Athletic apparel company Under Armour (UA) is revising its business strategy amidst continuing squeeze on profitability from margin pressures. The focus of the recently announced restructuring program is to enhance overall business performance and optimize growth initiatives.
The Baltimore, Maryland-based company expects the ongoing initiatives would drag its financial performance during the remainder of the year. Accordingly, the outlook for full-year operating loss has been revised up to $60 million from the previous guidance of $50 million. It also narrowed the estimate for operating income, excluding the restructuring costs, to the range of $140 million to $160 million. Adjusted income is forecast to be between $0.16 per share and $0.19 per share, compared to the earlier outlook of $0.14-$0.19 per share.
The focus of the recently announced restructuring program is to enhance overall business performance
“This redesign will help simplify the organization for smarter, faster execution, capture additional cost efficiencies, and shift resources to drive greater operating leverage as we move into 2019 and beyond,” said Under Armour CFO David Bergman.
This week, the company broadened the purview of the restructuring program by announcing a 3% reduction in its workforce, which is expected to add about $10 billion in severance charges to the total program cost. The overhauling will come to a close by March next year when the employment reduction is expected to complete.
Under Armour, which was once touted as the next “Nike,” has been losing ground in the North American market for quite some time mainly due to stiff competition, especially in footwear, and the general headwinds facing apparel retailers. Its renewed focus on footwear with the introduction of premium brands this year did not pay well owing to low margins and high promotional expenses.
While new product launches are in the pipeline, it is unlikely to ease the current slump and restore margins, because the company will be compelled to offer massive discounts to drive more sales.
Under Armour stock has been struggling for long to regain its lost strength after suffering a massive fall about two years ago, which ended the bullish momentum the stock had maintained ever since the company went public. The stock ended the last trading session lower but gained about 2% in premarket trading Thursday.
Adidas and Nike are showing the new kid Under Armour its place