this or how long it will it take, whether it's entering new market product categories like footwear, new distribution channels like entering the mall or new geographies like going to some of the places that Charlie spoke about. But we believe that we're prudent with the outlook that we provided that we've certainly got some lottery tickets in there but we're also very measured, I think, in our approach and that understanding that some things are going to work and some things are not going to work, and so within that balance I think we want to make sure that we can deliver and have the confidence to speak about the math that we put in front of you and say, we feel good about our ability to achieve the marks that we put out there. Robbie? Why don't we raise our hands who wants the next question. We'll get mics in somebody else's hand afterwards. We'll have to wait.

Robert F. Ohmes - BofA Merrill Lynch, Research Division

Thanks. Robbie Holmes from Bank of America Merrill Lynch. Just a follow-up on Kate's question, the growth that you put out there for us, is it pretty consistent year-to-year or -- I'm hearing about 4 new international offices in 2014 and a lot of new initiatives in footwear, et cetera. Should we be thinking that maybe might be a little slower near term and then you get a bigger bump in '15, '16?

Brad Dickerson

Yes, I think you can -- from a modeling perspective, assume a relatively consistent pace the next 3 years, I think, in general. It doesn't mean you won't see a little bit of may be a plus or minus year-by-year but I think in general, anticipate that growth to be relatively consistent. And I'd say with 14 quarters now of 20-plus percent growth, we've -- we're -- that's a great number and statistic but we also recognize that we're concentrating on the 20%, 25% on an annual basis and so we may have some ups and downs. We want to make sure that everyone is prepared for that, that we're certainly not guaranteeing anything as much as we feel very good about the outlook on an annual basis and that we'll stay committed to that of delivering on an annual basis. And so any of these international markets, opening up these subsidiaries, distributors and these markets to, one thing that we've learned from 14 years in Japan, from 7, now 8 years in Europe, 4 years in China is that these things are going to take time. So the global market, it's vast and that's why what makes the opportunities of direct-to-consumer, our apparel business here and the domestic things we had going on that allow us to fund and continue to invest in the longer-term basis in some of -- I think some heading to that direction as well.

Matthew R. Boss - JP Morgan Chase & Co, Research Division

Matt Boss, JPMorgan. From an EBIT margin perspective, you've outlined 90 basis points of gross margin offset by the SG&A deleverage, should we think about flat to -- is it flat EBIT margin over the next 3 years? Is it down? Or what's the best way to think about that?

Brad Dickerson

If you look at our current EBIT margin coming out of last year at 11.4%, and I think, if you did the math on the $4 billion or $480 million it's about 12%, so I think our commitment here is like I said in my prepared remarks is to get a little bit better every year. I think that's an important thing, an important part of our culture is to keep improving and getting better. That they have to balance that though with the critical investments we need. Again, go back to my earlier comments, it's not just about 2016, there's a lot of impressive numbers we put up here for the next 3 years, but a lot of these investments over the 2016 timeframe are really going to benefit 2017 and beyond just like the investments we made last -- that we're making the last Investor Day have benefited the last couple of years. So you'll see a slight improvement in operating margin year-by-year, some improvement in gross margin and some deleverage in SG&A, so think about that going up just a little bit every year as we kind of commit toward internally and externally to get better every year, while really balancing that need to invest.

Kevin A. Plank

Fundamentally, we think it's important that we always move forward. Going backwards or even staying the same is something that just culturally doesn't fit with us but. At the same time, as you hear -- the hardest thing about Investor Day is figuring out how to edit the information we would have passed on to you and looking and say, in the span of 5.5 hours, how are we going to get across the messaging that we want. So there's a lot of great stories we didn't get into detail. The $200 million Outdoor business that we had. There's -- on the international side, there's additional things in Women's and Armour39 through digital sport. So we have to be thoughtful and prudent about that and our job frankly as leadership for the company is to make sure that we are responsible for deploying the resources, time, people and money. There's only so much of anyone of them. So even if strategically, it may be the right place to be, whether that's a new market and Charlie, can say I think that we need to be in Russia, for instance, as part of the BRIC formula but we don't have the right partner or leadership there, we're going to -- we'll take a pass there. But when we look and see the leadership that Charlie has put together, for instance, in Brazil, and you've got these teams of professionals who are going at it. What can we do to carve off to make sure we can prioritize. And that's the thing, I think, we're -- Brad and I find that balance as well is making sure that it's not -- we got opportunities everywhere, but being, I think, prudent enough to make the decision to invest in the places you're going to have the greatest ROI in the shortest period of time that allow us to sit here and have these meetings with you 5 and 10 and 20 years from now versus just a couple years from now.

