Good day, ladies and gentlemen, and welcome to the Under Armour First Quarter and Conference Call. At this time, all participants are in a listen only mode. Later, there will be a question and answer session and instructions will follow at that time. As a reminder, today's call is being recorded. I would now like to turn the conference over to Tom Shaw, Director of Investor Relations.
Sir, you may begin.
Thanks, and good morning to everyone joining us today's Q1 conference call. During the course of this call, we'll be making projections or other forward looking statements regarding future events or the future financial performance of the company. We wish to caution that such statements are subject to risks and uncertainties that could cause actual events or results to differ materially. These risks and uncertainties are described in our press release and in the Risk Factors section of our filings with the SEC. The company assumes no obligation to update forward looking statements to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
In addition, as required by Regulation G, we need to make you aware that during the call, we will reference certain non GAAP financial specifically currency neutral net revenue growth. We provide a reconciliation of this non GAAP financial information in our earnings release, a copy of which is available on our website at uabiz.com. Joining us on today's call will be Kevin Plank, Chairman and CEO followed by Brad Dickerson, our Chief Operating Officer and CFO, who will discuss the company's financial performance for the Q1 and provide an update to our 2015 outlook. After the prepared remarks, Kevin and Brad will be available for Q and A session that will end at approximately 9:30 a. M.
Finally, a replay of the teleconference will be available at our website at approximately 11 a. M. Eastern Time today. And with that, I'll turn it over to Kevin Plank.
Thanks, Tom, and good morning, everyone. I want to start this morning with some math. There are 1696 players in the NFL and there is only 1 Super Bowl MVP. There have been hundreds of skiers in the women's Alpine circuit since 2004, but just one has won 67 times. There are 450 players in the NBA and there is, at least in my mind, just one MVP.
There are 125 players on the PGA Tour and there is only 1 Masters Champion. The numbers associated with the recent performances of Under Armour athletes like Tom Brady, Lindsey Vonn, Stephen Curry and most recently Jordan Speith are compelling and true evidence that we are just getting started. 3 months ago, we talked to you about some of the First, there were acquisitions of MyFitnessPal and Endo Mondo, which combined with our existing Map MyFitness and UA Record platforms, created the world's largest digital health and fitness community, now with over 130,000,000 unique users. We opened our Chicago Brand House, 30,000 square feet of Magnificent Mile with the best presentation of the Under Armour brand experience anywhere in the world. We opened a store in the Mall of America, bringing the Under Armour brand to more than 40,000,000 shoppers annually.
We signed Sao Paulo Football Club, Brazil's most successful club with 18 overall titles and more than 17,000,000 supporters in that market. And with the results from our Q1, we've now recorded 20 consecutive quarters of 20 plus percent revenue growth. That's 5 years since our last quarter with less than 20% revenue growth or to put it more topically, back before Jordan Spieth had his driver's license. But without question, the most impressive performances were put together by the Under Armour athletes I mentioned earlier. So indulge me for a minute while I talk about these record setting performances from Under Armour athletes so far in 2015.
Tom Brady won his 4th Super Bowl ring and his 3rd Super Bowl MVP award. Lindsey Vonn broke the record for most career alpine skiing Women's World Cup wins. Stephen Curry, the league's most unguardable player, led his team to the best record in the NBA and is my choice to win the NBA's MVP award when it's announced shortly, as well as having been the leading vote getter at the MVP All Star Game. Jordan Spieth, a record setting performance at the Masters, where he became the 1st player to win wire to wire since 1976. He reached 19 under, which no one had ever done in the history of the tournament, set the record for most birdies that won Masters with 28 and became only the 2nd man in 100 years to win a major wire to wire at 21 years or younger.
Equally important, Jordan dominated those 4 days at the Masters with a sense of purpose and will that define both him and Under Armour. Part of the formula for success in our business is making a big bet and we did so when we signed Jordan as a teenager a few years ago. To quote the great Dodgers executive Branch Rickey, Luck is a residue of design. And knowing that we have Jordan Spieth as the face of Under Armour Golf into the future solidifies our presence in the category and aligns us with the new face of golf in the United States. We're proud to be associated with athletes like Tom, Lindsay, Stephen and Jordan, not just because of their accomplishments, but especially because of the people that they are.
The great performances of these athletes are driving sales force too. We had a great launch of the Curry 1 at the All Star Game in February and there's tremendous buzz in the sneaker community about that shoe as well as great anticipation already around the Curry too. So, while it feels good to be viewed as a growing presence in the signature shoe market, it's important to recognize that we are just getting started. In golf apparel, our team did a great job of outfitting Jordan for the Masters and it provided terrific visibility for our golf apparel and footwear. When we signed him, we knew he had the ability to help drive our brand beyond just golf and that we needed to align our product stories with his aggressive, young and fearless personality.
We've come a long way in the category in the last 2 years and because we know that every detail matters, it was nice to be able to put him in that blue polo on Sunday, knowing how great it would look wearing a green jacket. Moving on to other areas of our business that continue to shine, We saw 41% growth in our footwear business this past quarter. In addition to the heat being generated in basketball by the Curry 1, our SpeedForm Gemini running shoe at $130 continues to collect rave reviews and check at retail. Building off the success of our SpeedForm platform, we're introducing cleated models in both American and global football, including a boot worn by one of our newest athletes, Memphis Depay, the top scorer in the Dutch league who helped his team clinch 1st place Saturday with a spectacular free kick and who at only 21 years old may soon become one of the most exciting players in the beautiful game. We continue to see strength in our core apparel business, with revenues up 21% in the quarter, the 22nd consecutive quarter of 20 plus percent apparel revenue growth, our largest category.
