Less than two months after Under Armour founder Kevin Plank took back over as CEO, the company launched a restructuring expected to include layoffs and other moves to elevate the brand and make the company more efficient.
The plan, approved by the Baltimore-based sports apparel and footwear brand’s board, is expected to cost an estimated $70 million to $90 million in pre-tax restructuring and related charges, the company said Thursday.
Details about the layoffs were not included in the initial announcement or discussed during a morning conference call. Under Armour declined to comment about possible layoffs locally. The company said it employs about 15,000 globally. According to the Maryland Department of Commerce, it employed more more than 1,800 people in Baltimore in 2023.
Under Armour announced the restructuring, its second since 2017, as it reported that sales in its fourth quarter ended March 31 declined 5%, to $1.3 billion, in line with Wall Street’s expectations, and warned of additional sharp drops in revenue ahead in its U.S. market.
Shares of Under Armour, which have languished around or under $10 a share since early 2022, edged up 2 cents to $6.82 each by early afternoon.
The company reported income of $6.57 million, or 2 cents per share, for the January-to-March period, compared with $179 million, or 38 cents per share, a year earlier. On an adjusted basis, earnings were 11 cents per share, beating analysts’ estimates of 8 cents per share.
Plank blamed factors such as lower wholesale demand and “inconsistent execution” across the business and said that over the next 18 months the company will focus on managing costs and boosting the brand and shareholder value.
“We are simply doing too much stuff,” Plank said during the call. “There are too many products, too many initiatives, too much of too much. We must be highly focused and prioritize what needs to get done.”
During his time as executive chairman and largely not involved in day-to-day decisions, he said, the industry has been roiled by a global pandemic, intense competition and shifts in consumer shopping behavior. Beyond that, the sports apparel maker has failed to consistently deliver on its goal of becoming the top athletic brand of choice, he said.
The company has struggled with a lack of continuity in execution and seen turnover in various leadership roles. And over the past four years, it has become “overly siloed and bureaucratic with competing internal agendas,” Plank told analysts.
“In our largest [U.S.] market, we have become a brand that competes primarily on price, versus our core competency which is performance and technical innovation, an aspect of UA that has frankly gone untold for too long,” he said.
The new turnaround plan will build on Under Armour’s reputation as a “podium brand,” with 1,900 retail stores, one of three or four athletic brands with global recognition, and focus on creating the best athletic performance products, the CEO said.
Over the next year and a half, the sports apparel maker plans to reduce product assortments by about 25%, especially of discounted items, and speed up time it takes to create new products and get them to market, aiming for as fast as six months. Additionally, customers can expect to see more descriptive tags on apparel and footwear in stores, describing what the merchandise does and how it improves athletic performance, Plank said.
Streamlining also will mean reducing the number of outside agencies, consultants and experts the brand relies on, especially in marketing, he said.
In a broad shift from previous strategies, Under Armour intends to turn its attention back to its core men’s apparel segment. That business, Plank said, has become overly promotional, hurting brand reputation.
“We will rectify this,” he said. “This focus does not mean we are de-prioritizing our footwear or women’s business per se, but from a sequencing perspective, men’s apparel will be our highest priority.”
Resetting the brand to a more premium position and narrowing the focus to core fundamentals could prove a significant catalyst over the long term, said Sharon Zackfia, an equity analyst with William Blair, a Chicago-based global investment bank.
But “the reality is that this will take time to unfold … and the reset of the business takes away what had appeared to be a fairly compelling valuation that we thought would limit stock downside,” Zackfia said in a report Thursday.
The analyst downgraded Under Armour’s stock to market perform, pending an indication that it will return to growth.
“Risks include Under Armour’s ability to maintain and evolve a strong brand image and product portfolio in an industry with intense competition, historically high turnover rates in senior management, and majority voting control held by CEO Kevin Plank,” Zackfia said in the report.
Under Armour said Thursday it expects revenue to be down at a low-double-digit percentage rate in its fiscal 2025. Much of that is expected to be driven by a 15% to 17% percent decline in the company’s largest U.S market as it works to reset business after years in a heightened promotional climate.
The restructuring will include up to $50 million in cash-related charges, consisting of about $15 million in employee severance and benefits costs, and $35 million related to “transformational initiatives.”
It also includes up to $40 million in non-cash charges, with about $7 million in employee severance and benefits costs and $33 million in facility, software and other asset-related charges, Under Armour said.
Under Armour’s board also has authorized the repurchase of up to $500 million of outstanding Class C common stock. Repurchases under the program can be made over the next three years.