Matthew R. Boss - JP Morgan Chase & Co, Research Division

One other quick thing. What's the delta on the international margins versus the total?

Brad Dickerson

Probably, we don't want to get into the specifics of that. We usually don't give the specifics of our gross margins in those types of businesses. Again, I think the important thing to take away from that is there's a pretty drastic difference in the business models. So whether it's a licensing model or a wholesale, retail model or a distributor model, there's varying varying differences. So that gross margin in International business could change significantly with business model changes that were not assuming any drastic business model changes the next 3 years.

Sam Poser - Sterne Agee & Leach Inc., Research Division

A couple of questions. Sam Poser with Sterne Agee. Number 1, Brazil, it seems like a very important business coming up. But Brazil is a very close border country. How do you deal with the duty structure and all those issues about positioning the brand into Brazil to get that really working going into the big events coming up? And then I have one another question.

Kevin A. Plank

The greatest thing about this is I've got an unbelievable team so let me turn now -- Charlie if I can get you microphone back before I try to stumble through that one. We've got another one over here for the management team. It was part of that, of the mic. One thing you'll find about charlie is he's very real. He's not from South Jersey, that's a real German accent, so go ahead and belt it out.

Karl-Heinz Maurath

And I will keep talking with a German accent. I love this question because it normally comes always up when there are questions around Latin America and I have worked there for 10 years. So we need to differentiate between footwear and apparel. If you talk footwear, it's a major, major drag because Brazil is one of the market with a huge amount of tariff and nontariff trade barriers. If you take footwear made in China, there's 35% input duty plus I think $13.65 on top. So footwear share is fairly small. The good news is when we enter the market, we have a lot of apparel and high apparel share, where we produce a lot of the apparel in Latin America but there are hardly or no input duties into Brazil. At least for the market entry strategy for Brazil, we're well-prepared. Our Footwear today is predominantly done in China, so it would be a problem. When we go in, it's not a big issue because the quantity is small and we look at product sourcing, getting in the future products also from Indonesia into Brazil in order to go around this tariff and nontrade tariffs, sorry. The German accent.

Byron K. Adams

I think it's also important to note that we've been doing business in that region specifically into the United States for some time. Actually, it was our first 807 program that we move from Allentown, Pennsylvania into Honduras. There's favorable trade agreements within the region, specifically with Brazil, we actually had our team member, Bobby Hall, who's been on a 7-week trip intervening new manufacturers. So we're really kind of getting a jump and trying to put a game plan together. It is a complicated marketplace but there is some great manufacturers there as well. So there is a -- even though it's complicated, there is a infrastructure that's been built over time in Brazil that you can access.

Sam Poser - Sterne Agee & Leach Inc., Research Division

Thanks. And then secondly, you've -- back to the international in general about the margins and everything, when you're converting certain of your businesses to the subsidiaries that would then raise your gross margin, raise your sales significantly and raise your SG&A at the same time, how much of -- I got -- how much business are you doing in those 4 countries that are -- how much will that affect it from the 4 countries that are converting over to subsidiaries in 2014? And then you talked about -- I didn't follow what you said in Europe about taking over some of the businesses in Germany and so on and so forth. I think those are not becoming.

Kevin A. Plank

Yes, the only -- when you look at the next 3 years we're not assuming any changes in any of the business model, so a licensee today is a licensee in 2016 in these numbers. Your distributor today is the distributor in the 2016 numbers, the only model change that Charlie spoke about in his presentation was Mexico, so Mexico is going from a distributor-type model to our own in-house model so subsidiaries starting in January of '14. Mexico's business today is relatively small, so the impact today is relatively insignificant, but obviously the ability to control that market and the opportunity that market is huge going forward. So do we have opportunities to convert some of these models over the next 3 years? Naturally, the answer to that is yes. We haven't assumed that in here for right now for obvious because we're not in any discussions to do so right now at this point in time. But that opportunity exists. But remember, a licensing model is 100% gross margin so taking that in house actually goes against your gross margins and a distributor is a lower gross margin, it would come better coming in house. Okay?

