Good morning, ladies and gentlemen, and welcome to the Under Armour Inc. First Quarter Earnings Webcast and Conference Call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions will follow at that time. As a reminder, this conference call is being recorded.
I would now like to turn the conference 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 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 an unanticipated event.
Joining 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 Q1 followed by an update to our 2014 outlook. After the prepared remarks, Kevin and Brad will be available for Q and A sessions that will end at approximately 9:30 a. M. Finally, a replay of this teleconference will be available on our website at approximately 11 am Eastern Time today. And with that, I'll turn it over to Kevin Ployn.
Thanks, Tom, and good morning, everyone. Our first quarter results are a great example of what happens when we execute at a high level. We grew revenues 36% this quarter and the strength was evident across genders, categories, geographies and both our wholesale and direct distribution channel. Our top line growth exceeded 20% for the 16th consecutive quarter. That's 4 straight years.
And we saw a meaningful acceleration in both our footwear and international businesses. Our first quarter results also illustrate 2 key elements of what I'd like to discuss today. 1st, what we are capable of delivering today as a North American based brand and second, the boundless opportunities that exist for our brand, both here at home and in markets beyond our shores. I want to start today by addressing 3 product categories that demonstrate both our ability to execute and the opportunities that still lies out in front of us. I'll hit running first, then cover golf and then outdoor.
Of the 3 categories, running represents the biggest revenue opportunity for us, given the size of both the footwear and apparel components as well as the fact that it's an important category across all geographies. We've always had a strong running presence in apparel, but have focused a tremendous amount of resources the past few years in cracking the code in footwear. I think it's safe to say that given the strong launch this past quarter of our C Form Apollo footwear, we are on a trajectory to become a significant player in the global running marketplace. While the number of pairs we sold in was limited, we did a great job of executing the SpeedForm launch and set ourselves up to broaden and deepen the platform for the balance of 2014 and beyond. So while we saw the benefits this quarter with a great SpeedForm launch, I think the important takeaway is how well it positions us to benefit from the flow of footwear and apparel product our team is working on and running.
We are unique in that we came to the running category through apparel and are therefore in great position to have successful platforms like SpeedForm help ignite our entire apparel business be it in running, training or other pieces of our core business. We believe our opportunity to grow running in an integrated way with footwear, apparel and accessories combined with what we will bring to market with our connected fitness initiative truly positions our running business as a key building block of our global growth story for the foreseeable future. Part of that confidence comes from the growing strength of team we are building and running. It's a team where we've made significant investment in human resources, a team that understands the importance of building multiple platforms for all different types of athletes. A team that continues to break the rules about footwork instruction as we did with SpeedForm to create the precision feel, fit and comfort consumers have come to accept from our apparel.
The second piece of business that speaks to the scope of our opportunity is golf. I'm sure there are a lot of people watching the Masters a couple of weeks ago who said to themselves, hey, look Under Armour is making golf shirts now. But as most of you know, the golf category was one of our first steps outside of our core compression apparel. That original insight came from the football field, when some of our coaches saw how dry our compression was keeping their players and asked us for polo shirts that they could wear on the sidelines with a little looser fit with the same performance properties. Then those sideline polos started making their way to the golf course and we quickly understood the opportunity to authenticate ourselves with that consumer.
We built the UA golf business business systematically by doing what we do in every category we enter, bringing performance innovation to the consumer and maintaining a premium position wherever we do business. And the business started to change along with Under Armour. When we started out, the overwhelming majority of polos sold in golf pro shops were cotton. I think any of you who've been in a pro shop in the last year or 2 have noticed how that map has absolutely flipped and the overwhelming majority of golf polos are made now from performance materials. Then last year, we signed 19 year old kid who we thought was a great fit for the Under Armour brand for one simple reason.
He has the talent and drive to be a game changer. What we saw in that 1st year of our relationship with Jordan Spieth was an athlete with little fear and high confidence in his ability to compete with the world's best golfers. We talked about that at our Investor Day last June and he went out in July and became the youngest winner on the PGA Tour in 82 years. We continue to grow our golf business, which approached the $100,000,000 mark in 2013, with an increased focus on fit and style in both our shirts and pants to accompany the technology we build into our Gulf of Terrace. And we also thought that Jordan had the opportunity to be something special and make sure we are in position to capitalize on his presence over the long term.
He proved that at the Masters was not only a great finish playing in the final pairing, but in a manner that he comported himself both on and off the course. So again, our golf business is a great example of not only our ability to execute today, but to position ourselves for sustainable growth by partnering with a great table of young golfers like Hunter Mahan, Scott Stollins, Gary Woodland and of course Jordan Spieth. The 3rd category I'd like to discuss today is outdoor. It's not a category that we talk to you about a lot, but it's one that has been a critical piece of our growth and brings a new dimension to our brand. You've heard us talk consistently about being a premium brand wherever we show up and Outdoor is a great example of this.
In both the hunt and fish categories, we've been an authentic brand with our consumer from day 1. We've seen a very strong 6 month trend across the board and we're seeing great growth across specialty outdoor accounts as well as our bigger wholesale partners, all driven by great product and innovation like our UA scent control and Magna. We will continue to grow this category from a comp perspective as well as growing new categories like outerwear and boots. That has enabled us to reach more athletes off the playing field and expand our presence in their closets with products that is more lifestyle based. Our outdoor business is another great example of Under Armour authenticating itself with our consumer, earning their trust and expanding our share of their closets.
There are 3 big categories of business for us, running, golf and outdoor, all of which are helping drive our business today and where we are setting ourselves up to be major players on a global level. Better understanding the scope of opportunity we have outside North America has been a focus of our organization for at least the past 24 months. We talked at our Investor Day last June about how we would ensure building our brand globally in the same authentic manner we did here in the United States. Since then, we progressed against several of our key global initiatives, including transitioning our distributor in Mexico to a wholly owned subsidiary, launching our brand in Brazil and Chile and signing several sports marketing agreements in global football. 2 of those teams, Toluca in Mexico and Colo Colo in Chile have had outstanding runs with Colo Colo winning their 1st Chilean Primera Division title in 5 years and just the 1st year wearing Under Armour kits.
