Under Armour to Cut Jobs as Retailer Anticipates Decrease in North America Sales

Under Armour announced a broad restructuring plan due to declining sales in its largest market, North America, where sales dropped by 10% during the fourth fiscal quarter. Profits also plunged by more than 96%, prompting the company to predict further declines throughout the current fiscal year. The restructuring plan is expected to cost between $70 million and $90 million, but specific details were not provided by the company. Shares of Under Armour dropped about 10% in premarket trading following the earnings report, which showed earnings per share of 11 cents adjusted vs. the expected 8 cents and revenue of $1.33 billion in line with expectations.

The company’s reported net income for the fourth quarter was $6.6 million, or 2 cents per share, compared to $170.6 million, or 38 cents per share, a year earlier. Sales dropped to $1.33 billion, down 5% from $1.4 billion in the prior year, with North American sales falling 10% to $772 million. Under Armour anticipates a further decline in sales in North America, expecting a drop between 15% and 17% in the current fiscal year. CEO Kevin Plank acknowledged the company’s challenges, attributing them to lower wholesale channel demand and inconsistent execution across the business. He emphasized the need to build a premium brand positioning by making proactive decisions to improve overall business performance.

Across the business, Under Armour anticipates a low-double-digit percentage decrease in revenue for the current fiscal year, with plans to reduce promotions and discounting to improve gross margins. The company is expecting diluted earnings per share to be between 2 cents and 5 cents, and adjusted diluted earnings per share to be between 18 cents and 21 cents for the year. These numbers are significantly lower than analyst expectations, which had anticipated earnings per share of 52 cents. Under Armour is focused on reconstituting its brand strength by refocusing on core fundamentals and reducing business complexity over the next 18 months.

Two months prior to the announcement of the restructuring plan, former Marriott executive Stephanie Linnartz stepped down as CEO of Under Armour after less than a year in the role. Linnartz was the second CEO the company had gone through in under two years, and her departure led founder Kevin Plank to once again take on the role of CEO. Linnartz had sought to pivot the brand’s offering towards a more athleisure-focused assortment with stylish options for women, but was ousted before her plans could be fully implemented. Following her departure, analysts downgraded Under Armour and lowered their price targets, leading to a 23% decline in the company’s shares year-to-date.

In conclusion, Under Armour’s fourth fiscal quarter was marked by significant declines in sales and profits, prompting the company to announce a restructuring plan to address the challenges it faces, particularly in the North American market. The company’s new CEO, Kevin Plank, is focused on repositioning the brand for long-term success by simplifying operations, reducing discounting, and reestablishing a premium positioning. Despite the current difficulties, Under Armour remains optimistic about its future prospects and is taking proactive steps to improve its financial performance and brand strength in the coming months.