Michael Binetti - UBS Investment Bank, Research Division

Michael Binetti, UBS. So I remember being here 2 years ago and everybody trying to pull targets and goals out of you on the revenue for Footwear, Brad, and I remember you guys really didn't want to. So I thought it was affirming today, here you gave some targets around where you think revenues can go over the next few years. The number that you did throw out was the low-30s on the gross margins on Footwear. And as we think about that over the next 3 years, where do you see the margins on the Footwear business going? You seem to be getting more confident in the platform at least over the next 3 years?

Brad Dickerson

I'll jump on that first and I'll let Kip add on to that afterwards. Yes, low-30s today but I think it's really important to note if you look at our Footwear business compared to a lot of our competition even though we've seen some really good success in the non cleated part of our footwear the last couple of years, cleated footwear, albeit, an extremely important part of our business from an authenticity perspective is still a very large part of our business and mix. It is the lowest of low margins from a category perspective in footwear. So part of the reason why we're in the low-30s is mix itself. And over time, as we become more and more successful in running and a lot of that growth, the $600 million, is going to come from running, in a category like running. You should see some natural improvement in gross margins from mix perspective along with the fact, and I'll let Kip jump on this, is that we're just going to be getting better in general from a Footwear operations perspective.

Unknown Executive

Yes, I think that incrementally getting better is the key for all of the teams, apparel, Footwear and accessories, but specifically in Footwear, having the ability to engineer quality and margin at beginning of the design process is what we're going to focus on. So I do think it will incrementally get better. Running is obviously better than cleated, I think Brad stated that we continue to see running be one of our biggest global opportunities, as well as training. We tend to see higher margins in those categories. It's natural. So we're excited about some nice gains there.

Brad Dickerson

Yes, numbers we've thrown out, again, longer term, this is not a 2016 target necessarily. But the longer term we feel like Footwear gross margin should be kind of be in that 40 to low-40s area, that's not something that we think we can achieve by '16. We think we can improve where we are today because of mix and some of the things that Kip is talking about. But longer-term that's kind of where we think we should be. The important thing with Footwear though as we always talk about this is you got too look at the whole business model in footwear. So it's not just a gross margin story. So although gross margins are dilutive in footwear, over time, as we see success especially in our noncleated Footwear businesses, you have the ability to really leverage SG&A much better in Footwear because the higher price point is in footwear. So although you're going to see kind of with the maturing Footwear business over the long term, you're going to see lower gross margins. From an operating margin perspective, the Footwear business should look relatively similar to our apparel business and that's a piece that I want to make sure you walk away with. That's really important to remember.

Michael Binetti - UBS Investment Bank, Research Division

Kevin, if I could just ask one more follow-up then on the -- as you move into specialty and you think about the evolution of your Direct-to-Consumer business, I guess Under Armour, has one of the most crystal clear and discrete strong partnerships with a very small number of retailers, so as you move into building your own specialty stores, how do you think about what your brand needs to do to segment the product that you have at Sports Authority, Academy, to help them keep confidence to have do their business, while you also pursue your own stores over the next few years?

Kevin A. Plank

Well, let me start then I want Henry to jump in on the end on some of the segmentation question. I think it's a very good point, very good question. First and foremost, there's a big landscape for distribution out there. First of all, there's a big landscape of consumers out there that we believe today, even as much as we've grown and opening things like the department store channel recently and some other things in the last 2 years, we really don't feel like we've scratched the surface. We believe there's a lot of consumers that would like our brand, that are looking for our brand but, frankly, haven't found our brand. So the very silver and honest conversation that we have with our key distribution partners is that we commit to them as we continue to deliver these double-digit comps to them, which we've done on a consistent basis for really since our inception in their stores. And so, we need to keep driving differentiation, we need to keep driving innovation in the stores and making sure that there's a reason as to why they want to go there. The sophistication of our business, of our brand as a whole is something that I think you're seeing us have the capacity to not just make a -- your $25 t-shirt and a $50 ColdGear mock that are sold. So we've got this capacity now to probably speak in a couple different dialects to the consumer than just sort of one clear Under Armour voice. So whether that's Men's to Women's and whether that's Men's or Women's, whether that's mall to sporting goods and whether that's on field or off field. So we're really -- we're keying in on that of, number one, we're not going to give up an inch of what we've built with our key sporting goods partners. We're going to continue to drive space, we're going to drive our footprint, we're going to drive our presentation. And we have big ideas and expectations of what that can be. At the same time, any of you -- and I want to reiterate, anybody who didn't make it to Harbor East, I think it's a really important part of the story that we're telling here today to just see that and get some sense and feeling of what our brand looks like. We have all that product in one place. But certainly, when you walk into Harbor East, it'll give the expectation of segmentation that I don't think you've really probably seen from us before. You've maybe seen Under Armour limited to a few racks or maybe a bit of a presence in a store but not in the way that we have the capacity to do.

