Good morning, ladies and gentlemen, and welcome to the Under Armour, Inc. 2nd Quarter Earnings Webcast and Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over
to your host, Mr.
Tom Shaw, Director of Investor Relations. Mr. Shaw, you may begin.
Thanks, and good morning to everyone joining us on today's Q2 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 a statement is made or to reflect the occurrence of unanticipated events.
Joining us on today's call will be Kevin Plank, Chairman and CEO followed by Brad Dickerson, our Chief Financial Officer, who will discuss the company's financial performance for the Q2 followed by an update to our 2014 outlook. After the prepared remarks, Kevin and Brad will be available for a 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. In our press release this morning, we raised our full year revenue guidance for 2014 to a range of $2,980,000,000 to $3,000,000,000 That represents growth of 28% to 29% for the year, an increase from our prior range of 24% to 25%. That's a great forecast of growth, strongly supported by the 34% revenue increase that we saw in the Q2. But these numbers are not without precedent.
Back in 2017, net revenues grew 41% for the full year and more recently in 2011, revenues grew 38% for the full year. As we said previously on these calls, the growth opportunities for the Under Armour brand are abundant. What is however unprecedented is the source of our growth, the new dimension these revenue drivers are bringing to our brand and most importantly, the confidence it provides that our strategy is right and positions us well for sustainable growth. To illustrate the breadth of the growth and help you understand the benefits of our investments, I want to discuss 5 pieces of our business that are bringing diversity to our story: footwear, women's, connected fitness, direct to consumer and international. We've been investing in each of these growth drivers to varying degrees over the past several years, empowered by the continued strong growth in our North American Apparel business.
With apparel growing 35% in Q2, our confidence in the strength of our core business is high, with strong revenue growth across both our wholesale and direct to consumer businesses. But as we reach the midpoint of our fiscal year, we believe we will all look back on 2014 as a pivotal year in our diversification, one where we've built solid foundations in these newer businesses. So let me address these 5 growth drivers individually beginning with footwear. I said earlier that the source of our revenue growth was unprecedented and footwear is a great example of that. In the 1st 6 months of 2014, our revenue number for footwear was $223,000,000 just slightly less than the $239,000,000 we did in the full year of 2012.
So it took 6 months of this year to accomplish what we did for the full year in 2012. Those results are driven directly by taking what's in our DNA as performance leader in apparel and transferring that commitment to making all athletes better to our footwear. With the success of our SpeedForm Apollo running shoe launch, supported by our first brand holiday, we believe we've made a strong impression with runners looking for great technical footwear. Equally important is that we are well positioned to capitalize on this momentum in running and build a broad platform in this key footwear category. Our initial SpeedForm Apollo shoe established a foothold, but we believe our next shoe in the line, the SpeedForm Gemini that will start to hit retail early in 2015 has the potential to validate our technical credentials with an even broader base of running consumers.
When we entered the market with Football League, we knew that in order to be viewed as a truly global athletic brand, we would need to provide authentic footwear solutions for athletes. Our breakthrough product in 2013, the Hi Lite fleet continues to lead both sales and innovation in the football market at $130 We're able to pick the price of a highlight up to $130 from just $110 a year ago, because we've brought a new level of innovation to this game changing cleat with the introduction of ClutchFit, our revolutionary second skin upper material that flexes under pressure, locking the athlete in with a superior fit and a poor feel. This constant flow of product innovation, which we're seeing in both SpeedForm and High to name a few, is an outgrowth of the category strategies we have developed, ones that are built with a focus on consistently exceeding athletes' expectations. We are investing in these category strategies with a long term focus and believe we will look back on 2014 as the year we transitioned from a company learning how to make great shoes into a truly disruptive voice in the global footwear market. Disruption is also our goal with our upcoming Holiday 2 campaign that for the first time will be focused on the dialogue Under Armour will be having with women.
For a long time, athletic brands have recognized women as athletes and celebrated their exploits in the playing field, the tennis, basketball and volleyball courts. And we've built an incredibly successful 500,000,000 dollars plus business by doing just that, focusing on meeting the needs of the female athlete where she plays. As we reach out to our female consumer to better understand their fitness and performance needs, there is a ton of conversation about the diversity of activities they do to reach their fitness goals. Running with their friends, barre classes, kickboxing, spin, kung fu, Pilates, yoga, Tough Mudder, mountain biking, etcetera. The list of activities is exhausting.
And fortunately for us, they are all athletic pursuits where a woman expects a level of performance in her product that matches the effort she's putting into her fitness level. Our Holiday 2 campaign will debut next week and we're excited about the conversation that we'll be having with both the consumer who sees herself as a female athlete and the one who describes herself as an athletic female. The initial TV spot in this campaign features Misty Copeland, Principal Dancer with the American Ballet Theatre. The story of how Misty willed her way to this position in the dance community is compelling and 100 percent reflective of our brand DNA. Her athleticism is overwhelming and we'll communicate that in a fully integrated way, including an online presence, markedly different from what we've done in the past.
So yes, it's a ballerina in an Under Armour ad, but I would challenge anyone to describe anything she does from this spot as not seeing the moves of an athlete, an incredible athlete. We've built a large women's business and look at this next phase as a great opportunity to bring dimension to our brand Part of what you'll see with our women's campaign in Holiday 2 is an outgrowth Part of what you'll see with our women's campaign in Holiday 2 is an outgrowth of the opportunities resulting from our acquisition last fall of Map My Fitness. It's become abundantly clear to us that the MMS platform brings to Under Armour a myriad of applications and potential platforms that can provide great user experiences for our consumer. Map My Fitness, the 3rd leg in today's diversification agenda is a powerful vehicle with greatest potential to help make all athletes better. What the MMS acquisition is teaching us about today's athletic consumer is way ahead of our expectations and consumers are engaging with the platform at a level beyond what we anticipated when we partnered with Robin Thurston and his team late last year.
