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Under Armour to lay off staff as sales continue to fall

May 24, 2024 United States
Under Armour to lay off staff as sales continue to fall
The Baltimore-based company has launched a restructuring plan for fiscal 2025, which includes the layoffs of an unspecified number of employees, after reporting weak fourth quarter and full year results
“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”, commented Under Armour President and CEO Kevin Plank.


Fourth Quarter Results

In the three months to the 31st of March, the company’s revenue declined by 5% on a reported and currency-neutral basis to 1.3 billion US dollars, as compared to the same period of last year.

By region. On a comparable basis to the fourth quarter of fiscal 2023, Under Armour’s revenue in North America totalled 772 million US dollars, down by 10%, while international revenue reached 561 million US dollars, up by 7% or 6% on a currency-neutral basis.

Turning to the distribution channel. In the first quarter of the previous fiscal year, the company’s wholesale revenue decreased by 7% to 850 million US dollars and direct-to-consumer revenue was flat at 455 million US dollars, as compared to the same prior year period. E-commerce revenue decreased by 8%, accounting for 43% of the total direct-to-consumer revenue.

Finally, Under Armour’s fourth quarter apparel revenue was 877 million US dollars, down by 1% year-over-year, footwear revenue was 338 million US dollars, down by 11% year-over-year, and accessories revenue was 89 million US dollars, down by 7% year-over-year.

In the three months to March, the sportswear company’s gross margin improved by 170 basis points to 45.0%, mainly due to supply chain efficiencies lowering freight and product costs. This gain was partially offset by strategic inventory management, including promotions in the direct-to-consumer channel.

In the fourth quarter of fiscal 2024, Under Armour’s net income decreased by 96% year-over-year to 7 million US dollars (or 0.02 US dollars per diluted share) from 171 million US dollars (or 0.38 US dollars per diluted share) in the same period last year. 

Adjusted net income also declined significantly, dropping to 49 million US dollars (or 0.11 US dollars per adjusted diluted share), as compared to 245 million US dollars (0.54 US dollars per adjusted diluted share) in the fourth quarter of 2023.


Full Year Results

In the twelve years that ended on the 31st of March, the company’s revenue reached 5.7 billion US dollars, decreasing by 3% or 4% on a currency neutral basis, on a comparable basis to the prior fiscal year.

Under Armour’s full year gross margin increased by 130 basis points from the previous year to 46.1%, mainly due to supply chain efficiencies lowering freight and product costs. This gain was partially offset by strategic inventory management, including promotions in the direct-to-consumer channel.

The company’s net income amounted to 232 million US dollars over fiscal 2024 (or diluted earnings per share of 0.52 US dollars), as compared to 374 million US dollars (or 0.81 US dollars per diluted share) in the previous year. Adjusted net income remained stable at 245 million US dollars (or adjusted diluted earnings per share of 0.54 US dollars).

Fiscal 2025 Outlook

“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”, said Plank.

As a result, Under Armour has initiated a restructuring plan that includes an unspecified number of layoffs to streamline the business at a cost of between 70 million and 90 million US dollars, including millions in employee severance costs. At the same time, the company is focused on returning to its core fundamentals over the next 18 months: better products, stronger marketing and a simpler business model, as well as tight cost management.

In this context, it expects its revenue to be down at a low-double-digit percentage rate, including an expected 15 to 17% decline in North America, diluted earnings per share between 0.02 and 0.05 US dollars and adjusted diluted earnings per share between 0.18 and 0.21 US dollars.


Image Credits: about.underarmour.com


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