Under Armour Faces Sales Decline and Restructuring Amid Market Challenges

Key Points

• Under Armour reported a 4.9% sales decline in Q4 FY24 and anticipates further revenue decreases in fiscal 2025.
• The company has initiated a restructuring plan
• including layoffs costing $70-90 million and a focus on premium positioning.
• Analysts have downgraded stock ratings due to concerns about the brand's challenges
• despite potential long-term benefits from the restructuring.

In this news

Under Armour is experiencing a significant downturn, with shares dropping approximately 10% in premarket trading following the announcement of a bleak financial outlook. The company reported a 4.9% sales decline in Q4 FY24, with wholesale revenue decreasing by 7% and North America revenue dropping by 10%. Despite beating adjusted EPS estimates at $0.11, the overall financial performance has led to a restructuring plan that includes layoffs costing between $70-90 million.

The restructuring plan, spearheaded by returning founder and CEO Kevin Plank, aims to focus on premium positioning, reduce promotions, and cut down on discounts. The company plans to streamline operations, prioritize core men's apparel, and enhance direct-to-consumer channels. However, the fiscal 2025 outlook remains grim, with an anticipated low-double-digit revenue decrease and North American sales projected to drop by 15% to 17%. Analysts have expressed concerns about the brand's challenges, leading to downgraded stock ratings despite potential long-term benefits from the restructuring.

Under Armour's strategy aligns with broader market trends, as competitors like Nike and Lululemon Athletica also face disappointing forecasts. The company's focus on revitalizing its brand and improving profitability is seen as a necessary step, but the immediate financial impact and market response highlight the challenges ahead. Investors and analysts remain cautious, with some optimism about the company's direction under Plank's leadership, but the path to recovery will be closely watched in the coming months.