More importantly, our acquisition of MMF has given us a platform to get deeper into the conversation with potential technology partners around the intersection of proactive health and wearable technologies. And a key part of what makes UA a potentially attractive partner is the rate at which we continue to add new users. In fact, we added over 1,000,000 new users every month in Q2 to the Map My Fitness platform and are well on our way to adding over 10,000,000 new registered users in 2014. We continue to enhance the core of Map My Fitness platform, adding capabilities in tracking, analysis, content and commerce. But as I mentioned with the women's campaign, this platform enables us to talk in a really authentic and personal way to our consumer.
There are multiple opportunities across all of our categories to use the Map My Fitness platform as a vehicle to engage consumers. And that opportunity is not only in the U. S. As we anticipate that by year end, we will have over 30,000,000 registered users with about a third of them coming from outside of the United States. That's a big number.
The 4th piece I want to talk to you today about is our direct to consumer business and the opportunity it's giving us to bring the UA brand to a new consumer. Retail partnerships have never been bigger or stronger. We look at direct to consumer as not only a source of revenue growth, but as our best opportunity to bring the U8 brand to a new consumer, whether that's a 25 year old athletic female in our SoHo store or a 14 year old future Premier League player who just happens to live now in London, Sao Paulo or Singapore. We're being strategic about the UA brand to a much more diverse consumer. Based on the amount of traffic we are seeing on our mobile sites, it's clear that the opportunity to sell to our core young consumer through his or her device will be a huge part of our strategy going forward.
In the U. S, we can use physical retail space to showcase the full breadth of our product and attack business opportunities through expanded and differentiated presentation. The strong initial performance of our women's product in our new SoHo store and footwear in both our U. S. And international doors are great examples of it.
And when we open our store on Michigan Avenue in Chicago, we're able to tell great product stories about locally relevant partners like Northwestern and our newest powerhouse, the University of Notre Dame. Our ability to control the merchandising and flow of product in our own doors is also enabling us to test elevated product offering. So whether it's our women's studio Capris and Harrow pants or footwear like the Steve Form Apollo or the Anatomics worn by Stephen Curry, we were able to get immediate reads from our consumer and the results, especially as it related to pricing, have been very, very encouraging. The equity we've built as a performance brand and the innovation we're bringing to our consumer is enabling us to be successful with pricing at levels well beyond the norm for other parts of our business. Outside the United States, one of our primary goals is to use Under Armour retail to bring our brand to consumers who are challenged to find it.
We are also focused on ensuring that the presentation of our brand in that retail space, whether it's UA owned or through a strategic partner, reflects the premium nature of our product and position. Our direct to consumer process is very much about a global strategy. So when you walk through our New York store and see the breadth of our product, understand that it is the only new brand house door we'll be opening in the U. S. This year.
In reality, 80% of the brand house square footage we are opening in 2014 will come from outside the United States, with the majority being in China. We recently opened doors in Panama City, and Singapore. And it's important to understand that the vast majority of these new doors are through partnerships, where we are able to control the presentation without the capital outlay and that we believe these partnerships can play a critical role in building our brand awareness outside of the United States. That brings me to the 5th and final part of the diversification and that's the opportunity in our global business. I gave you a stat earlier about how fast we are growing our footwear business.
So here's a similar one to international. We surpassed $100,000,000 in international revenues for the 1st 6 months of this year, close to the $108,000,000 we did in the full year of 2012. I just addressed how we are growing brand awareness outside the U. S. Through an elevated consumer experience at retail.
We're also growing our roster of locally relevant assets in global football with Cruz Azul and Toluca in Mexico and Colo Colo in Chile to go along One key One key factor in our international growth story is our ability to bring a broader mix of products to these new markets than we could have done 3 to 4 years ago. Because just as we are over indexing our sales velocity in women's at our Soho store, we are selling more footwear than we had anticipated as we open our retail doors outside the United States. This will help ensure a more balanced sales mix as international becomes a bigger percentage of our overall business. In summary, we've been talking on these calls for some time about how we will use North American growth engine to fuel our global growth story. As I've outlined today, there are many elements to the investments we make and they all connect to help grow the overall pie.
Connected fitness will help drive our women's business. Footwear will help drive our DTC business and all 4 of these growth drivers will contribute to our overall global growth. As I said earlier, we hope to look back on 2014 as a year where we transform from being just a great U. S. Apparel brand to truly establishing ourselves as players in both the footwear and international markets.
That confidence stems from the investments we've made in past years these areas and reinforces our strategy of investing in our brand for the long term. Some of the investments we made in 2010. In 2010 were designed to help us become a $3,000,000,000 brand someday. The investments we're making today will be critical to our becoming a $5,000,000,000 and eventually a $10,000,000,000 brand. We have a number of key initiatives going on at this point and our responsibility is to strive to build an integrated, operationally excellent global company, while continuing to deliver great results for our shareholders.
17 consecutive quarters of growing revenues 20 plus percent, more than 4 years. That's a metric of which we are incredibly proud. More importantly than those numbers is the diversity we are bringing to UA, diversity in the makeup of revenues, diversity in whom our brand is speaking to and diversity in how we connect with our consumers. With that, I'll turn it over
to Brad. Thanks, Kevin. I'd now like to spend some time discussing our Q2 2014 financial results followed by our updated outlook for 20 14. Our net revenues for the Q2 of 2014 increased 34% to 610,000,000 dollars Growth again was balanced across many parts of our business, including the North America wholesale, direct to consumer and international channels as well as our apparel and footwear categories. Areas that contribute to upside from our original plan during the quarter included positive trends in our international and footwear businesses, a desire from our wholesale partners for earlier delivery of back to school products and outperformance in both our factory house and e commerce channels.