In addition to our strength in golf, we are off to a strong start with the introduction of ARMOUR, our re engineered base layer featuring enhanced ventilation. As we grow our presence in key footwear categories like running and basketball, it's helping drive our business in those key growth categories across all men's and women's apparel. Our growing strength in footwear is also helping to drive apparel sales with kids as we understand how critically important the footwear piece is to how our young male and female consumers dress. Our financial results are great evidence the growing power of the Under Armour brand and our ability to execute against this tremendous opportunity. But operationally, we believe we have yet to play our best game.
We believe there's a great opportunity to improve both how our supply chain gets product to market and how our product looks once we get there. On the latter, our growing pipeline of innovation in footwear, apparel, accessories and connected fitness provides us with the opportunity to evolve our model by providing better merchandising to our wholesale partners as well as in our own direct to consumer businesses. We are adding human capital to our global merchandising function, starting with Kevin Eskridge, who will run our global merchandising team after 2 plus years successfully establishing our brand in China. The Under Armour brand will continue to grow by ensuring we show up in a premium way whenever our consumer interacts with our brand, whether that's in a wholesale partner store, our own doors, an e commerce environment or anywhere our brand is available. Our ability to stratify our presentation at retail with multiple end use categories is an asset we have yet to fully maximize and we believe these types of surgical improvements in our merchandising will help ensure our continued growth with our wholesale partners.
In our DTC business, we are laser focused on using our brand house stores to provide that elite presentation of the Under Armour brand. That presentation is on display at our newest 30,000 square foot brand house store on the Magnificent Mile in Chicago, where we've dedicated space for men's and women's running, golf, basketball, hunt, studio and youth, as well as deep presentations of local assets like Notre Dame, Northwestern, the Cubs and White Sox. It's also our first opportunity to bring our connected fitness story to our consumer, and we will evolve that experience as we continue to develop our BrandHouse presence. Our connected fitness community added over 10,000,000 unique users since our last call in February and now totals more than 130,000,000 combined. We averaged more than 130,000 people in the first quarter downloading one of our 4 apps.
We are focused on integrating the 4 companies and continued development of the individual apps as we build out the Under Armour Record platform. To build on this, we are expanding our partnership with SAP the infrastructure that will help us create a single integrated view of our consumer. We believe the brands that can build true communities among their consumers by improving their health and fitness will be best positioned and we are focused on the competitive advantage we enjoy by having the world's largest digital health and fitness community. The final piece I want to cover today is our fastest growing business, international, where we grew 74% this past quarter. We continue to show great strength as the Under Armour brand establishes itself as an authentic athletic brand in new markets.
We will add over 100 total stores outside the United States in 2015. And this past quarter, we opened our first stores in Abu Dhabi in Brazil. Next month, we will be in Brazil to unveil the kit for our newest team, Sao Paulo Football Club, the most successful club in the country's history. Adding key assets like Sao Paulo accelerates our presence in these new markets and helps us deliver authenticity as we establish ourselves in global football. And finally, on international, we are most excited about the fact that we are just getting started.
I mentioned earlier that we are bringing our former GM in China back to run our global merchandising team. Taking over as our new GM in China is Eric Haskell, who brings extensive industry experience in the country as he leads what will be one of our largest countries in revenue outside North America by the end of 2015. So, whether it was football cleats when we entered that market, golf with Jordan Spieth or basketball with Stephen Curry, we've consistently proven our ability to go hard and disrupt key categories, which we believe positions us as the next great global athletic brand. And with the additional asset of our Connected Fitness platform, we believe we can do so in a way that connects us to our consumer like no other brand on the planet. We are truly just getting started.
And with that, I'll turn it over to Brad.
Thanks, Kevin. I'd now like to spend some time discussing our Q1 results followed by our updated outlook for 2015. Our net revenues for the Q1 of 2015 increased 25 percent to 805,000,000 dollars As Kevin highlighted, our results represent the 20th straight quarter of achieving above 20% top line growth. We are proud of this consistency, particularly in a period where several external headwinds, including the strong negatively impacted our business. On a currency neutral basis, net revenues increased 27% for the period.
In addition, our North American business experienced some disruptions from the West Coast port delays and weather related store closures during the period, which we estimate had a 1% to 2% cumulative impact on overall net revenues. Looking at our product categories, we grew apparel net revenues 21 percent to $555,000,000 compared to $459,000,000 in the prior year's quarter. Despite the impact of some of the headwinds I just outlined, we were able to post strong results in our largest product category led by the introductions of ARMOUR base layer and our updated training platform as well as continued growth in golf and running. 1st quarter footwear net revenues increased 41 percent to $161,000,000 from $114,000,000 in the prior year, representing 20% of our total business for the first time since our initial running shoe launch in early 2009. As the centerpieces of our first brand holiday of 20 15, our new SpeedForm Gemini and Apollo event running shoes as well as Stephen Curry's 1st signature basketball shoe, the Curry 1, drove tremendous excitement the category in the marketplace.
Our accessories net revenues during the Q1 increased 23% to $63,000,000 from $52,000,000 last year with particular strength within our bag line. Our global direct to consumer net revenues increased 21% for the quarter, representing approximately 25% of net revenues. The e commerce growth rate exceeded our retail growth rate during the quarter with weather driving store closures for several of our domestic doors during the quarter. Nevertheless, we were excited with the retail progress we made during the quarter, including strong new brand house openings in Chicago on the Magnificent Mile and in Minneapolis at the Mall of America as well as our 1st Brand House store in Brazil. From a global standpoint, we ended the Q1 with 153 owned stores, including 134 Factory House stores and 19 Brand House stores, compared to 134 owned stores in the year ago period comprised of 123 Factory House stores and 11 Brand House stores.