Toluca played in a CONCACAF Champions League final last night at home against fellow Mexican League team, Cruz Azul for a sport in prestigious FIFA World Cup in December against Baylor World's best club teams. And while Toluca did not advance, Unearl will still be represented in the tournament as we've just signed an agreement to outfit Cruz Azul starting later this year. Our strong 79% increase in international revenues this quarter is a positive sign that these new initiatives are off to a strong start and that the story of our brand continues to play well as we expand into new markets outside North America. And the strength this quarter internationally was really across all including and especially Europe where the Under Armour brand continues to gain traction. In key markets like Germany and France, our brand awareness doubled year over year and in the UK where we are in the 2nd year of outfitting Tottenham Hotspur in the English Premier League, it grew 3 times as we continue to bring new consumers into our brand through global football.
One last area that I want to touch on is the opening today of our first new store in New York City, which will we talked we talked about how the deeper presentation of footwear and women's would help our wholesale partners get a better understanding of the opportunity we see in these key categories. This morning when we opened the doors in our Soho store, that breadth of product will be on display in full force And the timing will be particularly good for our women's business as we activate our next brand holiday later this summer. It will be our 1st holiday focused exclusively on women's and we believe it will help call attention constantly evolving to meet the needs of both the female athlete and the athletic female. In summary, when we look at the 16 consecutive quarters of revenues up 20 plus percent, it's clear that we are executing well during a period of tremendous growth. There's going to be variability in any given quarter and this consistent growth can map inefficiencies in our business where we can improve.
We are becoming better merchandisers and what you see in our New York store today should be the standard for how we want our brand to look around the world in all channels of distribution. Within our supply chain, we are constantly looking to improve our inventory turns while balancing consistently high demand for our products. We are a growth company. And as a part of that growth story, we will not always make the perfect decision, but we promise that when that happens, it will be done full speed and we will never make the same ones twice. So whether it's categories like running, golf and outdoor, key growth drivers like women's and footwear, early stage businesses like basketball and connected fitness or new markets like Brazil in China.
It's equally clear that the opportunities for the Under Armour brand are abundant and our philosophy around growth is unchanged. Our North American growth and cash creation will be the engine that feeds and fuels our global ambition. We still have tremendous runway here in North American market that will fuel our business and enable us to invest early and often to capitalize on the opportunities that will drive our growth in the years to come. And with that, I'll turn it over to
Brad. Thanks, Kevin. I would now like to spend some time discussing our Q1 2014 financial results, followed by our updated outlook for 2014. Our net revenues for the Q1 of 2014 increased 36% to 642,000,000 dollars As expected, we experienced a strong rate of growth during the quarter given sustained momentum in apparel, a broader range of product and running footwear and international market expansion. This quarter marks the first time since the Q3 of 2011 where each of these key growth drivers surpassed 30% growth.
Taking a look at apparel, we grew this category 30 3% during the quarter to $459,000,000 compared to $346,000,000 in the prior year. This represents the 18th straight quarter of at least 20% growth for our largest product category. Overall, we saw strong apparel growth from our training, golf, hunting and fishing lines. In women's, our studio line remains a standout, while youth registered notable gains in training and baseball during the period.
Taking a look at some of
our product programs, we experienced broad based strength in fleets, UA Tech and base layer, while also offering new innovations with cold air infrared and Arbovax. 1st quarter footwear net revenues increased 41 percent to $114,000,000 from $81,000,000 in the prior year, representing approximately 18% of net revenues for the period. We were encouraged by the strong sell through rate of our SpeedForm Apollo running shoe, while also offering a broader running assortment at key price points, including the Assert, Engage and Spine EVO styles. We are also seeing success in baseball with our fitted business taking market share despite a somewhat slower start to the season given adverse weather conditions. Our accessories net revenues during the Q1 increased 43% to $52,000,000 from $36,000,000 in the prior year period, primarily driven by our headwear lines.
Our direct to consumer net revenues increased 33% for the quarter, representing approximately 26% of net revenues. During the quarter, we opened our first of what we expect to be 7 new factory house stores for the year. Our first quarter ending store count in North America totaled 100 and 18 locations compared to 103 a year ago. We also expanded 2 existing locations during the quarter as part of our current full year plan to expand 12 locations. Looking at our full price BrandHouse stores, we are excited to open our 3rd location several of our 2013 openings at Harbor East in Baltimore and Tysons Corner near DC.
These 3 brand house locations will provide valuable learnings as our full price retail strategy continues to evolve. In e commerce, we continue to see strong results driven primarily by traffic gains. Our efforts throughout the duration of 2014 will include an enhanced mobile experience, improved consumer marketing segmentation efforts and increased engagement in connected fitness. International net revenues increased 79% to $55,000,000 in the 1st quarter and represented 9% of total net revenues. We experienced broad based geographic strength during the quarter.
In Europe, we are starting to see the combined benefits of higher brand awareness and a more focused in country strategy around our 3 key markets of the UK, Germany and France. In Asia, we are starting to accelerate our franchise store model in China and driving growth through e commerce and expanded distributor relationships. Finally, in Latin America, our growth was primarily driven by the conversion of a Mexican distributor to an Under Armour subsidiary at the beginning of the year.
Moving on to margins.
1st quarter gross margins expanded 100 basis points to 46.9% compared with 45.9% in the prior year's quarter. The following factors contributed to this improvement. First, our sales mix remained favorable due primarily to a lower mix of excess inventory sold to our factory house outlet stores, contributing approximately 40 basis points of gross margin improvement. 2nd, improvements in our supply chain drove lower aircraft expenses year over year, contributing approximately 30 basis points of gross margin improvement. Finally, we experienced lower product input costs, primarily in our accessories business, contributing approximately 20 basis points of gross margin improvement.
