Baltimore, Maryland – Athletic apparel retailer Under Armour is facing a significant restructuring plan that is expected to result in employee layoffs and cost between $70 million and $90 million. The company has not disclosed the exact number of employees affected, but a portion of the funds will go towards employee severance and benefits.
Following the announcement of the restructuring plan, Under Armour’s shares experienced a significant drop of about 10% during premarket trading. The company’s performance in its fourth fiscal quarter was closely watched by Wall Street analysts. They were surprised by the company’s results compared to their expectations.
During the quarter ending on March 31, Under Armour reported a notable decline in net income and sales. The company’s net income was $6.6 million, down from $170.6 million the previous year. Sales also dropped to $1.33 billion, a 5% decrease from the previous year’s $1.4 billion.
Sales in North America were particularly concerning, dropping by 10% to $772 million, missing analysts’ expectations. Under Armour anticipates that sales in North America will continue to decline, projecting a 15% to 17% decrease in the current fiscal year.
Founder and CEO Kevin Plank expressed the company’s proactive approach to facing challenges and emphasized the importance of rebuilding the brand’s strength. Under Armour is expecting a decrease in revenue for the current fiscal year, contrary to analysts’ expectations of sales growth.
To offset the sales decline, the company plans to reduce promotions and discounting, aiming to improve its gross margin. Under Armour expects diluted earnings per share to be between 2 cents and 5 cents, while adjusted diluted earnings per share are projected to be between 18 cents and 21 cents for the year.
The restructuring comes on the heels of leadership changes at Under Armour, with former CEO Stephanie Linnartz stepping down after a short tenure and Plank resuming his role as CEO. Linnartz’s departure followed strategic initiatives aimed at reshaping the brand’s image and product offerings.
Despite challenges and changes in leadership, Under Armour remains focused on building a stronger brand presence and adapting to shifting market trends. The company’s performance in the upcoming months will be crucial in determining its future trajectory in the competitive athletic apparel industry.