In our e commerce channel, we continue to see strong overall trends as our consumer continues to shift to mobile, which represented over 40% of our traffic and nearly 20% of our e commerce sales during the period. At the same time, we are seeing a strong response to our new local e commerce sites, including the Q1 launches in the Philippines and the Netherlands, which we believe is indicative of some of the untapped demand in these markets. Looking at our regions, North America net revenues increased 20 percent to $700,000,000 in the Q1 compared to $583,000,000 in the prior year's quarter. On a currency neutral basis, North America net revenues increased 21% for the period, driven primarily by growth in the apparel and footwear categories and in our direct to consumer channel, as I just outlined. International net revenues increased 74% to $96,000,000 in the Q1 and represented 12% of total net revenues.
On a currency neutral basis, international net revenues increased 86% for the period. This was the Q1 in Under Armour's history where the international mix surpassed 10%. In the EMEA region, in addition to a strong launch of our new Dutch website, we celebrated the opening of our new office in Germany, which puts us closer to our customers at a time when we are beginning to see strong traction within the market. We are also just beginning our new distributor agreement in the Middle East, which included the January opening of our 1st regional BrandHouse store in Abu Dhabi. In Asia Pacific, we more than tripled our business in China as we began to accelerate our partner store expansion efforts and experienced significant traction across e commerce.
We also remain in the early stages of our expansion efforts in Southeast Asia, Taiwan and Hong Kong. Finally, in Latin America, we are still less than a year into our market entry in Brazil and we are seeing success building brand awareness with efforts such as our recent signing of Sao Paulo Football Club, the opening of our first brand house store in Sao Paulo a local marketing push in conjunction with our SpeedForm Gemini launch. Moving on to margins. 1st quarter gross margins held steady year over year at 46.9% with 3 primary factors contributing to this performance during the quarter. First, favorable product margins in both North American and International Apparel and Footwear benefited gross margins by approximately 110 basis points for the period.
2nd, higher air freight costs primarily tied to our efforts to mitigate the impacts of the West Coast port disruptions negatively impacted gross margins by approximately 60 basis points in the period. Finally, the strengthening of the U. S. Dollar negatively impacted gross margins by approximately 50 basis points for the period as we purchased the majority of our inventory for international businesses in U. S.
Dollars. Selling, general and administrative expenses as a percentage of net revenues deleveraged 80 basis points to 43.5 percent in the Q1 of 2015 from 42.7%
in the
prior year's period. Starting this quarter in an effort to simplify and streamline our conversation, we are consolidating our SG and A detail into 2 primary buckets, marketing and other SG and A. Other SG and A is to some of our previously outlined selling, product innovation and supply chain and corporate services buckets. SG and A details for the Q1 of fall. Marketing costs decreased to 13.4% of net revenues for the quarter from 13.7% in the prior year period, driven primarily by the shift of certain planned expenditures to later in 2015.
Other SG and A cost increased to 30.1 percent of net revenue for the quarter from 29% in the prior year, driven primarily by our Connected Fitness acquisitions and investments in BrandHouse and e Commerce. The one time deal closing cost of $6,300,000 for the Connected Fitness acquisitions negatively impacted the quarter by approximately 80 basis points. Operating income for the Q1 increased 3 percent to $28,000,000 compared with $27,000,000 in the prior year period. Interest and other expense for the Q1 increased to $4,000,000 compared with $2,000,000 in the prior year period, primarily reflecting increased interest expense associated with the financing of our Connected Fitness acquisitions. Our 1st quarter tax rate of 50.3% was unfavorable to the 46.1% rate last year, primarily driven by increased losses in our newer Latin American businesses.
Discrete tax items such as international losses are particularly impactful to our effective tax rate in periods such as the Q1 with lower consolidated pretax income levels. 1st quarter net income decreased 13% to $12,000,000 compared to $14,000,000 in the prior year period, while our diluted earnings per share decreased to 0 point 0 $5 from 0 point 0 $6 in the prior year's period. On the balance sheet, total cash and cash equivalents for the quarter increased 29% to $232,000,000 compared with $180,000,000 at March 31, 2014. Inventory for the quarter increased 22 percent to $578,000,000 compared to $400,000,000 at March 31, 2014. Total debt increased to $677,000,000 as compared to $152,000,000 at March 31, 2014,000,000 at December 31, 2014.
The 1st quarter increase reflects the financing of our Connected Fitness acquisitions, including $250,000,000 on a revolving line of credit and additional $150,000,000 of term debt. Looking at our cash flows, our investment in capital expenditures was $68,000,000 for the Q1 compared to $31,000,000 in the prior year's period, driven primarily by our investments in our new North American distribution center, our corporate headquarters in Baltimore Based on current visibility, we expect 2015 net revenues of approximately $3,780,000,000 representing growth of 23% and 15 operating income in the range of $400,000,000 to $408,000,000 representing growth of 13% to 15%. Our operating income guidance includes dilutive impact of the Connected Fitness acquisitions consisting of $6,300,000 of one time transaction costs incurred in the Q1 as well as full year operating losses from these businesses and non cash amortization charges of the intangible assets generated from the acquisitions. Below operating results, we estimate a $9,000,000 increase year over year in interest expense, primarily due to incremental borrowings under our credit agreement to fund higher than previously anticipated given the continued strengthening of the U. S.
Dollar, which negatively impacts our international profitability, which in turn negatively impacts our consolidated tax rate. As this impact is more pronounced in quarters with lower consolidated pre tax profits, our guidance assumes a 2nd quarter tax rate similar to our Q1 rate followed by a more normalized effective tax rate expected in the back half of the year. I would also like to add some color on several items, starting with revenues. As we indicated last quarter and as reflected in our Q1 results, international and footwear are areas that are planned to outperform in 2015 as we continue to enter and expand in new markets and see successes across our footwear lines. From a macro standpoint, the strengthening of the U.