Selling, general and administrative expenses as a percentage of net revenues leveraged 40 basis points to 42.7% in the Q1 of 2014 from 43.1% in the prior year's period. Details around our 4 SG and A buckets are as follows. 1st, marketing costs increased 1st, marketing costs increased 13.7% of net revenues for the quarter from 13.3% in the prior year period, primarily driven by the launch of our first brand holiday of 2014 and international marketing efforts. 2nd, selling costs increased slightly to 10.8% of net revenues for the quarter from 10.7% in the prior year period as our direct to consumer business grew roughly in line with our overall business combined with increased investments around our brand house store strategy. 3rd, product innovation and supply chain costs decreased to 10.4% of net revenue for the quarter from 10.5% in the prior year period as costs tied to our connected fitness efforts were offset by lapping prior year costs tied to the start up of our expanded West Coast distribution facility.
Finally, corporate services declined to 7.8% of net revenues for the quarter from 8.6% in the prior year period, primarily reflecting lower incentive compensation expenses. Operating income for the Q1 increased 99 percent to $27,000,000 compared with $13,000,000 in the prior year period. Operating margin expanded 130 basis points during the quarter to 4.2% compared to 2.9% in the prior year period. Our first quarter tax rate of 46.1 percent was unfavorable to the 39.9% rate last year, primarily due to an R and D tax credit reported in the first quarter of 2013 as well as higher international investments primarily associated with the 2014 market entries in Brazil and Chile. Our net income in the Q1 increased 73 percent to $14,000,000 compared with $8,000,000 in the prior year period.
First quarter diluted earnings per share increased 71 percent to $0.06 compared to $0.04 last year. The EPS calculations for both periods reflect the 2 for 1 stock split, which was effective April 14. On the balance sheet, total cash and cash equivalents for the quarter decreased 30 percent to $180,000,000 compared with $256,000,000 at March 31, 2013. We continue to utilize $100,000,000 of our $300,000,000 revolving credit facility, which was used to fund a portion of our $150,000,000 purchase of MatHai Fitness in December. Inventory at quarter end increased 46 percent to $472,000,000 compared to $324,000,000 at March 31, 2013.
Our investment in capital expenditures was approximately $31,000,000 for the Q1 compared with $11,000,000 in the prior year period. We continue to plan 2014 capital expenditures in the range of $140,000,000 to 150,000,000 dollars primarily driven by incremental investments to support our direct to consumer and international business and further develop and expand our global office footprint.
Now moving on to
our updated outlook for 2014. Based on current visibility, we expect 2014 net revenues of $2,880,000,000 to $2,910,000,000 representing growth of 24% to 25 percent and 2,004 operating income of $331,000,000 to $334,000,000 representing growth of 25% to 26%. Both expected growth rates are outpacing the long term growth rates laid out at our Day last June. Below operating results, we continue to anticipate higher interest expense in 20 14 given the financing of the Map My Fitness acquisition. We now expect a full year effective tax rate of approximately 40%, ahead of our prior guidance of approximately 39%, giving additional investments toward our international expansion.
Adjusted to the 2.1 stock split, fully diluted weighted average shares outstanding are now expected to be approximately 219,000,000. Dollars Given these updated full year parameters, we'd like to provide a few more details on how we currently see the quarterly cadence playing out. Looking at net revenues, we currently anticipate our growth rate for the remainder of the year to be roughly in line with our long term Investor Day compounded annual growth target of 22%. We currently have planned a growth rate for the 2nd quarter slightly higher than this target and for the 4th quarter slightly lower than this target. Relative to the Q4, we grew 35% last year given favorable weather, our improved year over year ability to better service demand, a strong new innovation story around cold gear infrared and better than expected direct to consumer performance.
Thus, we are taking a more balanced approach in planning the business for the Q4, particularly around weather expectations and our direct to consumer business, which represented approximately 40% of our total business during the Q4 of last year. Next on gross margins, where we continue to expect modest overall gain for the full year following the 48.7% level achieved in 2013. From a cadence standpoint, we currently expect year over year rates to be relatively flat during the second quarter, up strongly during the Q3 and down in the 4th quarter. Looking at the second quarter, we do not expect the 3 primary drivers of our positive performance during the Q1 to carry forward into the current period. This includes the normalization of our factory house product mix, a more consistent comparison on our supply chain performance year over year and the lapping of our Bags re launch, which carried higher margins commencing in the Q2 of last year.
During the Q3, the primary consideration is higher U. S. Import duties, which negatively impacted the year ago period by 90 basis points. For the 4th quarter, our forecast reflects a higher mix of our lower margin international business as well as our approach to finding the direct to consumer business considering the prior factors I previously mentioned. Moving on to SG and A.
As we indicated in January, we plan to allocate more dollars to marketing, international and connected fitness throughout 2014, areas that we believe are key to our long term global success. The timing of these investments this year is currently planned to create substantial deleverage of our SG and A rate in both the second and third quarters. The magnitude of this deleverage is expected to be greatest in the second quarter as higher marketing and product innovation and supply chain investments contribute to approximately 250 basis points of total expense rate deleverage year over year. We expect overall deleverage of SG and A to ease somewhat during the 3rd quarter before showing significant leverage during the 4th quarter. As a reminder, the Q4 of last year included significantly higher incentive compensation expenses and MatMyFitness deal related costs.
Overall, we continue to expect modest SG and A deleverage for the full year, inclusive of a marketing expense rate of approximately 11% of net revenues. To reiterate, our focus will remain on driving operating income dollar growth balance with making the right investments to drive our long term global success. Below operating results, we expect the elevated effective tax rate from the Q1 will persist during the Q2 before trending more in line with our full year guidance during the second half of the year. And finally, a quick update on our inventory position for the balance of the year. As we outlined last call, we expect the inventory growth rate to return to more in line levels with our revenue growth rate during the balance of the year.
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
Our first question is from Matt McClintock with Barclays. Your line is open.
Hello. Yes. Good
morning. Can you hear me?
Yes, Matt. How are you doing? Thank you. Good morning. Great quarter.
Kevin, you talked a little bit about the women's business and you had great success with the studio line and you talked about the brand holiday. I was just wondering if you could maybe go into some more detail on the product that's coming out this year that gets you excited? And maybe some of the innovation that you Holiday? Thank you. Sure.
So a few things. One, it's interesting. It feels like every time we talk about women's, people give us the perspective of congratulations on launching women's. We forget sometimes we have a $500,000,000 wholesale business of women's today. So we are certainly not in launch mode, we are in perfecting mode.
