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Under Armour Q3 likely to be hurt by restructuring plan

Athletic apparel company Under Armour Inc. (UAA) is set to report its third-quarter results on Tuesday before the bell. The company will likely post a wider loss in the third quarter as its restructuring program could squeeze its profitability.

Analysts, on an average, expect Under Armour to earn $0.12 per share on revenue of $1.42 billion for the third quarter. In comparison, during the previous year quarter, the company reported $0.22 per share on revenue of $1.41 billion. Majority of the analysts recommended a “hold” rating on the stock with an average price target of $19.14.

During mid-September, the company had revised its business strategy for enhancing business performance and optimizing growth initiatives. For the balance of the year, the company’s financial performance would be hurt by the ongoing initiatives after Under Armour widened its operating loss estimate for the full year 2018.

The operating loss estimates were lifted to $60 million from $50 million while narrowing adjusted operating income forecast to the range of $140 million to $160 million. Adjusted EPS guidance was trimmed to the range of $0.16 to $0.19 from the previous range of $0.14 to $0.19.

Under Armour revs up restructuring program with 3% job cut

The company clarified that the restructuring program included a 3% workforce reduction, which will add about $10 billion in severance charges to the total program cost. The overhauling will come to a close by March next year.

Under Armour has been facing stiff competition in the North American footwear market. Low margins and higher promotional expenses hurt the company as the launch of premium brands in footwear did not pay well. Separately, massive discounts to promote its premium brands have burned the pockets of Under Armour.

The company is facing a drop in demand for its products in the North American market and is trying to offset it by setting its footprint in the international market. To lower the costs and expenses, Under Armour has put in place a restructuring plan.

Shares of Under Armour opened lower and remained in the negative territory. The stock has risen over 9% in the past year and over 21% in the year so far.

 

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