S. Dollar is expected to impact our 2015 net revenues by approximately 2 to 3 percentage points given current exchange rates and we have factored this in our updated guidance. Now looking at gross margins. Given the continued strengthening of the U. S.
Dollar along with anticipated higher ongoing airfreight needed to service our customers, we now expect full year gross margin will be roughly in line with last year's 49% rate. This compares to our prior guidance of a modest year over year improvement. Specifically, we expect our 2nd quarter and third quarter margins will be down approximately 50 basis points compared to last year. We continue to plan for higher air freight expenses in the second quarter as we continue our efforts to mitigate the impacts of the West Coast port disruptions, while the negative impact of the stronger U. S.
Dollar is expected to have the most pronounced margin impact in the 2nd and third quarters. In SG and A, the timing of certain expenses has resulted in some changes to our quarterly cadence. Given our current visibility, we now expect SG and A expense deleverage of approximately 200 basis points during the Q2, including higher costs associated with our brand house strategy given the timing of store openings as well as the timing of certain marketing and innovation expenditures. We anticipate SG and A will continue to deleverage albeit to a lesser degree during the Q3 before showing modest leverage during the Q4. From an operating income standpoint, while the gross margin headwinds have increased since our previous guidance, we have seen some offsetting impacts from our Connected Fitness acquisitions, primarily related to lower amortization expense than previously anticipated.
In addition, we continue to expect to mitigate some of the overall margin pressures through targeted improvements in gross margin and SG and A the largest offset emerging in the 4th quarter. Finally, some updates on our planned capital expenditures. We had previously indicated planned 2015 capital expenditures in the range of $280,000,000 to 290,000,000 dollars inclusive of approximately $90,000,000 for our new domestic distribution center and the expansion of our corporate headquarters in Baltimore. Following our recent acquisitions in the connected fitness space, we began looking into areas of integration tied to our overall business. An important first step is our technology platform.
As such, we've decided to invest in our systems with SAP to enhance, expand and integrate our core apparel and footwear systems along with our connected fitness platforms. This project will occur over the next few years with the initial phases occurring in 2015. As a result, we now expect 2015 capital expenditures in the range of $330,000,000 to 340,000,000 dollars We would now like to open the call for your questions. We ask that you limit your questions to 2 per person, so we can get to as many of you as possible. Operator?
Thank you. Our first question is from Matt McClintock of Barclays. You may begin.
Hi, yes. Good morning, everybody.
Good morning. Kevin, in your prepared remarks, you talked about merchandising improvements and supply chain improvements. I wondered if you could focus a little bit more on the supply chain improvements. What are you doing in regards to working with your supply chain to make more efficient going forward?
Well, I think a couple of things we've done is just from an organization standpoint and the way we structure it. So Brad, as you know, has taken on additional responsibilities and making and shelving some things around where we prioritize footwear and I'd move Kipp and have him exclusively focused on footwear and innovation. And I think it's really going to be a driver for the company with what you'll see coming out as we see this massive opportunity in footwear. At the same time, the supply chain, particularly as you get more complex, particularly as you look to grow globally, it's incredibly complex for us much further beyond where we were just making we used to sell tight T shirts and we put them in sporting goods stores and they would sell. And now it's a much more complex and diverse line.
And you have things like women's that includes fashion and flow and all these other pieces that come to bear. Doing business with other markets is incredibly sophisticated and difficult as well. We just opened or just broke ground rather a few months ago, a new distribution facility down in Tennessee and things like that, that are happening and taking place for us. When I wanted that to come across frankly a bit deprecating for the company in terms of we just think we can do better. We're incredibly proud I think of the results that we put on the paper and what we've done, particularly from an apparel standpoint with 22 consecutive quarters and then pushing the growth that we have.
But as I said, we have yet to play our best game. So I don't think that what Brad is building out with our team and Jim Hardy, who's been our Chief Supply Chain Officer here for the last several years and bringing to bear the expertise. I can tell you what we're doing physically with warehouses and some of the other components, but also systems are going to play last 9 or nearly 10 years. And so we've had a lot of insight into what running what best run companies do and what they look like. And I think we're now in a position that we're big enough to be able to implement that, but not too big where it'll actually be a hindrance to the company.
So I think there's a renewed vigor is that what we've done to date has been good and we've done well. But we're just looking and saying from a company that now has a focus on things like women's where we're looking to turn product every 3 4 weeks versus having 2 seasons a year, doing business and truly having distribution facilities in Europe, in Asia, in Southeast Asia, in Latin America, around the world and figuring out those complicated supply chains that include things like duty and tariff all that are those other issues. It's just it's becoming a much more complicated world and we're elevating ourselves. And so Brad is moving away from the CFO, which of course will continue to report to him. It's part of the challenge with closing on $4,000,000,000 or close to $2,000,000,000 in FOB this year, gross margin moving a few bps, let alone a percentage point or 2 has a massive impact in the company.
And so we think that we've done well. We think that we've been probably a little fat in getting to this point. And we're just looking and recognizing the that if we when we begin to tighten the belt and bring in professionals, this is not like finding a new designer where you're hoping someone can do the job. There's lots of people that have this expertise and experience from some of the fast fashion people that are great to learn from as well as what we can implement ourselves. And so I think what you're seeing is the company growing up.
And the last thing I'll just say is around the merchandising function. We did not have a merchandising function in the organization. And I say that from we had product people that built product and we had sales people that sold it in and then the buyers would select what they wanted. But truly curating and articulating exactly the voice that we want depending on the distribution is not a function that we had as a company. So what you're seeing, I believe, is a more sophisticated Under Armour.