And I think we're incredibly proud of the team and that always begins with leadership. Leanne, who joined our company a little less than 2 years ago, her first season will be hitting floors this fall and partner with, I think, the outstanding leadership that consumer into what the athletic female wants. We want to make sure as well we never lose that athlete credibility. We want 16 year old girls that are playing field hockey and volleyball and basketball and soccer and lacrosse. We want them to feel like Under Armour is their brand.
We just want to demonstrate that we've got additional chapters in 2, 3 and 4 that we can grow up and we can grow older with her as well. I think the one thing you'll see and I'll get to innovation the second, is the commitment that we have as being successful in the women's space. You won't see that any more clearly articulated than what we're going to be doing with our 2nd holiday that will be hitting, as I mentioned in my comments, later in the summer. And holiday Q4 is 100% committed and about limits. Brands are about points of view.
I think we're incredibly excited about the creative that we have and the statements that this is making about Under Armour's commitment to this space and I think more importantly our thought leadership in this space. The campaign is going to be about increasing awareness and the breadth of the line and secondly the taste of where we really see taking this consumer to. When you think about innovation, Under Armour, I think we've been coined and I think we haven't shied away from positioning ourselves as an innovation company. And we take no exception to that with what we're doing with women's. And whether it's something as core and base exception to that with what we're doing with women's.
And whether it's something as core and basic and as important to the female athlete or the athletic female as the sports bra, the things like armor bra. But taking it from being a really great functional bra to making it sexy and beautiful and ensuring that she has the use for wearing it beyond the athletic field. So I think she'll see us take that. And to be honest with you, I know a lot of people on the call are dialing in from New York. I can't emphasize enough, if you want to see what does our normal women's look like, take a walk down to our new brand house in SoHo, which opens today.
It's a soft opening. So we're just getting going. We'll have a grand opening next week. So be nice when you go as we work out the cobwebs. But I think we're incredibly excited by what's on the floor, the presentation of products that we have there and the commitment to A, innovation.
The thing that makes Under Armour unique is every product does something, rich moisture, keeps you light, keeps you cool. But that didn't mean it didn't have to we couldn't allow it to be beautiful or sexy or cute. And I think that when you walk in there, anyone who has an idea or picture of what they thought Under Armour limbs is or was, will absolutely be blown away in change. And I want to be clear, the goal that we have as you walk into our brand house in SoHo is that you will see, a, a great breadth, but frankly this is the inspiration that we are hoping to bring all of our partners at every channel of distribution to have Under Armour presented in this way. So beyond just the authentic and things really for that athletic female, I think you're going to see a beautiful presentation of Under Armour women's product that we're really proud of and then backing that up with some great storytelling coming later this year of driving home Under Armour to be successful in women's
space. Thanks for
that, Kevin. We'll make sure to make
it down there today.
Thanks, Matt.
Thank you. And our next question is from Michael Binetti with UBS. Your line is open.
Hey, guys. Thanks and congrats on a great quarter.
Thank you.
Brad, one quick question for you. Can you discuss a little bit in case I missed it how much the improvement in the fulfillment rates you guys had, which obviously continued in the Q1 from the Q4? Is there
any way you can help
us estimate how much that contributed in the Q1? And then is that completely go away as an opportunity in the Q2? And then I have a quick follow-up. Yes.
The fill rates the metrics from the fill rates are relatively comparable year over year. The change though I think is the way we got there relative to achieving those fill rates. So fill rates by request date and fill rates by cancel date, affiliates by request date were around 70 and affiliates by cancel date were kind of in the mid-90s. Just the difference being last year, we took some more unnatural ways to get there relative to air freighting product in to get here on time, whereas issued that product float a little more naturally. So that busts the call out of the benefit in margin because of air freight expense.
So as we get forward into the rest of the year, what we start to see in Q2, Q3 and Q4 as we start to comp better supply chain performance last year. So we're going to see less of that benefit in Q2, Q3 and Q4, especially in the back half of the year where we started to improve that supply chain performance in the back half of last year. So you're still seeing some comp benefit in Q1 here. That will start to fade into Q2 and then become less so in Q3
and Q4.
Okay. And great. And then Kevin, if I could ask you just a bigger picture question. Since you guys announced your Eeyore acquisition, there's been a lot of media coverage on what's going on in the digital part of the athletic industry. You guys obviously acquired Map My Fitness recently seen headlines that Nike has been moving away from at least from the hardware side of their fuel business.
Can you give us the state of the union on how the integration is going? And maybe how you see the industry moving forward with digital investments like this and how it fits into your longer term thinking?
Yes. Thanks very much, Michael. It's a great question. And I think it's an opportunity that everyone looks at and is wondering where is this category going and what does it mean. So let me start by saying that proactive health or as we've now coined the term Connected Fitness, we believe it's a massive opportunity.
I think it's and as a company, we are positioning ourselves to put ourselves in a position to really look at this thing one of the next major industries. Proactive health means not waiting for your shift to go to the hospital, but how are you being prevented with that? And things like predictive analytics and the science and technology that are out there are things that just aren't being applied to your own body. And think about it for a second. People know more about their car today than they do about their own body.
You know how fast you're going, you know how much gas is in the car, you know how much oil is in there, you know the tire pressure. Yet you don't have an idea yourself of when you think about your own health, you go see the doctor every 12, 18 or 24 months. You walk in and he pulls out a manila folder and he starts with a subjective question of how do you feel. And you're thinking, my gosh, there's got to be more data and more analytics available to the world than that. So we've been positioning ourselves for quite some time around the UnArmour can play there.
Where we did and frankly going back to last year, we made the decision is looking at things like the wearables and the hardware, but that wasn't really where the future was. And the reason for that is because there has yet to be a single market leader who stepped forward. And we think about listening to some of the really exciting launches that are coming up around the wearable community, well, frankly, there's always going to be new and additional exciting launches coming up with someone trumping someone else. And the idea of that capital intensive business of sitting on a piece of hardware versus us sitting back and maybe saying, who is the best player in the world. The key to the acquisition we made last year with Map My Fitness was the idea of their being agnostic.
