Under Armor clothing goes on sale at a store in Manhattan, New York City, February 7, 2022.
Andrew Kelly | Reuters
Under armor announced a broad restructuring plan on Thursday as sales in its largest market, North America, fell 10% and predicted the trend will worsen during the current fiscal year.
The sportswear retailer also saw profits fall more than 96% during its fiscal fourth quarter, compared to the same period a year ago.
It's unclear how many employees Under Armor will lay 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 employee severance and benefits. The company declined to share more information with CNBC about the restructuring.
Shares fell about 10% in premarket trading.
Here's how the sportswear retailer fared in its fourth fiscal quarter, compared to what Wall Street expected, based on a survey of analysts by LSEG:
- Earnings per share: 11 cents adjusted versus 8 cents expected
- Revenue: $1.33 billion vs. $1.33 billion expected
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 year earlier. Excluding one-time items, the company reported earnings of 11 cents per share.
Revenue fell to $1.33 billion, down about 5% from $1.4 billion a year earlier.
During the quarter, North America sales fell 10% to $772 million, worse than the $780 million analysts expected, StreetAccount said.
The company said it expects sales in North America to continue to deteriorate. The company expects these to fall between 15% and 17% in the current financial year.
“Due to a confluence of factors, including lower demand from the wholesale channel 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 drive our revenue and will put pressure on profits in the near future. term,” said founder and CEO Kevin Plank in a statement.
“Over the next 18 months, there is a significant opportunity to restore Under Armor's brand strength by achieving more, doing less and focusing on our core fundamentals,” he added.
For Under Armor's business, the company expects sales to decline “by a low double-digit percentage” in the current fiscal year, while analysts had expected sales to grow 2.1%, according to LSEG.
The company plans to cut back on promotions and discounts, which is expected to increase gross margin between 0.75 and 1 percentage point this fiscal year.
Diluted earnings per share are expected to be between 2 cents and 5 cents and adjusted diluted earnings per share for the year 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 tough quarter comes about two months after the retailer announced that former Marriott executive Stephanie Linnartz would step down from her role as CEO after just a year in the job and Plank would once again take the helm of the company he founded in 1996.
Linnartz was the company's second CEO in less than two years.
She was hired on the bet that her experience building Marriott's renowned Bonvoy loyalty program and driving digital revenue for the hotel giant would make up for her lack of retail experience. Prior to her departure, she managed to overhaul Under Armor's C-suite and build out its loyalty program. She sought to pivot the brand's range to a more athleisure-focused offering with more stylish options for women.
Ultimately, she was deposed before those plans could come to fruition. Following the announcement of Linnartz's departure, a number of analysts downgraded Under Armor and lowered their price targets. The company's shares are down about 23% year to date, as of Wednesday's close.
Read the full earnings release here.