Taking a look at apparel, we grew this category 35% during the quarter to 420,000,000 dollars compared to 310,000,000 in the prior year. In general, we continue to see success where we drive newness and excitement for the consumer, including innovation stories like ARMORVENT as well as enhanced design elements through products such as AlterHego, UATEC and Graphic Keys. Specifically in men's, the 1st quarter momentum we experienced in golf and outdoor continued to drive results during the 2nd quarter. In women's, we saw strong growth in both the running and studio categories. And in youth, training and golf were the big story.
Building on our Q1 success, 2nd quarter footwear net revenues increased 34% to $110,000,000 from $82,000,000 in the prior year, representing approximately 18% of net revenues for the period. We continue to offer more balanced running price points across our sporting goods distribution and remain encouraged by the early success of our SpeedForm platform. Our momentum is also continuing in our feed business, where we are increasing market share in both baseball and football this year. Following on the relaunch of our bags business in the prior year period, our accessories net revenues during the Q2 increased 18 percent to $60,000,000 from $51,000,000 last year. Growth during the quarter was primarily driven by headwear.
Our direct to consumer net revenues increased 38% for the quarter, representing approximately 31% of net revenues. While Kevin walks you through some of the early progress we are making in international markets, it's important to note the vast majority of our current direct to consumer revenues are concentrated in North America. In our North America retail business, square footage in our factory house channel grew 22% year over year. This growth reflects a total of 118 Factory House stores at the end of the quarter, up 12% from the Q2 of 2013, as well as the upsizing of some existing doors. On the full price side, we now have 5 BrandHouse stores in North America following the April opening of our SoHo location in New York City.
In e commerce, strong traffic gains continue to drive our business during the quarter and we remain focused on key second half initiatives, including responsive design for mobile, consumer marketing segmentation and connected fitness engagement. Continuing the success from the Q1, international net revenues increased 80% to $46,000,000 in the second quarter and strategy around 3 key markets of the UK, Germany and France. In Asia, we are in the process of accelerating our partner store model in China, while also building both wholesale and distributor relationships across the region. Finally, in Latin America, our business benefited from the conversion of our Mexico distributor to an Under Armour subsidiary at the beginning of 2014 as well as our market entry into Brazil. Moving on to margin.
2nd quarter gross margins expanded approximately 90 basis points to 49.2% compared to 48.3 percent in the prior year's quarter. Two factors were the primary contributors to the improvement this quarter. First, we had a favorable year over year sales mix. As part of our inventory management process, there can be quarterly shifts in the timing of our excess inventory liquidation sales. Some footwear liquidations from the 2nd quarter shifted into the 3rd quarter, positively impacting the 2nd quarter gross margins by approximately 40 basis points.
Secondly, we experienced favorable product margins primarily in our in line footwear business, contributing approximately 30 basis points for the quarter. Selling, general and administrative expenses as a percentage of net revenues deleveraged 230 basis points 43.5% in the Q2 of 2014 from 41.2% in the prior year's period. Details around our 4 SG and A buckets are as follows. 1st, marketing costs increased to 11.6% of net revenues for the quarter from 10.7% in the prior year period, primarily driven by higher year over year sports marketing sponsorships in both our North American and international businesses. 2nd, selling costs increased to 11.5% of net revenues for the quarter from 11.3% in the prior year period, primarily driven by the overall growth of our direct to consumer business, including increased investments to support our factory house and brand house store strategy.
3rd, product innovation and supply chain costs increased to 11.4% of net revenues for the quarter from 10.2% in the prior year period, primarily driven by higher product innovation costs, including our Connected Fitness effort. Finally, corporate services remained unchanged at 9% of net revenues for the quarter. Operating income for the 2nd quarter increased 7% to $35,000,000 compared with $32,000,000 in the prior year period. Operating margin contracted 140 basis points during the quarter to 5.7% compared to 7.1% in the prior year period, largely driven by the timing of planned investments in product innovation and marketing. Our 2nd quarter tax rate of 47.5% was unfavorable to the 43% rate last year, primarily driven by increased investments in our Latin American businesses.
Our 2nd quarter net income and earnings per share were unchanged year over year at $18,000,000 and $0.08 respectively. On the balance sheet, total cash and cash equivalents for the quarter increased 34% to $300,000,000 compared with $224,000,000 at June 30, 2013. Long term debt increased to 197,000,000 dollars from $55,000,000 at June 30, 2013. In May 2014, we closed on a $150,000,000 term loan and paid off $100,000,000 drawn on our line of credit in connection with the funding of our December 2013 purchase of Manheim Fitness. Switching over to inventory.
As planned, we delivered inventory growth roughly in line with net revenue growth. Inventory at quarter end increased 35% to $662,000,000 compared to $491,000,000 at June 30, 2013. Our investment in capital expenditures was approximately 29,000,000 dollars for the Q2 compared with $22,000,000 in the prior year period. We continue to plan 20 14 capital expenditures of approximately $150,000,000 primarily driven by incremental investments to support our direct to consumer and international businesses, further develop and expand our global office footprint and increase capacity at our distribution centers. Now moving on to our updated outlook for 2014.
Based on current visibility, we expect 2014 net revenues of $2,980,000,000 to $3,000,000,000 representing growth of 28% to 29% and 2014 operating income of $343,000,000 to $345,000,000 representing growth of 29% to 30%. Both expected growth rates are outpacing the long term growth rates laid out at our Investor Day in June 2013. Below operating results, we continue to anticipate moderately higher interest expense in 2014, primarily reflecting the new $150,000,000 term loan. We expect the full year effective tax rate of approximately 40.5% ahead of last year's 37.8% rate, given investments to support our First, on net revenue. We are increasing the top end of our First on net revenue.