Their being open and accessible to over 400 devices that work within their community. And when you look and you think about the community, what we purchased last December was a community of NotMyFitness of 20,000,000 registered users. And as you think about just in the last 5 months, as of today, I spoke with Robin Thurston, the CEO and Co Founder of MMS and now the Head of Digital for Under Armour. And as of this morning around 11 we're going to pass 24,000,000 users. On Monday, we signed up more than 46,000 people in a single day to the MMS platform.
Now as we think about that size and scale and our prediction has it, we'll be over 30,000,000 users by year end. And if we sit here and we dream and we play out how big can this community be, it's tens of 1,000,000 and frankly, we believe it can be 100 of 1,000,000 someday. So the big question is what's the product that we're selling and what's the role that we play in that space? And you think about 30,000,000 people by the end of the year, that's the size of Canada. So we're definitely having an input and I think an impact.
And again, this world and this phrase, connected fitness of what it means. So the way we're thinking about is not building individual products, but more importantly building a platform with our own community that one day we envision to have that huge, huge scale and size. As I said when started, this category is incredibly large. We're working on products and we're continuing to operate the MMF platform today as it stood and existed prior to our acquisition and Rob and his team are driving toward that because there's a great product there. But we also understand what the engineering and the executive vision of one of the founders of this industry and Robin and his partner Kevin that we feel we're incredibly well positioned to see where this market is going.
Because as we know, our competition is not stepping away from this from any side. Everyone is getting involved and sort of trying to get into the game, but figuring out what is the game, I think is the next big question. And so we're anticipating additional announcements of large partnerships that our competition will be stepping up with. But frankly, we feel we are in the lead that we've got the largest community and that we're the ones that are dictating the tempo of this space. And so we're not making predictions about perfection, as I mentioned in my comments before, but we like where we are and we think that we've got the best insight to being an important place for the athletes to turn to as they're thinking about how is my body doing.
And frankly, expand the definition of exactly who is an athlete as we think about how big this opportunity could potentially be for our company and for our brand.
Thanks a lot again. Congrats.
Thank you very much.
Thank you. And our next question is from Sharon Zackfia with William Blair. Your Congratulations on a really great quarter. Question on the international side. So as we think about international longer term and the way you grow internationally, could you talk about direct to consumer and the role it will play in the international growth?
I'm assuming and maybe incorrectly that direct to consumer will be a bigger driver of how you grow overseas given the distribution, but would love some perspective on that.
Sure. Let me grab that and I've been doing a good job of giving long answers. So this one isn't going to get short. The world's a big place. I've spent a lot of time on the road in the last couple of years and beyond Investor Day, but just as we made that commitment to being a truly global company, which our definition of that is someday more than half of our revenues will come from outside of our home country.
And standing here today where less than 10% of our revenues are coming from outside North America. That's an incredibly large statement to make. Last year, I did over 230,000 miles of travel. This year, I'm on pace to break that. Just in the Q1 alone, been to Latin America to launch our brand in Brazil, visited a couple of our other markets down there.
I've been to Europe in our headquarters in Amsterdam as well as to London to see the Tottenham Hotspur play in London, where they won. The Middle East to meet with and select our future distribution partners there and heading to Asia in just a few weeks here. So we are without question focused on global. And I love that statement that we claimed what is the role of global there. Number 1, we've got this horse in North America.
And as we say, we believe that our North American growth and cash creation are going to be the engine that feeds our global ambition. That means we need to continue to win in the U. S. And so I want to be really clear that we're giving and providing the resources to the U. S.
To be successful. But ultimately, it gives us the ability to deploy resources outside of the United States and North America in front of some of the real revenue. But we believe that real revenue is there and it's coming. Instance, this year or this quarter, we posted 79% growth on our international business, but we haven't even started selling product in Brazil yet. The product that we've been selling in cola cola in Chile, for instance, has just been cola cola kits.
So they haven't even got our full in line sporting goods. So as we look at it, we extrapolate the numbers. We think that there is incredible opportunity. Now granted it's coming off a relatively small base, but frankly, all these things come back to leadership. And Charlie has been in the chair now for coming up on 2 years and has been doing just an excellent job building out a team of leaders around the globe.
So Under Armour today is going to be in 61 countries. I think we've got 31 different MDs that are managing that in offices all over the world. And we're doing a good job. So let me give you a quick rundown just how the world looks for. So Latin America, I mentioned it briefly, but one of the things we said we were going to do is we completed the transition of our distributor in Mexico to now being a wholly owned subsidiary of our brand.
The signings that we did at Cancata Cup last night final with Toluca wearing our kit includes Azul, who we begin to outfit at the end of this year or in July. So we'll have a winner that will be in the Latin American Club Championship down there. In Brazil, great feedback from the launch that we did in both Rio and Sao Paulo and the event turnout, I think, was really exciting. I think Under Armour is bringing a different energy and a different point of view to the brand that they don't have anyone like us today. The fashion role that other brands are playing is not the performance bent that Under Armour can bring still with product that looks great.
We're going to have 70 shop in shops that will be going up, as I mentioned, by the end of this week, we're going to start selling product there and it's a big idea. Chile was the 1st year in 5 years, Coca Cola hasn't won the Primerica title and our first year outfit in, they do that. And so we're getting our brand awareness out there in a big way. So speaking of brand awareness, Europe is something that it's been since 2000 and 6. We're proud to say this is the 1st year Europe will break $100,000,000 for us as a company.
And I believe we're really taking control and driving alignment across all of our European markets and countries. The one thing with that is aided and unaided awareness. And so there's a lot of things that work. We're spending a lot more money from a marketing standpoint, deploying resources there. There's the addition of Tottenham Hotspur, which has been critical, I think, from a brand awareness standpoint and being on the pitch in an authentic way on what's the EPL is massive.
And then getting to the point you make is more impactful direct to consumer. Our e commerce there is making a doing a better job. We've used some third party there is making doing a better job. We've used some third party partners to distribute our product via the web in Europe and we're bringing that in house. And with the addition of Henry and Jason LaRoe here in North America, figuring out how we can be better from a supply chain standpoint to have more and a broader array of our products available online.
