Key Takeaways
- Under Armour plans to focus on men’s apparel and restructure under Kevin Plank.
- North America sales expected to fall by up to 17% this year.
- Restructuring to cost up to $90 million with significant layoffs expected.
What Happened?
Under Armour, under returning founder Kevin Plank, announced a major restructuring plan to address declining revenue. The company will prioritize men’s apparel, a segment Plank believes has been neglected. North American sales are projected to drop by up to 17% this fiscal year, contributing to an overall expected revenue decline in the low double digits.
The restructuring, approved by the board, includes layoffs and is estimated to cost up to $90 million. Shares rose 1.2% following the announcement, though the stock is down 23% year-to-date, underperforming the S&P MidCap 400 Index, which has gained 9.3%.
Why It Matters?
This restructuring signifies a critical shift for Under Armour. Kevin Plank’s return aims to rejuvenate the brand, particularly in the struggling North American market. By refocusing on men’s apparel and reducing discounting, Under Armour hopes to rebuild brand perception and long-term value.
Investors should note the immediate financial pressures, including reduced promotional activities and simplified operations, which may impact short-term profitability. Plank’s strategy aims to strengthen brand equity over the next 18 months, crucial for sustainable growth.
What’s Next?
Investors should monitor the execution of Under Armour’s restructuring plan closely. Key indicators will include the impact of reduced discounting on sales volumes and the effectiveness of cost-saving measures. Plank’s emphasis on men’s apparel could shift market dynamics, potentially influencing competitors like Nike and Adidas.
