under the armor announced a sweeping restructuring plan on Thursday as it said sales in its largest market, North America, plunged 10% and predicted the trend would worsen throughout the current fiscal year.
The sportswear retailer also saw its profits fall by more than 96% during its fiscal fourth quarter, compared to the same period a year earlier.
It is unclear how many employees Under Armor will lay off as part of the restructuring, but the plan is expected to cost between $70 million and $90 million, a portion of which will be used for employee severance and benefit costs. The company declined to share more information with CNBC about its restructuring.
Shares fell about 10% in premarket trading.
Here's how the sportswear retailer fared in its fiscal fourth quarter compared to what Wall Street expected, according to a survey of analysts by LSEG:
- Earnings per share: 11 cents adjusted vs. 8 cents expected
- Revenue: $1.33 billion vs. $1.33 billion expected
The company's reported net income for the three-month period ended March 31 was $6.6 million, or 2 cents per share, compared with $170.6 million, or 38 cents per share, from the previous year. Excluding one-time items, the company reported earnings of 11 cents per share.
Sales fell to $1.33 billion, down about 5% from $1.4 billion a year earlier.
During the quarter, sales in North America fell 10% to $772 million, worse than the $780 million analysts expected, according to StreetAccount.
The company said it expects sales to continue to worsen in North America. The company expects they will fall between 15% and 17% in its current fiscal year.
“Due to a confluence of factors, including lower demand from the wholesale channel and inconsistent execution across our business, we are taking advantage of this critical time to make proactive decisions to build premium positioning for our brand, which will pressure our revenues and results in the short term,” founder and CEO Kevin Plank said in a statement.
“Over the next 18 months, there is a significant opportunity to rebuild the strength of the Under Armor brand by achieving more, doing less and focusing on our core fundamentals,” he added.
Across Under Armour's business, the company expects revenue to decline “at a low double-digit percentage rate” in its current fiscal year, while analysts expected sales to grow 2.1%, according to LSEG.
The company plans to reduce promotions and discounts, which it expects will cause its gross margin to increase between 0.75 and 1 percentage point for the fiscal year.
Diluted earnings per share are expected to be between 2 cents and 5 cents and adjusted diluted earnings per share are expected to be between 18 cents and 21 cents for the year. According to LSEG, analysts expected earnings per share of 52 cents.
Under Armour's tough quarter comes about two months after the retailer announced that former Marriott executive Stephanie Linnartz would step down as CEO after just a year on the job and Plank would return to take the helm of the company. company he founded in 1996.
Linnartz was the second CEO the company has gone through in less than two years.
They hired her with the bet that her experience building Marriott's renowned Bonvoy loyalty program and driving digital revenue for the hotel giant would make up for her lack of experience in the retail industry. Before her departure, she managed to reform Under Armor's top management and develop its loyalty program. She was trying to shift the brand's assortment toward a more athleisure-focused offering that had more stylish options for women.
Ultimately, she was ousted before those plans could come to fruition. Following the announcement of Linnartz's departure, several analysts downgraded Under Armor and lowered their price targets. The company's shares were down about 23% so far this year, as of Wednesday's close.
Read the full earnings release here.
