Under protection announced a sweeping restructuring plan on Thursday, announcing that its sales in its largest market, North America, had plunged 10% and forecasting the trend would worsen throughout the current fiscal year.
The sportswear retailer also saw profits fall more than 96% during its fiscal fourth quarter, compared to the year-ago period.
It is unclear how many Under Armor employees will be laid off as part of the restructuring, but the plan is expected to cost between $70 million and $90 million, some of which will be used for severance and employee benefits. The company declined to share more information with CNBC about its restructuring.
The company’s shares initially plunged double digits in premarket trading following the release of its earnings report, but then rebounded after the earnings conference call with Wall Street analysts. Shares closed down more than 1%.
Here’s how the sportswear retailer performed in its fiscal fourth quarter compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: 11 cents adjusted against 8 cents expected
- Income: $1.33 billion versus $1.33 billion expected
The company’s reported net income for the three months ended March 31 was $6.6 million, or 2 cents per share, compared with $170.6 million, or 38 cents per share, a year earlier. . Excluding one-time items, the company reported earnings of 11 cents per share.
Sales fell to $1.33 billion, down about 5% from $1.4 billion a year earlier.
During the quarter, sales in North America fell 10% to $772 million, worse than the $780 million analysts expected, according to StreetAccount.
Under Armor said it expects its sales to continue to deteriorate in North America. The company expects a decline of between 15 and 17 percent in the current fiscal year.
“Due to a confluence of factors, including a decline in demand from wholesale channels and inconsistent execution across our business, we are seizing this critical moment to make proactive decisions to build a premium positioning for our brand, which will put pressure on our bottom line and results in the short term. term,” founder and CEO Kevin Plank said in a statement.
“Over the next 18 months, there is a significant opportunity to rebuild the strength of the Under Armor brand by doing more, doing less and focusing on our core fundamentals,” he added.
For Under Armor’s overall business, the company expects revenue to decline “at a double-digit rate” in the current fiscal year, while analysts expected sales growth by 2.1%, according to LSEG.
The company plans to reduce promotions and discounts, which is expected to increase its gross margin by between 0.75 and 1 percentage point for the fiscal year.
It expects 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. Analysts were expecting earnings per share of 52 cents, according to LSEG.
Under Armour’s tough quarter comes about two months after the retailer announced that former Marriott executive Stephanie Linnartz would step down as CEO after barely a year on the job and that Plank would once again take the helm. company he founded in 1996.
Linnartz was the second CEO the company had in less than two years.
On a call with analysts, Plank was candid about the problems Under Armor is facing. He highlighted inconsistency in leadership as one of the main problems.
“With multiple CEOs and heads of product, marketing and North America over the past five years, the continual turnover of critical leaders has been at the heart of our inability to remain agile and decisive,” Plank said.
Linnartz was hired with a bet that her experience building Marriott’s popular Bonvoy loyalty program and generating digital revenue for the hospitality giant would make up for her lack of experience in the retail industry. Before her departure, she managed to overhaul Under Armour’s C-suite and grow its loyalty program. She was attempting to pivot the brand’s assortment toward a more athleisure-focused offering with sleeker options for women, who tend to spend more on clothing and shoes than men.
Plank is now seeking to undo some of that work. He told analysts the company had “taken our eyes off” its core menswear business, which had “significantly impacted” the brand’s perception and caused it to become “more promotional and trivialized.”
“We’re going to fix this,” Plank said. “This focus doesn’t mean we’re deprioritizing our footwear or women’s business per se, but from a sequencing perspective, men’s wear will be our highest priority.”
As Plank tries to revive the business, he said Under Armor plans to reduce its number of styles by about 25% over the next 18 months and reduce the time it takes to move a product from an idea to an exhibition hall. He aims to streamline the process so that it only takes between 6 and 12 months instead of the current 18 months – a system he called “simply uncompetitive in the 2024 landscape”.
The comprehensive restructuring will focus on streamlining Under Armour’s overall business, reducing silos and ensuring that each employee’s work directly contributes to its core purpose: “Sell More Shirts and Shoes.”
“We’re just doing too much. There are too many products, too many initiatives, too many,” Plank said. “To rebuild this brand, we need to be very focused and prioritize what needs to be done so our teams know exactly what to do with a clear definition of success.”
Read the full earnings release here.
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