Under Armour Is Slashing Almost 300 Jobs Amid Sluggish Sales
The Under Armour juggernaut has slowed down significantly.
The sports gear maker said it was cutting about 2% of its global workforce, or some 280 jobs, and it now expects slower revenue growth this fiscal year, pointing to an intensely competitive environment in retail. What’s more, sales in its once booming footwear category slipped, a big disappointment for Under Armour.
Under Armour shares tanked on the results, slipping 8.6% to about $18.30, their lowest level in four years. Just about a year ago, they were changing hands for roughly $43.
The company, popular for its Stephen Curry basketball shoes and Bandit running shoes as well as is sweat-wicking under garments, said it now expected full-year revenue growth of 9% to 11%, compared with its previous forecast of 11% to 12%. Earlier this year, it dropped a long-term target of hitting $7.5 billion in revenues by 2018, in acknowledgement of its weaker momentum.
The slowdown in shoes was of particular worry to Wall Street. Nomura Instinet analyst Simeon Siegel noted that the category had been singled out as “the prime driver for UA's next leg of growth” but is now in decline, raising “significant questions around UA's ultimate Addressable Market Size as it relates to NKE (Nike) and Adidas.” Under Armour CEO Kevin Plank himself, in announcing a restructuring aimed at making better use of the operations the company has built up recognized that its aggressive expansion in recent years required “significant investments and resources to build our brand.”
The company said about half of the job cuts would be at Under Armour’s Baltimore headquarters. Nike recently announced its own job cuts. Meanwhile, Adidas has been regaining ground lost a few years ago, and last week raised its own sales and profit forecast.
The company expects full-year earnings of 37 cents to 40 cents per share, below analysts’ average estimate of 42 cents, according to Reuters. Company revenue rose 8.7 percent to $1.09 billion in quarter ended June 30, in yet another period of slowing growth. But that increase came largely from international markets: Under Armour, which gets 22% of its sales in such markets, said sales rose 54%, excluding the impact of currency fluctuations, in the quarter. As for North America, where it still gets the bulk of its business, sales were unchanged from a year earlier, a stagnation that has clearly spooked investors.
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