Henry B. Stafford

Yes, I'd add on a few things. First of all, I see our -- the white space of our distribution as total opportunity. With the strength of this brand, we have runway that is quite significant. Second of all, 3 years ago, if you look at our business right now, we're making 40% fewer styles than we did 3 years ago, and we've added a lot of efficiencies. What that enables us to do now is as we build these resources we've talked about, I segment our business. Harbor East, 40% of the assortment in that store is unique to that 1 store, and we're going to continue to model that. Think an incredible partner in Dick's Sporting Goods. We're going to actually develop product specifically with Dick's Sporting Goods and for Dick's Sporting Goods for the consumer in that store. Same thing with Chip on the website. And we believe this segmentation, as we look at our blueprint in our distribution throughout not only North America but what Charlie is doing internationally, that's why we're adding these design resources. What Kip talked about in terms of development capabilities, engineering and so on and so fourth, you will see us show up differently. Whether it's a premier department store, whether it's a Dick's Sporting Goods or whether it's a specialty store, our website or a store in Brazil, we're going to show up differently. And that's something that our product teams are going to be committed to working on and have been working on.

Faye?

Faye I. Landes - Cowen and Company, LLC, Research Division

Faye...

Unknown Executive

It's on.

Faye I. Landes - Cowen and Company, LLC, Research Division

Faye Landes from Cowen & Company. Two possibly somewhat related questions, maybe not. First of all, can you elaborate a little bit on your thoughts on sports marketing assets? Obviously, the biggest thrill of the meeting was seeing the product. But the second biggest thrill was seeing one of your key sports marketing assets in person. But you just talk about how you think about that, especially as you go to other markets where there are people who may be relevant to those specific markets because the cost is very high to get people on board. And you obviously have some great people, but what -- how do you think about that going forward? What do you need to do? How important are they, et cetera? And the second question, and Kevin, I guess this is for you in particular, you've laid out very concrete goals, which I echo the sentiment and thanking you for that. What do you think are the sort of the 3 biggest risks to achieving those goals? And what are you doing to protect against that, protect the house against that?

Kevin A. Plank

Well, so -- thanks for the plug and...

Unknown Executive

I like that.

Kevin A. Plank

Very well done. So when it comes to assets, it's a constant struggle. It's a -- I call it something short of a fistfight of where are we going to again deploy those resources, particularly on the marketing side. So we've remained committed to this, our marketing percentage. Are we still 10% to 12%, Brad? Have you gotten to 13% or anything?

Brad Dickerson

Yes, 11%. We're at 11%. We're at...

Kevin A. Plank

We're at 11%. We're at 11-ish percent. But the struggle, the agreement, let's put it, the agreement begins there, is that we can't do everything and that if we were going to do something else that we really want to do, we'll probably have to take something away. However, we also have a business that's growing 20%, 25% a year. So it means that on a $200 million marketing budget, we've now got a $250 million to spend the following year. So a lot of that anniversary is in -- and -- moves it's way over, and a lot of it, frankly, is new dollars and new money for us to look at. The -- we're happy [ph] now because what kept us from probably being more of a global company in the past was really around leadership. Again, you can invest in a strategy all day long, but unless you have the person who's actually capable of executing it, you're going to be in short supply. You've got a chance to get a sense of Charlie and the strength of the team that Charlie is building here at Under Armour. And so more and more of those type of assets is going to be something that can be pulled from us. So, I mean, imagine Under Armour, this domestic American company that all of a sudden just made this huge investment in Kawakawa [ph], the largest club in Chile. And we're not -- we're in business, but we're truly not in business. We haven't opened our sub or distributor yet. But we're in the process of doing that. So in short and simple, we will fund great ideas. We will fund great ideas with great leaders who have the capacity to execute on those ideas, plain and simple. And so, that will be -- those decisions, luckily, will become harder and harder for us because we have so many good opportunities. But Charlie is going to create those opportunities and tell us where we can get into. We like deals, frankly, that eat what you can kill. So we're not a licensed jersey manufacturer. We don't align ourselves there. We invest in themes that will drive basically a broader ethos. We want kids growing up wanting to wear training and sport product from Under Armour because they saw Kawakawa [ph] wearing our product. We're not saying great news, we can now self 0.5 million or 1 million kit jerseys, and that's our business model. So we do that in addition to driving the value of the brand. At the other side, the things that -- how do you say, the 3 things that we look at to protect our house.