And at the end of the day, I think we're going to have a better end result for our consumer first and foremost that will continue to drive the kind of results that I think we've made everyone accustomed
to over the
last 5 years. Sounds great.
Thanks a lot, Kevin.
Thank you. Our next question is from Kate McShane of Citigroup. You may begin.
Hi, thanks. Good morning. I was wondering if we could hear a little bit more about your women's business. Can you update us on the performance of the category? And has some of the expansion that we've seen within just women's in general and the department store and some of the sporting goods stores helped the overall brand?
Sure. Well, Kate, I think, first of all, we see this general trend toward athletic in women's fashion as a whole is something that we don't see it slowing anytime soon, and we're very fortunate for that. I think it being in the heart and soul of it. Beginning going back to 2014, we're incredibly proud, I believe, of the conversation that we kicked off with our I Will What I Want campaign that began with Misty Copeland and that aspirational commercial that we had with Misty and then following up with Giselle, the momentum from that is something that we're still feeling today and capping it off last week with Misty being named one of Time Magazine's 100 Most Influential People on the Planet. So, I think we're having a bigger conversation than even what is the style color that's in the store.
At the end of the day, though, that is what we do for a living. And we're looking at how the style color hits in the store. I'm not sure that we have taken full advantage of the conversation from a product merchandising standpoint. And we believe that there's a greater opportunity for us in women's to have a conversation with her that is meeting her where she is versus asking her to come to us. And we articulated that last year with this idea of the athletics, the female athlete versus the athletic female.
And so I think you'll continue to see styles and silhouettes. And speaking about Under Armour, we basically built our women's business on the back of compression shorts and sports bras. And where we're trying to show up in more places for and be more relevant beyond just strictly in the gym or what she's wearing beneath, I think is part of where we're going. And I say all that in the context of, we built the $600,000,000 women's business by the end of 20 14. So there's no signs of this slowing.
I think you're just seeing us continue to sophisticate. But we feel great, I believe, about the team that we put in place, the momentum we have and the direction that we're going. A couple of things that play with that as well, and I think it's worth mentioning is our connected fitness platform, which in bringing that on and assembling that community of now over 130,000,000 more than 60% of which are women. And so, as we really get our arms around what we have there, we believe that continuing that conversation with her and having finding ways to have meaningful conversations, number 1, of how we can communicate to her, but also how we can listen to her. And so, I think you'll see Under Armour continue to take those steps toward being more relevant in more aspects of her life.
And I guess if there's one message that I wanted to get across today and whether it's sort of maybe a bit masked in the merchandising is that we don't believe we played our best game yet. We don't think when you walk into a store, you're getting the best version of Under Armour yet. And it's where we were and we're proud of it, but we believe that there's people out there that are doing it well. We believe we're one of those people. We just think can do a lot better.
So, more to come in that. And if I end it with anything and maybe just quickly on distribution, talking about meeting her where she is, our sporting goods partners have been incredibly aggressive in this space as well with ourselves, with our merchandising, with the way we set up. There's actually a lot of competition in sporting goods. And I feel we're answering that bell. But we also see that, number 1, in winning in our core distribution and number 2, the ability for us to move to other places where she is shopping is something that you'll continue to see happening from us with people like our department store partners and a few other places.
But to answer it in one fell swoop, Kate, it's we believe our women's business can be as large, if not bigger than our men's business. And we'll stick to that and we're pretty proud of our men's business as well.
That's very helpful. Thank you. And then if I could ask one follow-up question on international, specifically Europe. Can you give us any more detail on where you are today in terms of distribution versus where you were last year at this time, whether it be types of retailers or countries that you're in versus last year?
Let me take a crack and maybe Brad can hop on the back of that too. So we really had a breakthrough year in 2014. And again, like most things that came down to leadership, we struggled for a long time in Europe beginning back in 2,006 when we launched in finding our way and finding local partners that would spoke 6 languages and then finding Americans to send over and kind of back and forth. And I think we settled on someone that A, had a great understanding in relationship with the brand and the guy named Matt Shear who was running our Canadian business for us and took it from basically 0 to over $100,000,000 and walked into a $50,000,000 or $60,000,000 excited about that. And it's not as much today about a distribution expansion game, but it is about getting better in the places where we are doing business because when we say we were distributed in most of the stores, it was a few racks at best of a couple compression T shirts and typically men's only.
And so we're looking to, I think, modify that conversation as well and take our positioning to be, 1st of all, a full resource brand, meaning men's, women's and kids to show up and where we show up to show up in presence. Sporting Goods, particularly in a place like the UK, has been a pretty challenged place from a discount environment. And so we're also looking to be able to offset that of maybe creating a unique experience for people in wholesale distribution. And not unlike you're seeing us do here in America, we want to augment that with our own full price stores. The BrandHouse concept is something we're incredibly proud of and has really been working for us.
In anchoring this back to America for just a second, the 30,000 square feet we just opened up in Chicago, we can only dream about what that would do from a brand elevation standpoint and celebrating some of the stories that we have in the area. But I can tell you as a company, as we look to move forward, we'll continue to have wholesale be an incredibly important part of what we do. But where we look for statement retail and our brand through our brand house concepts, whether that means 2,000 to 3,000 square feet in some of the smaller markets, like when we mentioned Abu Dhabi or 30,000 square feet in Chicago, I think it's important that people understand the full expression of what our brand can be. And frankly, it's not appropriate that it's always interpreted. So we'll continue to build on that, and I think you'll see more of coming from us, particularly in a place like Europe.