And that in the past, it's been pretty limited what you're able to get in other markets. And we've really edited parts for them. So we're happy to be able to make much more of that as we understand and become better from a distribution supply chain logistics and frankly knowing how to get product to market. That isn't any different in Asia either And quickly on the direct to consumer side in China specifically, we've got nearly 20 stores in China by the end of April. That will be growing to over 50 stores by the end of 2014.
Now most of this is going to be utilized in the franchise store model, but we're expanding from 2 cities to 10 cities and we're seeing incredibly strong results with e commerce. And we're also going to be launching our brand on the e commerce front in Hong Kong and a few other markets throughout Southeast Asia as well. And again, all this, when you talk about Asia for us, it's anchored by our partners in Japan, up more than 50% in the quarter growth and that's on a real number. They continue to grow for us to be an anchor in Asia with brand appropriate retail stores, driving authenticity with the athlete, building incredibly strong Under Armour culture and fighting personality. And I can't point over and over that it all comes back to leadership.
And we've got a great leader in Shueisha Yasuda running that business for us in Japan. And the one thing that we found when you look at it and I don't know if I've given you enough detail on the e commerce side of it, the world quite as caught up as we are here in the States. Some markets are in front of us and some markets are lagging a little bit. But one thing we recognize is, number 1, we don't have to go at these new markets the way that our competitors have gone with them in the past. I don't know if that model is perfected by anyone yet, but we're keeping enough flexibility.
We're putting enough resources behind it to give ourselves the ability to make the best decision and not just the decision that someone else had done. So we expect to write the book. And again, not unlike Connected Fitness, we expect to be dictating the tempo as to how we enter these markets. And the good news, the world is a big place and we found that the Under Armour brand translates and we've got a big opportunity.
That's super helpful. Thank you. Thank you. And our next question is from Omar Saad with the ISI Group. Your line is open.
Thanks guys.
Hey Omar.
Wanted to ask a question about your philosophical approach to SG and A so to speak. You've had this kind of sales acceleration in the last couple quarters. You talked about boundless opportunities for the brand. It's still a very early stage growth company in so many ways. How do you think about pouring money back into the business to take advantage of this and perhaps extending a higher kind of growth rate curve looking out over a longer period what is your philosophy around investing reinvesting back in the business?
What is your philosophy around investing reinvesting back in the business?
One more, a couple
of things on that. I think one, there's always going to be some nuances in timing quarter by quarter. So we tend to look more on an annual basis of how we want to invest in our business and the timing of how we want to invest in our business to best support what we're trying to do and initiatives we're trying
to do during the course
of the year and the timing of that. So you'll see some nuances in where we're calling those out relative to marketing spend and so forth. And we've had some incentive compensation nuances also last year and this year as far as timing also. But as far as the level of investment, how we approach that, we really have consistently kind of looked at investing in our current growth drivers that are performing for us at the highest level by also balancing that with some mid term and longer term needs of our business. So as an example of that, investing in our direct to consumer business in the near term around expanding square footage in factory house stores, building brand house out and putting money into our e commerce business here in North America is a return that we tend to get right away in our business.
So we tend to put more of our SG and A investment in those kind of short term where the return is of parts of our business. That doesn't mean that we're going to ignore some of the longer term successes we need. And Kevin just talked about international. And absolutely, international is in a deep investment boat right now relative to not only growing our existing business in Europe, starting our business up in Asia the last few years, but obviously just getting into some of these markets in Latin America. So we definitely want to make sure we balance our investment kind of in the near term and over the next couple of years.
And a lot of that investment go into short term gain relative to getting ROI out of it right away, sprinkled with some mid term and long term investments that we know are going to pay off down the road later, but are much, much needed investments today. As far as how we look at how we go how things go during the course of the year, we've talked a lot about this over the course of the last probably 12 to 18 months that we see a lot of opportunities in our brand across all of our growth drivers near term and long term. And we will definitely use benefits that we have in top line or margin and the benefits of how that drops through into SG and A, we'll take advantage of that and accelerate and escalate SG and A investment to do one of 2 things. 1, that would give us an insurance policy on the execution of near term initiatives, especially around things like launching international markets and getting into markets for the first time in Latin America and Asia and so forth or 2, accelerating investments that would pull forward maybe hopefully by a year or 2 some benefits we might have in some of our growth drivers that are in investment mode.
So we've talked about focusing on operating income dollar growth and really taking any benefit we have in top line and margin to reinvest in our business to give us again that insurance policy will deliver and execute on our initiatives or continue to drive growth going forward.
And let me jump on the back end of that too. Brad and I, we've got a couple of deals that and agreements that we keep with one another. And number 1, first of all, when we talk to The Street, we're committed I think to the operating line that we've committed to and the ability that we see in our business to maintain and at times show leverage and grow that. At the same time, with the top line growing the way that it is, it means the dollar invested in number onwards is has the benefit of the top line growth that we're enjoying. By the end of this year, based on our latest outlook as we see the year, we'll be adding roughly $600,000,000 in revenues over what we did in 20 13 2014.
So that is just south of $3,000,000,000 for the year. And with an 11% roughly commitment to marketing, we've got 3 $30,000,000 to spend in marketing. And when you look at the largest sports marketing assets out there in the world, it really doesn't put us out of the game for anything. We could theoretically go buy anything we wanted to do. But we don't have all the money in the world, so we just have to be really thoughtful and we have to pick the right deals.
Two great examples of doing that. Number 1, I mentioned in my script regarding Jordan Speed. Hopefully, we use the phrase here at Under Armour humble and hungry. We placed the bet on Jordan really ahead of the curve when he was still a sophomore at the University of Texas and making the decision to turn pro that we would get behind and sponsor endorsement. And so we're incredibly proud of finding someone like Jordan.
And look, he didn't come out of nowhere, but he was certainly a bet that our company took in a really large way. And he's done everything that he said he would do and more. And hopefully, our company is delivering on that way and more as well. And so we want to remain opportunistic about staying close enough to the athlete and the consumer to find those Jordan's beefs out there. And you know they are incredibly rare and you can beat your chest a little bit once you do find them.