We are increasing the top end of our full year guidance by $90,000,000 driven a large part by our increased confidence in both our international and footwear businesses, where we have seen strong execution and consumer response during the front half of twenty 14. As far as cadence, our story is consistent with prior guidance with a somewhat higher growth rate expected during the Q3 relative to the 4th quarter. We continue to take a more balanced approach in finding the business around weather expectations for the Q4 as compared to last year, especially in our direct to consumer business, which represented approximately 40% of our total business during the Q4 last year. Next on gross margins, where we continue to expect a modest overall gain for the full year following the 48.7% level achieved in 2013. From a cadence standpoint, we continue to expect year over year rates to be up during the Q3 and down in the 4th quarter.
During the Q3, the primary consideration is higher U. S. Import duties, which negatively impacted the year ago period by 90 basis points. A shift in footwear liquidations from the Q2 to the Q3 discussed earlier will partially offset some of the year over year gains from the import duty comparison. For the Q4, our forecast for lower year over year gross margins reflects a higher mix impact of our international business, which is more weighted toward lower margin distributor businesses during the period as well as our previously mentioned approach to planning our 4th quarter business.
Moving on to SG and A. We continue to plan for modest deleverage for the full year. During the Q3, we expect overall SG and A spending will remain elevated with overall deleverage planned near the same levels as the 2 30 basis points experienced during the Q2. Specific areas of investment include increased marketing around our brand holiday campaign, higher selling costs tied to our brand house and e commerce initiatives and overall innovation spending in areas like connected fitness. In addition, we expect deleverage due to a higher incentive compensation expense during the period.
During the Q4, we continue to see leverage of SG and A, particularly in corporate services, primarily given elevated spending in the prior year around incentive compensation expenses and Map My Fitness deal related costs. Finally, on the balance sheet, we expect inventory growth to remain relatively in line with net revenue growth both the 3rd and 4th quarters. We'd 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?
Your first question is from Pamela Quintiliano with SunTrust. Your line is open.
Thank you. Congratulations on a quarter guys. You gave a lot of info on DTC and I was hoping you could just talk a little bit more about stores and what type of learnings you have from the newer locations particularly SoHo? I know you mentioned women's, but anything else there? Does it make you approach any aspects of the store build out differently?
And then just in line with that the tourism component, I'm sure it's very high. Are you able to collect data there? Is that impacting your future build out domestically or internationally?
Yes. Thanks very much, Pam. I think as we look the opportunity, retail has been an incredible learning center for us. Number 1, getting closer to the consumer and the things we found out. So we've had a great relationship.
And I want to reiterate, we are very much a wholesale distributor and have incredible partners. And so our business there is very strong, very healthy and something that we continue to see additional growth. As we learn though from retail, 2 real key learnings. Number 1 is probably women's and number 2 is footwear. The layout and it's difficult because I don't want all those to sort of lead to the store that we have in SoHo, but we've learned a lot of things from that.
Number 1, when you walk in there, I think you're probably overwhelmed with the breadth of women's product, the amount of color, the size of diversity, probably the sophistication that people a lot of people didn't expect from us with our brand. And it's really allowed us to elevate ourselves and take it to a place and reinforce the theory that we had that we can be a viable women's business and that someday women's can be as large if not bigger than our men's business. As you take or look at the what that's meant for us, it's taken us to a different place. And secondly, our sales there are in front of any place they are across our wholesale distribution or any other aspect of our business. So when we present it the right way, we know we've got the right product.
And then we think with doubling down on, for instance, the women's campaign, I'll talk about that a little bit later, we think there's a bigger opportunity there. Secondly, footwear for us, really highlighting the footwear presentation has elevated footwear. As we've said, typically in our wholesale distribution, footwear is anywhere between 11% to 14% in a traditional sporting goods store. And that's something we're working with our key partners to try things to get that percentage up. But in our own retail, that percentage is about 20% to 25% of store sales are footwear.
And oddly enough or probably surprisingly or excitingly enough is that when we go to our international doors, we're finding that footwear it's representing somewhere between 35% to 40% of our velocity. And I just got back from a trip from Asia and found that. We're really seeing that consistently. So when we have the ability to introduce ourselves, not reintroduce ourselves, but introduce ourselves as a footwear brand, as a women's brand, more importantly as a comprehensive athletic brand, we're seeing a lot of, lot of excitement. As far as So to specifically goes, it's interesting because we just got through a stat that 22% of our sales coming out of SoHo are actually from international credit cards.
And we're finding out that they're actually doing 40 percent more business than domestic people. So what this is telling us is that high street retail is something that will work for us. And we think about key markets and whether it's what New York means just from a global international basis as well as cities like Miami, where you can touch Latin America. There's things that we can do here in the States to really impact and drive sales. But with that, we've been opening these key brand houses in some key markets.
A couple of 3 weeks ago, I was just in Panama City opening a store to a lot of energy and excitement. And I think that the real reason that we've driven, I hopefully got that across my notes and the script, we've got a great wholesale business, but we're really utilizing retail with only 1 store opening this year, 1 store on the books so far in Chicago in 2015 to help us become excellent and proficient as we build out a global footprint for showcasing the Under Armour brand.
And then if I could just have one quick follow-up. On the with your wholesale partnerships, are they also taking the learnings from the SoHo location and other DTC in the way they're presenting product? Or is it changing their approach in dealing with you?
Yes. Well, I think everyone is unique in their own situation, without question. And the goal that we had when we built the 1st brand house here in Baltimore, 8,000 square feet was having our partners walk in and say, I want this in our store. And why doesn't our women's selection look like it does here with the breadth of color, style, design and really the reach, the ability to go outside of sporting goods. Because a lot of times, particularly in, you take a category like women's, it's you're branded by your buyers, you're branded by your partners and they say things like, we'll buy you for a compression short and a sport ball, but that's the way that we see you and there's a lot more to it.