And Kate, I'll just add on to that. Like if you look at the 3 spots where we had the most increase in revenues year over year in Europe, The UK, Germany and the Middle East were the 3 places that you'd see that. The UK, we talked about opening up an office in Manchester back in early 2014 and seeing some benefits getting closer to the customer and the consumer there. Germany, again, putting some focus in market over the course of the last 12 to 18 months and just recently now opening up an office in Munich in Germany, again, getting close to the customer there. And then in the Middle East, we opened up our distributor there in the Middle East in Q4 of last year.
So seeing obviously some benefit and we're comping that in Q1.
Thank you.
Thank you.
Thank you. Our next question is from Jay Sole of Morgan Stanley. You may begin.
Hi, good morning. Good morning. Kevin, can you talk about the Connected Fitness strategy for a moment? Just from a big picture perspective, how will you define success in Connected Fitness?
Yes. We've spent a lot of time thinking about that and looking at what we bought and what it means in the positioning. So a couple of things, just some updates since we've been to we left you in New York and gave you a last real deep dive on what's happening with Connected Fitness. So first of all, it's still very it's very new. The MyFitnessPal deal just closed on March 17th.
So we're less than 30 days roughly into our partnership and getting to know one another. As we said, the 1st year was all going to be about integration. The integration begins with culture. Culture of 4 different companies really coming together. And we've been doing that with Mat Life Fitness from Austin.
A couple 5, 6 weeks ago, we just opened our new 35,000 square foot office in Austin, which is it's an incredibly hot tech market. And the Under Armour connected fitness office there anchored with a flag in the ground of what that Under Armour attitude looks like. And it's evolving with taking the best things, I believe, of the culture that we're like a Map My Fitness and evolving that together to really help shape Under Armour. And it's no different with EndoMondo and MyFitnessPal and the way that we're going to approach that. The first thing we realized from the integration efforts though is that this need for alignment from a systems perspective.
So now between our own e commerce, the number of people we have 40 some odd maybe close to 50,000,000 people walking into our retail stores in North America this year, the 130,000,000 unique users that we have on the platform, finding a way to synthesize all this information is where the SAP integration really comes from. So we're looking for the single view of the consumer that will give us a much better picture and easier understanding of our consumer. I think it's going to make us a lot smarter ultimately in the long run to be able to anticipate the needs of our athletes and of our consumers. The second thing that we really focus on is building out the community. So within all of the apps, I mentioned some of the stats in my written comments, but building the world's largest 20 fourseven, 365 day digital health and fitness community.
In the Q1 alone, we added over $10,000,000 And I want to be clear, we expect to update you on the growth numbers in our Connected Fitness in 10,000,000 unit increments. So when we cross the $120,000,000 when we cross $130,000,000 we cross $140,000,000 that's how I will be articulating that. And you just look at the sheer scale where we don't want to compromise MyFitnessPal, Endomondo or Map My Fitness', those their individual apps and their downloads, we want to continue to encourage that. But we want to continue to focus on them all helping us with Under Armour Records, sort of the collaborative product that we're going to build that we think will then be able to aggregate those disparate communities into one place in time by satisfying them. And so using all the mind power that we have from Meta, Mike Lee and Robin of the founders of the 3 sites.
We think that we have the capacity and the capability to do that. And showing that we're not slowing down any of that growth, I mean, we averaged over 130,000 people were downloading 1 of the 4 apps every single day in the Q1. And we're not really seeing any signs of that slowing anytime soon. So there was a bit of concern and trepidation on our part, thinking about how we define victory is that are people going to say they've now they've been bought by a company, I'm not going to use it anymore. So we haven't seen any signs of that.
We just see them now having a higher expectation, I think, of the product that we're going to deliver. And I can tell you that everyone now with our closing on 500 people working in our connected fitness and digital spaces are focused on working toward that. So what I'll tell you is that I'm going to hold back before I truly define victory. I'm just going to start with we think we've grabbed something that is incredibly unique that's really large in size and scale. And that with that, there's the monetization things that we've talked about that we can look at from, A, the brand halo effect, subscription services, products and bundles, premium product services that we can showcase.
But at the end of the day, we're still finding out exactly what we have. Meanwhile, we're going to continue to grow what we have. We're going to be thoughtful about the investment that we make there. And we're going to continue to encourage things as they come to us. I mean, the Apple Watch is a great example of that.
I mean, 3 of our 4 apps are now completely compatible with the Apple Watch and we encourage it. We think it's another conversation around tracking and wearables and health and fitness. And so it's actually the best thing that can happen to us. And so those are the good things that I think are happening. But we're also working on building great new products.
And what I can tell you is if I'm going to give you put one flag in the sand, we want a little more time to reflect. We want a little more time to get used to the flights that we're getting used to between Baltimore to Austin to San Francisco to Copenhagen and get them comfortable with us and us comfortable with them. And we anticipate to have some very large news for you around Under Armour's Investor Day in September.
Well, that sounds great. I mean, if I can follow-up with one other one on that. Can you talk about you talked about the number of users, which has been the growth has been tremendous. Are there other metrics that you're using to measure progress? Is it sales?
Is it engagement from a user on the website? Any other detail you can share with us for how to measure it going forward would be really helpful.
Well, I'm not going to give the new one, but another stat that I like a lot is the number of workouts that we log in a given month. And when we made the announcement in big promises big promises to ourselves about what's about to happen. It's like getting ready for the new school year. How we follow through with that in February, March, when it's cold and rainy out is not quite as easy. But we'll be updating you with that in the future going forward.
But I we want to make sure we've got all the data synthesized and have it completely perfect. So we'll be updating you on the next call and then again at Investor Day.
Got it. Thanks so much. Thank you.
Thank you. Our next question is from Omar Saad of Evercore ISI. You may begin.