Faye I. Landes - Cowen and Company, LLC, Research Division

The big risk, the biggest risk [indiscernible].

Kevin A. Plank

Yes. I've been consistent with my answer for this, and I always believe that our biggest risk is ourselves. Maybe it's getting caught up from reading your own clippings. And first and foremost, we're proud of our ability to sit here today and tell you the commitment that we made to you back in 2011 that we're delivering on, exceeding that 2x growth by 2013. We understand that even in laying out another number for 2016, that, of course, there's risk around that as well. It comes down to people and execution. I believe that we have a good strategy. We've been really going through as a company this 3-year business plan process. It culminated and we've -- we're -- been meeting on it this week, but we're no longer talking about things in the vacuum of, God forbid, a week, a month or a quarter even, but we're talking in terms of 1 year and, frankly, a rolling 3-year plan. So we're really deciding and going back to my first point about the best ideas being funded, the best businesses being funded that have the best leadership for us as well in order to run too. So I think as long as we keep putting people in place -- and again, it's looking at Charlie and saying, do we have the right -- where we say we need to be global, we need to be global, but we need to make sure we're investing where we have an appropriate strategy, the supply chain that can support and keep up with it and, of course, a leader in place who can actually handle and deliver on it. So there's probably 2 more I could come up with, but those are -- that's one good one for now. Thanks, Faye.

Brian McGough

This is Brian McGough. I'm from Hedgeye Risk Management. I was hoping you could hit on -- and this is like a little bit of what they Faye was talked -- Faye hit on. But over a long time period, there's been a whole host of brands who have had in the shoe space maybe 3%, 4%, 5% share. And they've always been saying like, "Hey, if we can only get to 8% share, it'll be x in dollars." And the same thing internationally as far as apparel goes. And it tells me if it doesn't happen inside, they're a brand problem, which I think Under Armour certainly does not have; or a leadership problem, which also I don't think it has; or maybe a capital problem, and I don't know if there's a capital problem or not. And I was hoping you could shed a little bit of light on your own view as to whether you think you're investing enough money into each of those businesses, both international and also Footwear, in order to achieve the goals that you want to achieve over an appropriate time period.

Brad Dickerson

Well, I can jump on the international one to start with. I think, again, Charlie kind of outlined this, too. There's a pretty good balance in the strategy around how we're going to pursue our international opportunities of wholly-owned subsidiaries and also some distributor-type models. I think the interesting part of that balance is there are some self-funding -- there's a self-funding mechanism to some degree in that model. These distributor models really kind of lean more -- even the lower gross margin, kind of lean more on one party to kind of do the market entry and execute within market. So these distributor models kind of start Day 1 from a profitable perspective. So there is the ability of having a good balance of distributor models to entry -- in entering -- into -- enter into markets going forward, along with our own subsidiaries. So some of you who tried kind of outline that, but these can be somewhat self-sufficient relative to use of profitable distributor model to help fund the needs of kind of the own subsidiary model in some of the larger markets with the greater opportunity is. So Charlie and I spend a lot of time talking about the P&L in international, and he's a true, true believer that international should be profitable. That's the reason why he's here today. He has talked with a lot of people in the management team of Under Armour about that. So does it take a little bit of investment up front? Yes, it does, especially in your wholly-owned subsidiary models. But you can offset that with some easy wins in profitability on distributor models that you put in place early on. So international has a kind of a little bit of a self-funding mechanism to it.