And I think that our women's team and the creative that we've been driving there, our women's design center in New York, for instance, and what that's been, I think, bringing to us, it's coming through with product the way it's hitting the floor. And it is absolutely educating everyone up and down through our distribution channels, beginning with ourselves and our direct to consumer channel and as well as informing in a big way our wholesale partners. So it would create a lot of expectation for them of the way that we see how we can be presented. And frankly, we're looking for that to be reflected in all of our wholesale partners' stores in some way, shape or form.
Great. Thank you so much. Best of luck.
Thanks very much.
Thank you. And our next question is from Faye Landes with Caroline and Company. Your line is open.
Hi, good morning. Fantastic results, obviously. Congratulations. Can you just talk about your thinking on spending going forward? I mean, this is a tremendous we've got a tremendous revenue growth period and you're spending to support it.
When should we start thinking about leverage? Or is that not in the picture? How do you think about it?
Yes. Faye, we've talked a lot about this around our spending and our strategy around spending going forward here. With all the opportunities, especially what Kevin kind of laid out in his script, all the opportunities around things like women's, connected fitness, international, DTC, we see so many opportunities out there that it's really, really important for us to make sure that we balance the need to maintain operating margins and maybe even slightly, slightly improve operating margins a little bit year by year, but balance that with the absolute need to invest in our businesses. And Kevin made a great point in the script around the investments we made in 2010 or why we're seeing success in things like footwear and international and women's today in 2014. So the theory there being that if we keep investing and balances need to invest in 2014, you'll continue to see those benefits in future years to come like 2015 through 2017 and so forth.
So So we've said pretty consistently that our focus on operating margin is to slightly improve it year over year, kind of the pace you've seen from us the previous years, But more importantly, make sure we're putting the right investments in the right places to drive shorter term and longer term growth down the road. We've even talked about the possibility of if we overdrive a current year revenue or have some upside in gross margins like the back half of this year, potentially if we had some of those things and we had some extra dollars, we would absolutely look to spend those extra dollars in areas like international or connected fitness or women's places that we talked about earlier. So continue to see us spend, balance that spend to drive short term and long term growth and continue to see us focus on maintaining and slightly improving operating margin, but balancing that with investment.
Okay. And just one other quick question. On the women's bank, I mean, where is Jolene, can just a little text or context on what we expect to see on women's like when do we go somewhere other than SoHo other brand hasn't expect to see the full women's line the full the new women's line?
Let me just give you some color and context around women's as a whole and make sure we get the whole picture out there, because obviously it's a huge story for the brand as we've been preaching about for a long time, but especially coming up in the next 7 days with the big launch that we're doing next week in New York around breaking our spot, there's an incredible amount of excitement. So I just use the word launch, but it's probably absolutely the wrong phrase to use. It's not a launch when you already have a $500,000,000 business in women's and growing at a rate north of 20% consistently for a very long time. But we do think it's great timing for this campaign. Our women's business is healthy.
There's still areas that we see that we need to communicate and continue to have consumer. We're pleased and proud of the 26% growth for women's this past quarter, but we think that there's obviously a lot more upside and a lot more opportunity there. We believe there is this quiet shift that's going on where women are increasingly wearing more athletic product outside of the gym, obviously. We think that Under Armour is in the best position to continue to grow the business as we built this loyal base of athletes and we're growing with her as she moves into new categories, grows up and frankly new end uses for Under Armour. So as a brand, brand's job sort of have a point of view and the brand holiday that we're launching, our holiday too.
So remember this is back to school, this is the middle of football season sweating and soccer is breaking and all your fall sports and Under Armour, big tough Under Armour decided to launch last. And it's absolutely no accident and something we explicitly knowingly did because we think this is the best use of our time and resources. And I want to say, we're not forgetting about these other categories, but we're absolutely focused and taking the 3 holidays we do a year, we're doing holiday 2 and committing exclusively to women. So this will be the biggest global campaign we've ever done around women's for the women's brand. But I think it demonstrates the commitment that we have to the category.
And when I say commitment and we're committed to building 1st and foremost the best athletic product for women and for athletes and exciting a conversation around them talking about Under Armour being an important product. I mentioned our ballerina. It's Misty Copeland, who is is she's a great human being first and she's an amazing athlete and ballerina probably all beyond that. But she's the one featured in the ad. And she probably doesn't fit the old definition of what people would see as an athlete.
But when you see her story, you see her perform. And you frankly see the way that she willed her way to becoming one of the world's top ballerinas, it's 100% reflective of what the Under Armour brand DNA is all about. We're incredibly proud of the product that's going to be on the floor this fall. It brings a high design aesthetic to the line without sacrificing any of our commitment to performance. So every product you build, it may look like it's just a beautiful top, but it's a beautiful top that wicks moisture, keeps you light, keeps you cool and helps you perform in all the Under Armour DNA, which we think gives us our personality and our differentiation.
And then you're also going to see us continue to expand from that core audience. So we know that she trusts our sport bra and our compression shorts, but we think we can take her to a different place outside of the gym, off the court and take her to and from some of those other wearing occasions that we're seeing this shift happen with women wearing athletic product. And it gives us the ability to reach women who are incredibly active and participate in many sport activities, but probably don't consider themselves athletes, but definitely they see themselves as maybe moving or an athletic female, we're going to speak to her. I started this by saying and I mentioned a little bit earlier, believe that women's can be as big, if not bigger than men's. And this campaign is something I think that underscores our commitment and investment in making that a reality.
Okay, great. Thanks a lot.
Thank you, Faye.