Hi, thanks. Good morning, guys. Nice quarter. I wanted to ask about DTC actually. It slowed a little bit.
I know some of it was some of the storms in the quarter. We've been hearing kind of generally outlet trends, traffic outlets have been slower in general to outlet centers. I wonder if you can give an update specifically on your outlet business and then also the e commerce side as well?
Yes. Omar, I'll take this one. On the DTC side, maybe to kind of reconcile some of the impact of some of these things that we talked about in my prepared remarks. Again, on the total revenue side, we talked about growing at 25%, but obviously at a constant currency, we're at 27%. And then we estimated the impact of due to port delays and weather of 1% to 2%.
I'll be honest with you, I think we're being pretty conservative there.
The thing that we can
really measure and define accurately there is the was at was at least at 1 percentage point due to store closures for 2 different weekends during the Q1 where the storms hit on the weekend and we literally had dozens of stores closed down. It's a little more difficult to estimate the exact impact of port on our businesses of both in DTC and wholesale and a little more difficult to impact the weather impact on our wholesale business too to some degree. So we think that 1% to 2% is pretty conservative. So again, total revenue going from 25% to 29%, I guess, if you use the upper end of that port and weather impact. On the DTC side, again, I think if you look at weather and port, we'd probably be more, I would say, in the upper 20s as a percentage growth, which would be similar to our growth rate in the Q4 for DTC.
The biggest driver of DTC growth change year over year as we've talked about is the fact that we're opening up less house stores. So we planned our DTC growth down year over year because of the slower growth in factory house for us. And again, that was as planned. On the e commerce side in DTC, we've seen consistent strong growth in e commerce. There's not really when you look at Q1's growth rate versus last year's growth rate, pretty consistent growth rate overall in e commerce.
So most of that decline in DTC growth rate was coming from the retail side, a lot of some of it being planned and some of it being because of the impact of weather. Also just to take that a little bit further into the impact in North America, obviously, we reported North America 20% growth. Again, if you take into effect FX, which is more on our Canadian business and again, the port and weather challenges, we probably were closer to probably a 24% or so growth rate in North America normalized taking into those items. So DTC going forward, I think obviously we would expect not really any impact going forward for port and weather, obviously, in the next few quarters. However, again, just again to make you aware that we have planned slower growth specifically around factory house new doors.
Thanks, Brad. That's really helpful. And then Kevin, you talked a lot about it upfront. You've got these really hot properties right now in Speith and Curry.
Maybe you guys can talk about some of the initiatives to keep momentum going with these guys and how you monetize this, keep the momentum going through the summer into the fall. I don't know if there's product initiatives out there or maybe you start to tie it into the digital piece as well. I'm not sure if it's advanced enough to leverage that yet. But just thinking about these 2 incredibly hot properties right now and how you turn that into dollars and cents or maybe it's just brand halo. Help us understand how you're thinking about it.
Let me expand the conversation from just those 2 for a second. But Clayton Kershaw, 2014 National League MVP and Cy Young Award winner. Tom Brady, 2014 Super Bowl MVP. 3rd time being named the MVP. Memphis is the patient I think what he's going to be as we move into the beautiful game in a bigger way.
Jordan, obviously, Andy Murray, the number 3 ranked tennis player in the world. Misty Copeland Vaughn, I think another Maven just on the women's side in defining what a beautiful athlete is. And then Steph Curry. So without question, Jordan and Steph are 2 that incredibly relevant right now and make a lot of sense. With Jordan, I think we're letting it come to us.
I mean, I'm incredibly proud, I think, of the styling and the way that we dress Jordan. It was incredibly athletic, incredibly Under Armour, incredibly bold and it was incredibly American. And we think that that story is something that's going to translate as Under Armour continues to move itself from just being a product that's seen and as we continue to move to other places. Now this doesn't mean that we begin to compromise who we are, the fact that every Under Armour product does something for you. But I just think that people are finding and seeing more ways that they can utilize and interact with our brand.
So having someone like Jordan be able to showcase those looks for us over the next decade and frankly throughout the rest of his career is something we're incredibly excited about. You look at sports where over the last 30 years where transformational athletes have lived and been successful, it's golf and basketball. And sitting on Jordan that we think has that type of upside and potential is pretty remarkable. So he's got a lot more career to play. It's one tournament.
But I can tell you, when you sit down with Jordan Spieth, there's every belief that he's going to win every golf tournament every time he heads out and takes the tee box. And I can just tell you that not every golfer thinks like that. He's different. He's special. And we're going to continue to evolve that.
So from a PR standpoint, I think we had a great pop. We had 4 great days of celebrating him and there'll be more to come and Post will be spoken through his play. As far as Steph goes, it's certainly not guaranteed. Nothing is guaranteed. But no matter what happens with the MVP vote, we couldn't be more proud just to have someone like Stephen Curry.
I said this before is that the crew he rolls with is his wife, his kid, his mom and his dad. And right down to his agent, his entire organization is just really some of the best people that we deal with. And so I'm as proud, I think, of the quality of people we have and then, of course, what they're doing on court. But Steph, from the Curry I to the Curry II, we've been modifying and chasing that a little bit where we had pretty limited, I think, expectations of what we really wanted to do with that product to begin with and looking and saying the places we have coming from places like China are really just extraordinary. And so I think there's probably been some books written about how you're supposed to limit and allocate and tighten things up.
