Under Armour forecast a surprise drop in annual sales and projected profit below analysts’ estimates on Thursday, as the sportswear maker laid out a plan to simplify its business and cut jobs in the face of weak demand in the US.
The company said it looks to “meaningfully reset” business in North America, its biggest market, and reverse impact from years of heightened promotions and inflated inventories.
“Too many areas of our product strategy have been designated as priorities. This has caused operational inefficiency and a strain on resources, which has diluted our ability to have a consumer-centric point of view,” founder Kevin Plank, who returned to the role of CEO in April, said on a post-earnings call.
As part of the restructuring plan, the company expects to incur total pre-tax charges of up to $90 million, including employee severance costs.
It, however, did not disclose how many jobs would be affected.
The company also said it would work to drive a more premium assortment in its direct-to-consumer channel.
“The magnitude of the correction needed points to a prior strategy that had not been working. The brand’s transformation is also expected to take 18 months, longer than anticipated,” said Telsey Advisory Group analyst Cristina Fernandez.
Shares of the company were marginally up, with some analysts being optimistic about Plank’s new plan.
“We are encouraged by management’s change in tone to elevate the brand by containing revenues,” BMO Capital Markets analyst Simeon Siegel wrote in a note.
The company’s weak projection echoed disappointing forecasts from sportswear peers Nike and Lululemon Athletica.
Under Armour expects fiscal 2025 revenue to be down at a low double-digit percentage rate, while analysts expect a 2.1% rise, according to LSEG data.
It also sees earnings to be between 18 cents and 21 cents per share, below estimates of 59 cents.
The company, however, beat estimates for the fourth quarter.
