Kevin Plank is looking to rebuild at Under Armour Inc. — and he has plenty of work to do with a new restructuring plan and sales in North America expected to fall by up 17 percent this year as the company reins in promotions.
Investors sent shares of the company down 9.8 percent to $6.01 in premarket trading on Thursday.
Under Armour’s fourth-quarter net income tallied $6.5 million in the fourth quarter, down from earnings of $170.6 million a year earlier. Still, adjusted earnings per share of 11 cents came in better than the 7 cents analysts were projecting, according to Yahoo Finance.
Revenues for the three months ended March 31 slipped 4.7 percent to $1.33 billion from $1.4 billion.
Kevin Plank, Under Armour’s founder, who stepped back in as president and chief executive officer in March, said: “Amid a challenging retail environment in fiscal 2024 that included high inventories and a consistent drumbeat of promotions — we demonstrated disciplined expense control and delivered results that were aligned with our previous outlook. We also maintained a strong balance sheet, closing the year with a solid cash position and healthy inventory levels.”
But the company is looking at bigger changes going forward, with a restructuring that will lead to pre-tax charges $70 million to $90 million, including the cost of severance and “various transformational initiatives.”
“Due to a confluence of factors, including lower wholesale channel demand 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 pressure our top and bottom line in the near term,” Plank said. “Over the next 18 months, there is a significant opportunity to reconstitute Under Armour’s brand strength through achieving more by doing less and focusing on our core fundamentals: driving demand through better products and storytelling, running smarter plays like simplifying our operating model and elevating our consumer experience. In parallel, we’re focused on cost management and implementing the strategies necessary to grow our brand and improve shareholder value as we move forward.”
This year, Under Armour expects revenues to drop in the low double-digit range, with a 15 percent to 17 percent drop in North America as “the company works to meaningfully reset this business following years of heightened promotional activities, particularly in its DTC business.”
Adjusted earnings per share are expected to tally 18 cents to 21 cents, well below the 59 cents analysts forecast on average.
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