And so don't get me wrong, we're not going to open the floodgates, but we definitely see this as a watershed moment for us with several of our athletes to take advantage of things that you just don't get these opportunities in life. And so the train is going by. We're going to hop on the train and we will exploit that to the sense where it makes the best sense for our athletes and continuing their performance 1st and foremost, as well as things that will celebrate the brand and help drive So the Curry I, the Curry II, like I've seen the Curry III and the Curry IV. So this is a being in the signature basketball business, we've sort of been around it before, but now we're really in the game and it's something that we liked very much. And at the same time, it's going to help elevate what was a 100 ish or a little less than $100,000,000 ish basketball business.
And our goal is building a $1,000,000,000 basketball brand. Thanks guys. Thanks, Omar.
Thank you. Our next question is from Dave Weinert of Deutsche Bank. You may begin.
Great. Good morning. So I had two questions. Brad, first on your gross margin guidance. I think you said the 2nd 2Q and 3Q gross margin would be down in part because of West Coast airfreight and then FX.
Is the expectation that in 4Q those impacts or at least the first one regarding airfreight will fade and you'll get better you'll get a better expectation in 4Q. And then regarding China, Kevin, I think you said that by 2017, China could be the 2nd largest market behind North America. If you could just kind of confirm that and maybe talk a little bit about what you're seeing there? Thanks.
Hi, Dave. I'll take the gross margin question first. And yes, if you just look at the nuances here, I think that the big stories are the foreign currency impact and airfreight. And if you look at just how the timing of those works out, the biggest pressure for airfreight, which again is mostly around mitigating the West Coast port delays is going to be in the front half of the year. We talked about it in Q1.
We'll also have some of it some residual going into Q2 also. And then when you look at FX, your biggest impact we're going to have impacts every quarter for FX, but your biggest impacts are going to be Q2 and Q3 kind of right in the middle of the year.
When
you kind of line those two things up together, your Q2 probably is your biggest challenge because you have both FX and airfreight. In Q3, you end up just with kind of more of an FX impact. And as you get to Q4, the FX impact is still there in Q4, just a little bit less so because as you recall, the strengthening of the dollar started to happen in Q4 last year. So your comp gets a little bit easier, but you still do have some challenge in FX in Q4 also.
Okay. Thanks.
And Dave, as far as we think about China, yes, I made that statement. So I want to be clear that our Japanese business is continues to be our largest business outside the United States and closing around $300,000,000 business for us. But that shows up as a licensing partnership that we have there. But without question, I think, even considering Europe and the growth, the great growth that we're seeing there in the 30% 40% type of growth range that we're experiencing there. China is one of those it seems like an abundantly limitless place.
And so we're just experiencing feeling a bit of that. We finished 2014 with about 50 roughly 57 stores by the end of the year. We may mention that we're going to be opening 100 stores outside of North America today. The majority of those are actually going to be in China. So we'll probably come close to doubling the number of stores we have in China.
And these are partner stores that we show up. And a lot of it is going to be a learning process. I mentioned Eric Haskell, who begins with us April 1. He was previously the CFO and COO of Adidas China. And it was before we brought him on, he's the MD of Adidas India.
So he's somebody that we look at and say, this is somebody who's sort of been there, done it. They've seen the movie. And really why it's not as easy as a find and our brand is incredibly unique and different. The partnerships and the relationships that are there are something that we really just need to tap into. We feel like we've established, I think, done a lot of the hard work in China as we've been there now.
Really, we opened our 1st store there in 2010. So we've done a lot of slugging, put the hard work in. And frankly, with some of these relevant global assets we have and whether that is Stephen Curry that we're working on a tour of China with Stephen at some point later this year or whether that is the relevance of a Jordan showing up or the EPL, whether it's Tottenham Hospital or now having Memphis Depay showing up as well. So we think that we're doing things to interact and be relevant in that market. And China is almost its own world.
And so we believe that when we focus and now we have the foundations in place that we're really going to be able to number 1, bring something to China and give something to China. And in turn, we think that's going to have and reap a great reward for Under Armour and ultimately our shareholders too.
Great. Thanks for the color.
Thank you.
Operator, we have time for one more question.
Our next question is from Lindsey Druckerman of Goldman Sachs. You may begin.
Thanks. Good morning, everyone. Thanks for the question. I wanted to follow-up on Brad at the Connected Fitness Day, you talked about disclosing core operating income, core operating margin going forward just because of some of the noise related to your acquisitions. I was hoping you could talk a little bit about your outlook for the full year, whether your view on core had changed given some of the differences in amortization expense that you're expecting?
And then maybe it sounds as if maybe there's opportunity to talk about some more specific cost savings. And Kevin, you talked about perhaps being a little bit fat getting to where you are in terms of inventory purchases and just how we should sort of think about some of the opportunity for more belt tightening, more efficiencies going forward? Thanks.
Sure, Lindsey. And I think as you talked about, yes, there were just some changes here in some of the impacts. So obviously with FX working against us a little bit more from our last time we spoke and airfreight also, we do see some offsets to those impact. One in the connected fitness space. The acquisitions themselves back in February, we talked about a 90 basis point impact to 2015 just from the acquisitions.
We see that probably being closer to about 70 basis points or so. The biggest change being the amount of amortization that we were anticipating back in February and the intangibles and the acquisition came in a little bit different as far as value and the useful lives are a little bit longer. So we had a little bit of a benefit in amortization there for Connected Fitness offsetting some of those headwinds we had in FX and airfreight. In addition, in our core business, we do see some other opportunities again for some additional savings to help offset some of the other headwinds we talked about earlier. So overall, Connected Fitness acquisitions, we thought it'd be 90 basis point impact for the year.
It's looking more like about 70 basis points now.
Great. Thanks.
Yes. All right. Thanks everyone for joining us on the call today. We look forward to reporting you our Q2 2015 results, which typically have been scheduled for Thursday, July 23 at 8:30 am Eastern Time. Thanks again and goodbye.
Have a wonderful day.