Under Armour announced a serious restructuring plan on Thursday as sales fell 10% in its largest market, North America, and predicted the trend would worsen in the present fiscal 12 months.
The sportswear retailer also reported a profit decline of greater than 96% in its fourth fiscal quarter in comparison with the identical period last 12 months.
It’s unclear what number of employees Under Armor will lay off consequently restructuring, however the plan is predicted to cost between $70 million and $90 million, a part of which can be used for worker severance and advantages. The company declined to supply CNBC with further details about its restructuring.
The company’s shares fell greater than 2% in morning trading.
Here’s how the athletic apparel retailer performed in comparison with Wall Street’s expectations in its fiscal fourth quarter, based on an analyst survey from LSEG:
- Earnings per share: 11 cents adjusted vs. 8 cents expected
- Revenue: $1.33 billion versus expected $1.33 billion
The company’s reported net income for the three-month period ended March 31 was $6.6 million, or 2 cents per share, compared with $170.6 million, or 38 cents per share, a 12 months earlier. Excluding one-time items, the corporate reported profit of 11 cents per share.
Revenue fell to $1.33 billion, down about 5% from $1.4 billion a 12 months ago.
According to StreetAccount, North American sales fell 10% to $772 million throughout the quarter, greater than the $780 million expected by analysts.
Under Armor said it expects North American sales to proceed to deteriorate. For the present financial 12 months, the corporate expects a decline of between 15% and 17%.
“Due to a mixture of things, including lower demand for wholesale channels and inconsistent execution across our business, we’re using this critical moment to make proactive decisions to construct premium positioning for our brand, which can put pressure on our business within the near future sales and profit margins will exercise tenure,” said founder and CEO Kevin Plank in a statement.
“Over the subsequent 18 months, there may be a major opportunity to revive Under Armor’s brand strength by achieving more, doing less and specializing in our core competencies,” he added.
Across Under Armour’s entire business, the company expects a sales decline “within the low double-digit percentage range” for the current fiscal year, while analysts had expected sales growth of 2.1%, according to LSEG.
The company plans to limit promotions and discounts, which is expected to increase gross margin by 0.75 to 1 percentage point in the fiscal year.
For the year, diluted earnings per share are expected to be between 2 cents and 5 cents and adjusted diluted earnings per share are expected to be between 18 cents and 21 cents. Analysts had expected earnings per share of 52 cents, according to LSEG.
Under Armour’s difficult quarter comes about two months after the retailer announced that former Marriott executive Stephanie Linnartz would step down from her role as CEO after barely a year on the job and Plank would return to lead the company he founded in 1996 .
Linnartz was the second CEO the company has gone through in less than two years.
She was hired on the bet that her experience building Marriott’s renowned Bonvoy loyalty program and driving digital sales for the hotel giant would make up for her lack of experience in the retail industry. Before her departure, she managed to overhaul Under Armor’s leadership team and expand its loyalty program. She sought to shift the brand’s lineup to a more athleisure-focused offering that offered more stylish options for women.
Ultimately, she was ousted before those plans could come to fruition. Following the announcement of Linnartz’s departure, several analysts downgraded Under Armor and lowered their price targets. Shares of the company were down about 23% year to date as of Wednesday’s close.
Read the full earnings release Here.
