under armor announced Thursday that sales in its largest market, North America, are down 10%, a trend that is expected to worsen throughout the year, and announced major restructuring plans.
The sports apparel retailer saw its profits drop more than 96% during its fourth quarter fiscal period compared to the same period last year.
It’s unclear how many employees Under Armor will lay off as part of this plan. However, the plan is expected to cost between $70 million and $90 million, some of which will go toward employee retirement and benefit costs. The company declined to share further information with CNBC about the restructuring.
The company’s shares initially fell by double digits in premarket trading after the earnings release, but rebounded after the company held an earnings conference with Wall Street analysts. The stock closed down more than 1%.
Here’s how the sports apparel retailer’s fiscal fourth-quarter results compare to Wall Street expectations, based on a survey of analysts by LSEG.
- Earnings per share: 11 cent adjustment vs. Expected 8 cents
- Revenue: $1.33 billion vs. $1.33 billion expected
The company reported net income of $6.6 million, or 2 cents per share, for the three months ended March 31, compared with $170.6 million, or 38 cents per share, in the year-ago period. Excluding one-time items, the company reported earnings of 11 cents per share.
Sales were $1.33 billion, down about 5% from $1.4 billion in the same period last year.
According to Street Accounts, North American sales for the quarter fell 10% to $772 million, below analysts’ expectations of $780 million.
Under Armor said it expects sales in North America to continue to deteriorate. The company expects a decline of 15% to 17% this fiscal year.
“Due to a combination of factors including lower demand in our 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 brands. “This will put pressure on our sales and earnings in the near term,” founder and CEO Kevin Plank said in a statement.
“Over the next 18 months, we have a significant opportunity to rebuild the Under Armor brand by doing more with less and focusing on our core fundamentals,” he added.
For Under Armor’s overall business, analysts expected sales to increase 2.1%, while the company expects sales to decline “at a low double-digit percentage” this fiscal year, according to LSEG. Expect.
The company plans to reduce promotions and discounts, which it expects to increase its gross profit margin by 0.75 to 1 percentage point this fiscal year.
The company expects full-year diluted earnings of 2 cents to 5 cents and adjusted diluted earnings of 18 cents to 21 cents. Analysts had expected earnings of 52 cents per share, according to LSEG.
Under Armour’s tough quarter comes after the company announced that former Marriott executive Stephanie Linnertz would step down as CEO after just a year on the job and retake the helm of the company Plank founded in 1996. It happened two months later.
Linnertz is the second CEO the company has replaced in less than two years.
On a conference call with analysts, Plank was candid about what went wrong at Under Armour. He pointed to inconsistent leadership as one of the main problems.
“With multiple CEO and product, marketing and North American leadership changes over the past five years, we continue to experience significant leadership changes that prevent us from remaining agile and decisive,” Plank said. said.
Linnertz was hired on a bet that his experience building Marriott’s famous Bonvoy loyalty program and driving digital revenue for the hotel giant would make up for his lack of retail experience. Prior to her retirement, she undertook an overhaul of Armor’s executive leadership and successfully built a loyalty program. She is pivoting her brand’s range to more athleisure-focused products that offer more stylish options for women, who tend to spend more on clothes and shoes than men. did.
Now Planck is trying to undo some of that work. He told analysts that the company had “taken its eye off” from its core men’s wear business, which would have a “significant impact” on brand perception and lead to the brand becoming “more promoted and commoditized.” He said it happened.
“We’re going to fix this,” Plank said. “This focus does not mean we deprioritize our footwear or our women’s business itself, but from a sequencing standpoint, men’s apparel is our top priority.”
As Plank looks to rebuild the business, Under Armor plans to reduce the number of styles by about 25% over the next 18 months and reduce the time it takes to get products from idea to showroom floor, he said. . He aims to streamline the process so that it only takes six to 12 months instead of the current 18 months, but he says the system is “completely uncompetitive in 2024 conditions.”
The complete restructuring will streamline Under Armor’s entire business, reducing silos and ensuring that every staff member’s work directly contributes to its primary goal: “Sell more shirts and shoes.” focus on.
“We’re just doing too much. Too many products, too many initiatives, too much,” Plank said. “Rebuilding this brand requires a lot of focus and prioritization so that the team has a clear definition of success.”
Please read the full financial results release here.
