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Saturday, May 18, 2024

Cuts and Layoffs Coming at Under Armour As Sales Keep Dropping

  • The company has cycled through two CEOs in the two years beforehand. 
  • Adidas and Nike are also suffering in the sports apparel space. 
Annie Rice/Avalanche-Journal / USA TODAY

The winds of change continue to swirl at Under Armour. 

The company announced a restructuring Thursday that would include a significant number of layoffs after North American revenue dropped 10% to $772 million this quarter, the latest sign of turbulence in the sports apparel industry. Analysts had forecast $780 million in revenue for the company’s largest market. It’s unknown how many jobs will be impacted. 

Kevin Plank, the company’s CEO and founder, blamed the sales on a number of factors and forecasted the struggles will continue for the rest of the year. The company said it expects sales to drop between 15% and 17% in North America during the fiscal year, and revenue will be down “at a low double-digit percentage rate” for the same period. Analysts forecasted sales to grow by 2.1% for the company’s fiscal year, according to LSEG. 

“Due to a confluence of factors, including lower wholesale channel demand and inconsistent execution across our business, we are seizing this critical moment to make proactive decisions to build a premium positioning for our brand, which will pressure our top and bottom line in the near term,” Plank said in a statement. 

Plank blamed both his company’s ability to perform and lower customer demand as reasons for slowing sales, an issue fellow competitors Nike and Adidas are also combating. 

“Over the next 18 months, there is a significant opportunity to reconstitute Under Armour’s brand strength through achieving more, by doing less and focusing on our core fundamentals,” he added.

The news comes amid a period of transition for the company after Plank was reinstalled as CEO in March, replacing former Marriott executive Stephanie Linnartz. Plank founded the company in 1996 as a college student at Maryland and had previously stepped back as CEO in 2019 due to struggling sales before returning to the role this year. Linnartz, a successful hotel executive, lasted less than a year on the job.

To save money, Under Armour is planning to reduce promotions and discounts, which could deflate high inventories and increase its gross margin by as much as 1%. 

“Too many areas of our product strategy have been designated as priorities,” Plank said on the earnings call. “This has caused operational inefficiency and a strain on resources, which has diluted our ability to have a consumer-centric point of view.” 

Plank revealed only so much of the restructuring—which includes a buyback of up to $500 million in shares—but it appears he plans to trim the company’s list of pressing matters in an attempt to boost sales and maximize resources. 

The restructuring is Under Armour’s second in four years after undergoing one in 2020, mainly to combat the effects of the COVID-19 pandemic. That resulted in 600 layoffs

Under Armour isn’t the only sports apparel company struggling this year. Nike announced 700 layoffs in April in what is the second phase of layoffs as part of a $2 billion cost-savings plan that was reported in December 2023. In total, Nike will lay off roughly 1,500 employees by late June, which accounts for roughly 2% of its workforce. In March, Adidas posted its first annual loss since the early ’90s. 

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