But I promise that's what we're trying to do is find assets before they're really out in the open and the market really has a chance to understand what we're doing. The second would be Notre Dame. In the last I guess it was within this quarter, where we announced our new partnership with Notre Dame, it was announced as the largest sports marketing deal at the collegiate level in the country. And as we see that and just understanding the size of it is that we have the ability to go buy the best deals and the best assets. But we have to, I think, remain true to the philosophy we have about the operating line because one thing I'm incredibly emphatic about is that winning is a culture and winning is a habit.
I saw some people as we talked about SoHo and there's been some commentary about it, it's just a flagship. This is more about marketing than it is about profitability. Let me be clear, every activity that we
just good for the
brand, just for marketing. Everything must have a return. Just good for the brand, just for marketing. Everything must have a return. And that commitment is something that I think is cultural and I think it plays to what and who the Under Armour brand is.
It doesn't mean we win all the time, but we don't go into things thinking that we're going to lose. And so when we sign athletes and assets and when we did that deal with Notre Dame, it's because we put a business model behind us that said if we really focused on this, we can make this a profitable business for us, which will make more money for Notre Dame, which will give them the resources that they need to compete at the highest level and everybody basically wins. It just means ours being really good at what we do. So whether that's Notre Dame, Jordan, Spieth, Colo, Colo or any of the assets, Tottenham Hotspur, anyone that we sign, it's about having the resources behind the initial investment to make sure that we make those resources valuable. So within that, we haven't had an instance where we believe we have to change anything about the way that we're growing.
We think we can deliver growth with the outlook that we provided at our Investor Day last June. And we expect to deliver on that going forward. But I don't think that we're not doing anything because of the commitment that we have to growth and frankly with that growth the commitment that we have to profitability.
Thanks guys. That's really helpful. I actually wanted ask one quick follow-up on your speed skating business. No, I'm just kidding. The I know it's a big business for you.
The quick question on ASPs. It seems like there's a premiumization trend going on in the marketplace in the whole kind of athletic active lifestyle space. Are you guys seeing that in your business or feeling that in the marketplace? That's my last question. Yes.
ASPs, they've been trending kind of in that mid single digit range for us over the course of the last couple of quarters or so, maybe a little below that to mid range. Again, that does go back to what you're talking about, Omar, a lot of our new innovations coming in higher price points and so forth. So, yes, we're definitely seeing some of that kind of in that 3% to 5% range over the course of the last few quarters.
But one thing we've seen too, Omar, is that discounting does not we've talked to some of our partners about that and the way it works in the market. I mean, go back to last holiday season and there was a tremendous amount of discounting happening in the marketplace. And frankly, we didn't participate. And I think we're really proud of the 35% growth that we put up in the 4th quarter. And look, weather makes us all a lot smarter.
But it wasn't a consumer coming in and just choosing price. It was that there's a consumer that needs to make a decision based on price, but there is a bit of a barbell effect that continues to take place and Under Armour continues to differentiate itself as the premium player in any market. And so, as long as we are delivering newness and innovation and whether that newness is speed form, whether it's alter ego, whether it's our ColtGear infrared, which is an incredible product if you haven't tried it when it's cold outside, whether it's our new MagZip zipper we're going to be introducing on 400,000 pieces of jackets and outerwear at the end of this year. What it effectively is, it's a zipper that is has a magnetic lock on the bottom of it that allows you to zip your jacket with one hand. And it's things like that that we need to make sure we continue to do to the market and not relying on playing the price game.
There's plenty of people doing that. So Under Armour wants to stand for innovation. We're going to stand for newness on the floor. We'll continue to give our partners reasons for their consumers, all our consumers and customers to walk into their stores and find what's next and what's the latest and greatest at Under Armour.
Thanks guys. Very helpful stuff.
Thanks very much, Omar.
All right. Thank you. And our last question is from Camilo Lyon with Canaccord Genuity.
Thanks. Good morning, guys. Also great quarter. Thanks. So Kevin, you talked you started a conversation about talking about running and the momentum you're seeing on the product side, but you also mentioned human capital.
And I think about a month ago or so, you made a pretty significant hire in Fritz Taylor. I was wondering if you could just shed some light on what you think he'll bring to the category to the business? What he can do? And where do you think he can take the business to?
Well, first of all, it's great when you have industry veterans and Kamala is referring to as Taylor, who's our new Head of Running for Under Armour, 25 plus year vet, Mizuno Brooks, Nike, and is someone who brings a really strong point of view of what the consumer is looking for. I think we're really proud specifically of footwear business overall, but running is probably the most the easiest way for us to find where are we and where are we going. So a company that started as an apparel company, I think it's taken us as we are in our 8th year in the footwear business as a whole to really find our stride as to what is the product that really comes through from Under Armour. Again, not unlike our women's business, in 2013, we finished our footwear as just under $300,000,000 in revenues. Now this year, we're north of a $400,000,000 business for footwear in 2014.
Now we've got a long way to go, but we're beginning to create some scale and will allow us to grow much faster in the future. Speed form for us was something again, this happened prior to 15 years. The most difficult thing about footwear business is the long lead time, the long time it takes to get people on board. The good news is, as excited as we are about Fripps, this is not one person. I know I think we've got 3 or 4 people coming off of non competes at the end of this month, going to be joining our offices both here in Baltimore as well as in Portland.
Every month it's like that. People are coming off the non competes and we're lucky to have put ourselves in a position where we are looking for who's someone we can hire right now, who's someone we can hire right now to getting to the ability to take the long view and saying we're going to be in this business for a long time. Dollars 300,000,000 business is going to turn those $400,000,000 business to be a $500,000,000 business with a line of sight to $1,000,000,000 And now like we said over and over again, we believe that footwear has the potential to be larger than apparel force. So within that, this is factory relationships. This is supply chain.
This is getting the right design talent on board. Which is really having, I think, the ability to develop a point of view both for our product as well as from a distribution standpoint. And beyond things like C Form, which again, we're the largest number of pairs, but it certainly articulates the point of view of our company in running what Under Armour at $100 or running shoe looks and feels like. But within that, we've also got a $70 certain 80 hour engagement, dollars 90 Spine Evo that are products that we have in the market and that we believe in. And these are price points that work within our largest distribution today, which is sporting goods.