Kevin A. Plank

And to echo one of the things that Kip brought up in his presentation as well, there's a great quote from Drucker. There's like 2 primary functions for any business, and that's marketing and innovation. So about 30 steps in that direction is our innovation team, which is in the process of doubling their space right now. That only begins for that to happen. And where you look at -- because -- don't get me wrong, we stay up, -- and again, piling on Faye's question as well, is that there's been lots of brands who've been in our space. And I don't know, maybe they got tired, maybe they got complacent, maybe they just got fat. But I can tell you, this organization is very lean, it's very hungry and very much has a point of view on what it can do. As we said starting the meeting off, we have a pipeline of innovation that's coming at us from Apparel to Footwear to Accessories. And it's not, frankly, just coming from this building, but it's coming from everywhere. So one of the hardest things we're going to have to do is figure out, A, how to edit, how to be great editors, how to figure out which stories we lay on deciding that infrared is going to be the one that we're going to push at. Because I can tell you it wasn't, well, this is the last resort. We've got infrared. There were 10 technologies vying to be that. And so where we're going to develop those technologies internally, we want to become the centerpiece of energy where everybody's looking and saying, I've got a great idea of technology. And some of those partners that I mentioned, whether it's NAS [ph] or DARPA or others or other brands, other technology companies that are looking and saying, the front porch, that is Under Armour, they do story and distribution better than anybody else, and they understand innovation and know how to commercialize. Our ability to take those things and take them to the next level. We look at Footwear. And to be clear, in our models, that -- we've got 5 growth engines. And if one of them just flat out doesn't start or doesn't work or doesn't go anywhere, we still have 4 that we feel pretty good about delivering us to where we need to get to. Specifically, when it comes to a category or like Footwear, we look at that with the confidence that says, it's happening with the consumer, a lot of it has been mind share, a lot of it has been branding, a lot of it has been getting them into it. And when you look at the consumer awareness of Under Armour in that space, it was just 13% or 14% a couple of years ago. We're in the process of building on that and telling the consumer that we make the world's greatest footwear. And we'll continue to drive after that more and more. It's -- we had 1 point or 1.5 points of running shoe market share a couple of years ago. This year, it was 2.4%. I think we're the fastest growing where that goes. But that means there's about 97% in change out there that we're going to go get. And we see it all as opportunity. We see it as the brands coming in. We've used the analogy before, is that whether it's entering markets that have 90% market share, I don't believe Under Armour is coming from some of the positions that any other brands have. Everybody probably thinks their story is unique, but I'd liken Under Armour to a bit of a freight train because that's what's happened in the apparel space. It's something that's taken us 17 years to get to this point. But plain and simple, we're thought leaders in the space, and we're driving and we're moving forward. So we'll continue to establish that in Footwear. And a lot of that you got to see last night, a lot of it you got to see in some of the futures rooms. But it's happening. And obviously, you don't have quite the visibility into the things that we've seen, too. But first and foremost I'll tell you is that I believe we're putting together a world-class team. So what you're hearing us do with the offices and going and fishing where the fish are and unloading that, I think we're learning how to become a global product engine and frankly continue to play on that mission, that we have to be a true great innovation company.

How about one more question and then we'll wrap up?

Unknown Analyst

I appreciate that.

Kevin A. Plank

Yes.

Matthew McClintock - Barclays Capital, Research Division

Matt McClintock, Barclays. Clearly a longer-term goal, but you said potentially, e-commerce could be 25% of sales. And I was thinking about, Kevin, if you could talk about how you think about that channel as you think about international expansion specifically? And then also, maybe, Brad, if you could talk about the margin differential with that channel versus your other channels.

Brad Dickerson

Yes.

Kevin A. Plank

Chip, why don't you take -- why don't you talk through, if you could, on the international? And let me lead me you in and give you a little lead-in, is that first and foremost, we don't believe that we're required to enter every other market the way that others have. We think that digital gives us a completely new bandwidth to think about our approach versus having the heavy investment in bricks and mortars, and you see where some of the brands -- other brands have gotten caught up in a place like China with probably a little too much inventory on stores. So it allows us to test and probably be a lot smarter. But as it gets faster for us, it gets faster for everyone else at the same time. So I don't think there's any written formula. But we're certainly focusing on our ability to be able to service and have central basis where we will serve it from the web.