Thank you. And our next question is from Omar Saad with ISI Group. Your line is open.
Thank you. Great execution guys.
Thanks, Omar.
Great execution guys. Thanks so much. Wanted to ask you about this simultaneous sales and gross margin acceleration that seems to have begun about 3 quarters ago. I mean, look, those are the 2 kind of financial healthy financial indicators of brand strength, especially when you get them moving together. Do you think the 2 are related?
Is the key driver direct to consumer or mix shift to more premium products? Are you taking pricing all 3? Just help me think about this simultaneous sales acceleration in gross margin and over the long term how you think about the 2?
Yes. Omar, I think I'll look at both of them a little bit differently and then kind of bring it together at the end here. But on the sales side, obviously, we've had strong quarters over the last few quarters. And there's been some things that have been tailwinds first that we've talked about. Then some of those tailwinds actually as we get to the back half of the year start to feel a little bit tougher comps for us, we get into the back half of this year.
But we talked about things like supply chain and the fact that we in previous years have had some challenges on deliveries in the supply chain. As we got to the back half of last year, started to correct those and that gave us a little bit of a tailwind especially as we got into Q4 and early part of this year in comping some tougher supply chain deliveries in the prior year. So that favorable comp does start to go away from us a little bit as we get in the back half of this year when we started improving them last year. So that's part of the revenue piece. It's also part of the margin piece too where things like airfreight and so forth that we have needed in previous years, we have needed a lot less in the current year and as we get into the back half of this year too.
So that's been both a tailwind on the revenue side and the margin side. Obviously, we talked about weather last year in Q4 a lot being a good tailwind for us, especially around our DTC business where we can react very quickly to weather changes and so forth. So those are kind of some of the things that are consistent how we talked about in previous quarters. Some things that you saw in the current quarter maybe going into the back half of this year. On the revenue side, again, one thing we called out was some early demand from our wholesale partners.
Again, some maybe going off some challenges we had in prior years around getting deliveries on time from the back to school period. We had some requests from some of our wholesale partners to get that product in a little bit earlier, so we can get the floor set for back to school. That definitely helped the Q2 here. It took a little bit away from the Q3 as we go forward in order to do that. We have talked about factory house square footage growth as another revenue item that as we get towards the back half of the year, square footage growth in the front half of this year was in the upper 20s in Q1, low 20 percent in Q2.
As we get to the back half of the year, we'll be in the upper teens. So that will take away a little bit of that kind of revenue drivers that we've seen in the last few quarters. And obviously, when you look at our guidance, we've talked heavily about this and just being very, very careful about our 4th quarter revenue and what we're guiding to in Q4 coming off the tailwind of the weather positive last year in Q4. So being just kind of careful and we put in our guidance for this year. So those are kind of some of the numbers things.
On the airfreight that again, as you get to the back half of this year, kind of a little less of a favorable comp year over year in general. But to kind of wrap that all up, to bring up what's happening positively for us, probably the biggest change in the last 6 months specifically is the gaining confidence we're getting in this international and footwear business segments that have been really important to us. Obviously, we've put a lot of investment in those in the last few years and really the front half of twenty fourteen. Coming into twenty fourteen, we were being a little bit cautious in our guidance around the expectation of those two businesses, because they were relatively new for us. As we got through the 1st 6 months here and saw a lot of success, not just in selling in, but more importantly selling through to the consumer, it gives us a lot of confidence here in raising our guidance for the back half of this year.
Obviously, those businesses to some degree right now for us are a little bit of a drag on gross margin, but absolutely heading in the right direction longer term in places like footwear where we're having a better mix towards running and we're improving margins in products like SpeedForm. And international longer term will start to improve also in the near term though a little more distributor weighted which will hurt our gross margin.
Thanks. That's really helpful. And then you've as analysts when you guys talk to think about long term 20, 25 revenue targets. You've been above that. Are you ready to sign up given the gaining confidence in some of these new or newer areas of growth to an elevated growth rate long term?
Or is it premature at this point?
Yes, Alex, we'll probably stick to our last year Investor Day guidance for now and we'll do Investor Day every once in a while and give longer term guidance. So we looked at last year talking about our revenues through 2016 hitting $4,000,000,000 Obviously, as we wrapped up 2013 and as we get into 2014 here, we're outpacing that trend right now. So we're not going to sit here and commit to a number today for 20 15 or 2016. We'll definitely give some more insight to 2015 at the end of October on our next call. But obviously, I think just in general the trend being that what's changed from our last Investor Day last year to this year, I go back to the 2 big changes.
I'd say there's 3 big changes. 1 being our acquisition of Connected Fitness, 2 and 3 being our again improved confidence in international footwear, which as we start to look at 2015 and beyond, obviously would be probably the biggest change from our viewpoint we had at Investor Day last year. Thanks, guys.
Thanks, Omar.
Thank you. And our next question is from Rami Konik with Jefferies. Your line is open.
Yes. Thanks a lot. I guess Kevin, the way we're approaching the stock is talking about the brand for the next generation. And I guess what's different when I see adults, they'll have pieces of Nike and pieces of Under Armour in the gym, but you look at like a 5 year old or a 10 year old or a 15 year old, they're decked out from footwear to the apparel assortment in Under Armour. So you don't really talk about the kids part a lot.
What are you seeing there? And what are some of the initiatives in that part of your world to kind of build to the future when these kids become adults? And then in footwear, I guess my question there is, how do you think about you've had success with SpeedForm and Spine. How do you think about platforming over the years ahead? Should we expect like 1 or 2 platforms per year?
And then should we expect additional more SKUs or colorways to complement those platforms? And then lastly, in international, do you assume that do you think that international becomes half the company over time? And what is the biggest opportunity internationally? Thanks.