At the same time, take a look and just go from what we're doing there. Under Armour today, as you look or think about it, we're the 6th or 7th running brand, I guess, when you look at the chart. But we're the number 2 running brand in youth. With the number 2 youth brand in footwear period, running, training, basketball, kids love our product. And so we have a consumer who is demanding us and who we're willing to grow old with.
And frankly, as they're 9 today, we have 6 years to deal with them until they're 15 16 years old and continue to improve and enhance the product and enhance the team. And within that, what we're doing, I think the way that we're showing up on field, our baseball business, our football business, the oldest business, the longest football business that we've been in, are continuing to do well, continue to bring innovation like highlight, And then you take something And then you take something from a little more serious standpoint is like sport of basketball, which we've been pinned on since we entered basketball in 2011 and believing that we have an incredible opportunity there, we found a game changer in Stephen Curry and someone that we believe can really be a difference maker for our brand. And we're seeing that through little small things like exclusive colorways that we're doing at some of our key partners like Foot Locker and Finish Line, where they're blowing out and these are several units, but they're blowing out in a matter of minutes selling online and other things to these player exclusives. So we are finding and we're doing the work to figure out how to crack the code, but we believe that we've got a lot of momentum going in the right direction.
And I want the world to know that becoming great and running with things like the SpeedForm platform leading the way, continue to find the sweet spot within our existing wholesale sporting goods distribution and find a development mix that we have to make ourselves important in our key mall partners. We're down this road. We're on it every day. We've got great people that we're not making the calls or having to make the calls. There's people coming to us and saying, I want to be a part of what's being built at Under Armour.
So I think the energy, the heat, the momentum is there. It's just a matter of our execution and I feel pretty good about the team that we have in place to make that happen.
Great. And then just my final question for Brad. Brad, just on the guidance and how to think about the clear deceleration that you're talking about here in Q2 and Q3. Could you just help
us understand, why the strength that we've been
seeing in Q4 on understand why the strength that we've been seeing in Q4 on the top line and now in Q1 should not continue into Q2 and Q3? And then just finally on the Q4, could you remind us what you think the benefit from what it was in the Q4 of 2013? And because that seems to be the tougher comparison of the business.
So if
you could just provide some color on that that would be great.
Sure. As far as the flow from the Q1 to the 2nd quarter, there's a couple of things going on there. One, there was there's just some timing in the quarters on the seasonal basis front half of the year in some of our business. So footwear and international, we're seeing stronger growth in Q1 versus Q2 and it's just a timing issue in the season. Both of those businesses obviously are going to have strong growth rates for the full year, but a little more escalated in Q1 versus Q2.
So that's part of it. Also in the Q2, if you recall last year, we kind of relaunched our bag business with better margin product in the Q2 of last year. So that will be the Q1 that we're comping that over the last 4th quarter. So we had a little bit of a benefit there in Q1 of comping a bagged business where we're kind of pulling back last year in anticipation of our relaunch in Q2. In the supply chain performance, which I talked about earlier, Q1 is probably the last quarter some pretty decent year over year comparisons just in performance of how we're getting product to the retail floor.
By the time we get the Q2, we start to see a little bit tougher comps against that as we started doing much better than that last year in Q2. So those three things are why you're seeing some of the growth from Q1 to Q2 changes in Q2. As far as the back half of the year, a couple of things in Q4. You mentioned the weather that was definitely one thing you were taking into consideration. I believe in our last earnings call at the end of January, we talked about Q4 and the impact of weather in our strong growth rate in Q4 last year.
It's really tough to say how that impacts your business. We said it could have had an impact of a couple of percentage points possibly of the growth rate in Q4 last year by having a cold winter in Q4. Also, I think when you look at the Q4, it's important to note how we're looking and how we're approaching planning our direct to consumer business. 40% of our direct to consumer business for the whole year was sitting in the Q4 of last year. So DTC is huge in the Q4 for us.
Obviously, weather played a part in that last year in Q4, but we do have some nuances there also as you look to the Q4 of this year versus last year. In Q2 and Q3, we're actually we have a positive comp on 2 new stores in Q2 and Q3 with New York opening today and Tysons Corner being opened where it wasn't opened last year. As we get to the Q4, we just have a positive one store comp there with New York in the Q4 because Tysons was opened by then. We also have just square footage growth in factory house. We've talked about the door count growth going down and we start to focus more on square footage growth.
The reality in total when you look at new doors and square footage growth, last year in the back half of the year, we were up in the upper 20s as far as square footage growth. In factory house for this year, we're kind of being more down the low teens. So that's obviously impacting especially in Q4 where a lot of our DTC business sits. So our approach to the Q4 right now for this year is, we don't want to approach it like the weather will be a tailwind like it was for us last year. We don't want to approach it that the strength we saw in DTC last year will necessarily be duplicated this year.
That doesn't mean that we're not putting ourselves in a position if those two things turn into tailwinds for us that we can't deliver on it. We are definitely putting ourselves in position we can deliver if things work in our favor. But as far as how we're approaching the plan right now in our guidance, not assuming as much of that in our current guidance.
So to be clear, you will have the ability to chase product and go after more sales if those headwinds that you're planning for become tailwinds?
Yes. Yes. We're putting ourselves in a position if weather is cold again this Q4, we're putting ourselves in a position to be able to deliver And we're also putting ourselves in a position to DTC overdrive like it did last year. We're putting ourselves in a position to be able to deliver. But we want to be very careful obviously in how we approach that relative to our guidance and our expectations.
Sounds prudent. Thanks a lot and good luck for the rest
of the year guys.
Thanks, Dylan. Thanks, Drew.
Joe. Thanks, Jeff, for everybody joining us
on the call today. We look forward to reporting you our Q2 of 2014 results, which tentatively have been scheduled for Thursday, July 24 at 8:30 am Eastern Time. Thanks again and goodbye.
Thank you. Ladies and gentlemen, this does conclude the program. Thank you for participating in today's conference. Everyone have a great day.