Byron K. Adams

No, I think -- it's Chip Adams again. I think having a model then putting a model out is important, whether it's in retail or whether it's in e-commerce. And I think that there are 2 or 3 areas where we are looking at the model and saying, whether it's in Great Britain or China, "How do you do e-commerce well?" And if you look at the best practices of the companies who have done this well and done it aggressively, they figured out the model first and then they've moved aggressively. And the good news for us is that digital is now the new way to market globally, and we're not going to have to compete dollar for dollar for athletes or for media. We have to compete on our creativity to bring our athletes to people in a different way. So driving awareness in these countries is going to be done on a platform that we think creativity is going to win, not just massive dollars. And once we get that model right in the 2 or 3 countries where we're working on -commerce globally, then we're going to take it aggressively to the rest of the world. And we think it's in the really early stages of that.

Matthew McClintock - Barclays Capital, Research Division

Awesome.

Brad Dickerson

On the margin side, you've probably seen the gross margin side in the Direct-the-Consumer there with e-commerce. So it's probably one of your better gross margins in our business. If you look at a kind of our overall gross margin where we're at kind of right now, around 48, I would say that the e-commerce margin is probably almost 20 points above that. So kind of in the high-60s to some degree is where our e-commerce margins have been, and we've said that over time. But again, the model is a little bit different, a lot more variable costs in SG&A in the e-commerce side to run the demand drivers of the business. And a lot of our focus -- and to Chip's comments before, a lot of our focus right now is really driving, getting the consumer on our site. So there's an acquisition cost of getting that consumer today, and the benefit goes beyond just today, obviously in the future years. So the anticipation of taking our business from the high-single digits to in the 20% range of our total business, the cost to that really is capturing these consumers and these athletes. And there'll be a cost to that just kind of sitting as a variable cost in SG&A. Overall model again probably kind of looks like our wholesale para [ph] model to some degree, higher gross margins but more SG&A to capture those consumers.

Kevin A. Plank

So Jim, you had a question, too, didn't you, Jim? Good, good. We do have you excited today, don't we, Jimmy? I'd get that hold from you someday.

So let me wrap up with just a couple of points. And it's like the same way I wrap up every one of our management meetings anytime that we get together. And I always tell people, first and foremost, here's what I heard; secondly, here's what I think; and third, here's what we're going to do. So as you listen today, I hope you take that approach in hearing some probably new things and hopefully appreciating the perspective of how we're approaching our business and, I think, opportunity that we have in front of us. But it also comes down to what we said we're going to do that we expect to act on.

We laid out $4 billion as a revenue target for 2016, and we talked about the runway we have here in the U.S. Apparel -- with Apparel and the upside that we see in Footwear. In Men's, we told you we're going to approach the $1 billion mark this year here in the United States, tracking to a $1.5 billion by 2016.

Key takeaways for Men's, biggest piece of our business, but the reality is that we feel we are just getting started and there is still a tremendous opportunity for us to grow even here in existing distribution in the States.

In Women's, $250 million, $250 billion of growth since just 2010. And this is -- again, I don't think we have a lot of people believing when we told you that Women's can someday be larger than our Men's business. Great momentum in our business, and the promise that we're going to extend UA Women's to a new consumer, one that will help us reach the $1 billion mark by 2016.

Youth. What is Youth anyway? So that's what we call it, next. Growing faster than Men's, growing faster than Women's. By 2016, approaching the $500 million mark.

Footwear. Focused on being the performance brand on field, first and foremost, because we understand if we win at that pinnacle, it'll allow us to go every other direction.

Technology stories like you saw today with SpeedForm, the 2016 target for Footwear, USD 600 million.

International. You heard the strategy from Charlie that's going to make us a meaningful player outside the United States. By 2016, we're going to double the size of our international business and see it accounting for 12% of revenues compared to just 6% today.

Finally, Direct-to-Consumer. It enables us to control our presentation, like you saw last night, where already our biggest customer today at 29% of revenues, and we see that moving up to 31% by 2016. $4 billion by 2016, and we can't wait to talk to you about our next target in 2015.

Ladies and gentlemen, thanks very much for coming to visit us here in Baltimore, Maryland. It was great having you all here today. Thank you.

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