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Kroger Co. (KR)
March 12, 2013 11:00 am ET
Brad Dickerson - Chief Financial Officer and Principal Accounting Officer
Robert F. Ohmes - BofA Merrill Lynch, Research Division
Robert F. Ohmes - BofA Merrill Lynch, Research Division
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Thanks, Robbie. Great to be back here at the Bank of America Consumer & Retail Conference. I'm Brad Dickerson, the CFO of Under Armour. And the usual Safe Harbor language. There's lot going on with our company since we spoke here a year ago, and to fully get into it, the details of it, let's start the way we always do, showing our brand in action with many of our athletes and -- who our part of our brand. So let's get the heart pumping a little bit here with what we call, the voice of our brand.
Great. Everybody awake? So we've been at this for 17 years now. Fundamental mission has not changed, to make all athletes better. This was the genesis of the brand from the original compression shirt back when we started, and it continues today with our most recent innovations, Spine, Armour39, and this fall's ColdGear infrared, all of which we'll speak about in a little more detail later on.
Our 5 growth drivers have been a consistent message since we went public back in 2005: Men's apparel, Women's apparel, footwear, Direct-to-Consumer and international. Apparel and Direct-to-Consumer have been the big driver in recent years, including growth of 23% and 34%, respectively, in 2012. Footwear is on the cusp but is expected to drive more dollar growth the next couple of years. And we are laying the foundation in international and believe the opportunities are significant beyond 2015.
These multiple growth levers give us confidence on our long-term growth goal of 20%, 25% per year. Before we get to the detail of each of these growth drivers, let's first speak about innovation, which is a big driver of all the product categories for us.
We started with a simple message, wear HeatGear when it's hot, ColdGear when it's cold.
Our brand created today's $3 billion plus synthetic apparel market in the United States. The product has evolved. Compression during our IPO year of 2005 represents 64% of our apparel mix. Today, it's down to just 14%. In conjunction with evolving our fit profile for all athletes, we have ramped our efforts in innovation. In 2011, we launched Charged Cotton and Storm, a combined $65 million in business for us in 2011.
In 2012, we expanded those platforms, including Storm across our Armour Fleece line, and we launched new innovation like Spine and ColdBlack.
In 2013, Charged Cotton and Storm will approach $200 million each, and we're also debuting several new product categories like Armour39 and ColdGear Infrared. Let me start with Armour39, which is in the presale right now and will be officially available next month. This is our performance monitoring system that allows athletes, all sports, to measure, track and analyze the data that matters most. 4 unique measures: heart rate, calories, intensity and our proprietary measure of willpower. So I have a video here which real quick will talk about our Armour39 product.
Our big innovation story for the back half of this year is ColdGear Infrared, inspired by the stealth bomber in its use of ceramic. The technology is designed to keep athletes warmer longer. We use a ceramic infused ink that is applied to the product much like a graphic T-shirt would be -- would work. The added properties allow generated heat to be transferred throughout the product and stored much like a cup of coffee to some degree. Importantly, this innovation does not add weight to the product, does not sacrifice moisture management or how the impact -- how the fabric feels on the body. Here's another quick video on ColdGear Infrared.
So innovation will flow through our growth drivers and will be a key to our success in 2013 and beyond. So let's look at some of our growth drivers we talked about at the beginning of the presentation. First, our Men's apparel business. Key focus this year is on injecting newness across our platforms. Our product HeatGear Sonic is coming out, enhanced design, lightweight, better performance than our current products out there. Also leveraging some of our marketing platforms like the NFL Combine to get some of our innovation stories out there like Armour39, and obviously, bringing an inclusive line of product to our athletes. In some of our retail channels and at Dick's Sporting Goods, we have a retail exclusive with a lot of our NFL Combine product, for instance. On the Women's side of our business, it was 20% of our apparel business back in 2005, Women's. Today, it's approaching 30% of our apparel business, and obviously, an overall growing business in the company. Growth despite headwinds.
If you think about our brand over the last few years, 5, 6 years ago, we still had a lot of men designing women's product in our building. Happy to say now, we only have women designing women's product in our building. Also, a big cultural change over the last few years. With performance, it was always kind of the focus of our brand in total, and then everything was about performance. But sometimes, we ignored how things -- how they looked, the fit, the design of the product at the expense of performance. So in the last couple of years, a lot more focus on not just performance, our product must perform, it's the nucleus of our brand, is performance, but a lot more focus on the balance of design and fit and patterns and how it looks, especially in our Women's business, it's really important. Distribution challenge is relative, too. We've been very focused on sporting goods, which has been a very powerful driver for us, but the knowledge that -- and that's not the only place she shops for performance athletic wear. So places like department stores and mall and our own Direct-to-Consumer is a way to get to a consumer we couldn't get to in the past would be really, really important. We also added some executive creative director leadership. This year, Leanne Fremar comes from 10 years at Theory and will be opening up a design center here in New York City. The idea around this, not just on the Women's side of the business, though that's what the focus will be, but our overall business is to go where the design talent is. So a barrier for our company in the past has been the idea of trying to move people from New York City or Los Angeles to Baltimore. People want to come work for Under Armour, but they don't want to move to some degree. So this removes that barrier to some degree, where now we can go to where the talent is, and New York City has some of the best design talent in the world. It removes that barrier, it enables us to get that talent in house and utilize that talent. So Leanne will be running this office up here in New York, get the best talent and continue to drive our Women's business will be really important for us.