All right. We got 10 minutes left. I'm closing this call out with this question. So to this call out with this question. So to begin with number 1, we haven't figured out how to get a 5 year old credit card yet.
So we still have to work through the older brother and mom for that. And the good news is it typically does come from there. So without question, I think grandparents grew up wearing one brand from Europe. Parents grew up wearing a brand from the West Coast and we're very happy to see the youth of today are growing up wearing Under Armour. And we see that trend is happening.
And there's a lot of things that we have to do. It's certainly not God given to us, but we're pretty proud of the way that we're executing right now in order to deliver on that opportunity that we have. So youth for us, you're right, it's massive. And then the growth we're seeing happily, I said all along that our youth business is obviously outpacing the general growth of the business, both men's, women's, footwear, everything. So we're seeing youth in the 60% 70% type of growth opportunities we have there.
And frankly, the neatest thing when we typically talk about youth in the past, we would be referring to boys. And what we're seeing right now is that our girls business is frankly on fire. So we're very pleased with the balance that that's presenting for us. And that demonstrating, I think, given her a voice and giving her a brand that she can wear in a very big and balanced way, was something that she has much confidence with is Under Armour. We're very excited to be able to bring her up, take her through athletics, take her through her school years, take her into her college years and then get her out as she moves into 20 somethings and 30s.
We're learning a lot from the youth standpoint. The difficult thing we've always found with youth is distribution and where can you find appropriate distribution. So we've been working with our key wholesale partners and expanding their footprint. And I think you'll see that from some of our bigger players like DICK'S and even creating out some DICK'S and Sports Authority and some of the others. But really, I think you've seen a real commitment from our wholesale partners in saying what can they do to attack the youth business.
So that's happening with us. And frankly, there's not a lot of horses in this race either. Kids are pretty specific with what they're looking for. I think we're proud of the position and the leadership that we're taking there. So there's more to do on distribution and continue to work with our partners to give us appropriate space in stores to get those products a chance to be sold.
Let me before I leave you, I can't tell you how excited we are about our position as the product of the next generation and the brand of the next generation. And we think that's something which is really it's more of a movement than anything. And I wish I could explain it and knew exactly how to bottle it up. But instead, we're pleased with the results and we're happy that we're speaking in a very important way to this youth consumer. And there's a lot more to come there.
We think there's great opportunity, both in apparel and obviously in footwear. So let me move on to the footwear side of the question, asking about platforms. $2,900,000,000 to that
$
$2,900,000,000 to that $3,000,000,000 range. So 1st and foremost, with footwear, it always begins with the largest category, which is running. 1st and foremost, we're really excited about running. And the reason we are is because of leadership, product and distribution. First of all, we've done a great job, I think, bringing leadership onto our team.
Fritz Taylor, we've mentioned his name before, is now heading up running for the Under Armour brand and trying to create that cross functional process that will take place, connecting what we have in this leadership position with apparel and then tying it truly into footwear. And we've said today. And I say that because we started in 2,004 making shoes. We today. And I say that because we started in 2004 making shoes.
We started selling the products because of the 18 month calendar in 2,006. And we've been in this for a long time. And I'm telling you, it just takes a long time. But it took maybe it was not only the product, but it's the people, it's the positioning, it's factories, it's really the distribution, it's all those pieces that come together. And so with leadership and our team here existing and again, this is product that was long before Fritz got here, but he's walking in and he really has a full plate.
It's not something I'm saying the cover is not there. There's amazing technology that we have in the market today with SpeedForm, FOX like SpeedForm, but there's also there's a full coverage of things that we're about to bring out and that comes down to product. So the SpeedForm Apollo at $100 something, it met all of our expectations. And with that, it gave us confidence to go in a much bigger position, which you'll see rolling out through the end of 2014 with things like the SpeedForm Vet, which is a terrific upgrade to the product that we think has got a real aesthetic and something that will be compelling, still at $100 really performing well in sporting goods and of course some of our key mall partners as well. We also I mentioned the SpeedForm Gemini, which will be coming out in the beginning of 2015.
I'd tell you, it's just a terrific product. And if people thought that our SpeedForm was maybe a little bit light or more of a sprinter shoe. The Gemini is the shoe that you can wear. It's the everyman shoe. It's whether you're a 3 mile or pounder or whether you're a long distance looking to train for a marathon.
It's an incredible shoe, featuring unbelievable technology, the seamless fits just like our SpeedForm made in the same version of the Braff Factory where we made the original SpeedForm Apollo, but with things like Chargebone, which has got recovery and retention. Every runner, it's the shoe I think that we were literally supposed to make. It's something we're incredibly proud of. And we're also doing it at $130 So we're stretching the price points there. Running, I think, you'll see there's a lot more to come, obviously, largest category, but also our longest standing category is the shoe that we first sold in 2,006 football fleet and we promised the ability for us to chase the number one position there.
So as we sit here some 8 years later, we're still on our way to that goal. We're off to an incredibly strong start with football across all of our distribution and particularly in our retail stores and online and in places like East Bay, the online component of Foot Locker. And so we're seeing our product is really doing well. And so one thing that's interesting is we've got the number one cleat at the high end in the market called the Under Armour Highlight Cleat and it's a $110 shoe that we sold a year ago. We added clutch fit to it.
We upgraded the product. We moved the price point to $130 and the product is doing even better than it did a year ago. We're seeing our sales up over 35% after being number 1 last season and it's priced at $20 more. We've got the Cam Newton special shoe at 100 and $60 We've got our Ultra Ego with Superman and Batman and the Flash and other styles that are relatively basically sold out everywhere we're doing distribution. So we feel like we've cracked the code and we will take market share this season and we will continue our march to being the number one cleat in America.
And you can say, is that a big deal, small category? I think it's just telling us what else is to come. The category that we've been in for 8 years in football cleats, the category we've been in 7 years in baseball, 6 years in training shoes, 5 years in running, 4 years in basketball, all these things will come. And I used to use a speech called 7 years. I think my new speech is going to be called 8 years.
Sometimes it takes just time to become great at things. I don't know if I'm declaring that's great, but I'll tell you our product is great. We're still continuing to hunt down becoming the number one athletic footwear brand in the world. Basketball is a different story and another category that we think taking a leadership position there begins of course with product always 1st and foremost, but also with talent, Bringing Stephen Curry onto our roster who everyone from the President of the United States has called the best shooter that they've ever seen in basketball, is really an asset that we're going to blow out a few more product lines with Steph and see what we can do to really get his shoe moving forward. So we think he takes us to a different place.
So footwear is something we're incredibly happy for. What was the 3rd?
That was great. So the 3rd one is international.
Got you. Got you. All right. So we've had a lot of I've spent a lot of time on the road. Our company is spending more and more time on the road.
Charlie Marat, our team on the global side, going from being a North American wholesale apparel compression company into evolving into the global true athletic brand that we expect to be. And frankly, we believe we're in the process of It just takes time and it takes seeing a lot of different things. So just to give you a little bit of my calendar, which is indicative of what's happening across our team across the world. This year already, so halfway through the year, I've already been to Asia, I think once, maybe twice, the Middle East once, Europe 2 times, Latin America 3 times, including a couple of weeks ago at the World Cup, which was awesome, I've got to say. We are definitely committed to being a global brand.
And it's not something that's going to happen overnight and it's not going to happen from people doing North American jobs. They're spending a little bit of time helping us us become international. So building that out and one of the previous questions about things like investments and how we're seeing leverage come on the company, there's an entirely different company that needs to be built in order for us to be a global brand. And so we're proud of the fact that we're able to continue to deliver for our shareholders, both top line and especially bottom line, and doing all the while posting the numbers that we are and building out the infrastructure that will allow us to take advantage of the investments that we'll seeing now in the future, just like we saw with the investments, as Brad mentioned, in 2010 that we're seeing today in 2014 with things like footwear international. So we talk about the brand houses that we opened, the opening we did in SoHo, the tour we have coming in Chicago, But we've got a couple of big openings that are happening globally around the world.
We begin with in EMEA. Throughout Europe, crossing $100,000,000 and gaining momentum for the first time, it's taken us a long time. We've been in Europe since 2006, and we spent a long time, a, figuring out international business, logistics, product, sourcing, colors, how to tell your story, translation and all the pieces. It's just taken a long time, but I think we are finally positioned where we can start to accelerate. And that tipping point is something that we feel like we've reached in Europe and really ready to go.
Seeing aided and unaided brand awareness triple year over year in key markets like the U. K. And Germany, of course, we point to our strategic partnership with Tottenham Hotspur and what that's done being a part of EPO Football. Working on our new e commerce sites and not defining ourselves by having to limit ourselves to brick and mortar retail, but also seeing what we can do in finding new channels for distribution. So we're taking a new approach that we don't have the infrastructure investments that maybe other brands have.
And so we can take a clean sheet of paper and say, what's the most effective way for us to be important in these other markets. Latin America, I mentioned that. Mexico for us, was down there for we opened our Mexico City brand house, trending way above plan from where we thought it was going to be. A new sponsorship we just announced with Cruise Azul and then extending our existing partnership that we had with Toluca down there and 2 of the best soccer clubs in Mexico. Brazil, we launched in April.
We were down there. We've been watching. We saw the World Cup. And it was interesting interesting and just people asking and saying, how did you what did you think of World Cup and what was Under Armour's participation? And we didn't participate as much.
We had several athletes wearing boots on different teams and clubs from around the world. But our outlook is much longer and much more strategic. And as difficult as that is for us to say of the largest sporting event in the world that we weren't as key and important a partner as we wanted to be, we still grew our international business 80% this quarter and 79% last quarter. So we feel like we're putting the pieces in place to be able to take advantage of the global sport, the beautiful game of football, once it's truly have the ability to capitalize on it and once we are truly ready. So our outlook there is not saying, well, what's it going to look like 4 years in Russia or 8 years when we're in the Middle East.
We're taking a long term 12 to 20 year outlook of how Under Armour is going to be the leading global football brand in the world. Chile is very helpful. Thank you. I wasn't even done yet. I'd be on Asia.
Stock is working, so. I haven't seen that. Last thing I just want to say is leave Asia, our partners in Japan are amazing growing the brand, growing the business. Last and most importantly is just a couple of store openings that we had. I was down for a store opening in Panama recently, but also in Asia, we recently opened Singapore and the Philippines.
And I got to tell you, of all the travel I've done, I've never been to the Philippines, yet we delivered for our store opening there, we have 700 people waiting outside in line to get into a 2,500 square foot store. And it's the kind of thing that has you scratch your head and say, I think this brand has real legs and real opportunity and I think we have a chance of doing something incredibly special. So there's a lot of energy, a lot of heat, a lot of excitement and something that we're incredibly proud of. And I guess thank you. But the last thing I want to say before we do close the call is I'm very pleased that our CFO, Brad Dickerson, was here because he has a due date with a baby coming in the next 24 hours, and we thought that I was going to have to answer the financial questions.
So I'm very glad to report that you guys hear directly from Brad. So with that, thanks very much for the last question, Randy, and thank you all for your time.
All right, guys. As promised, Kevin took us to the end of the call here. So thanks again for everyone joining us today and we look forward to reporting you our Q3 2014 results, which we tentatively scheduled for Thursday, October 23 at 8:30 am Eastern Time. Thanks again. Goodbye.
Brad said he's going to name the baby armor.
Thanks.
Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.