Shares of athletic apparel manufacturer Under Armour (NYSE:UA, NYSE:UAA) are incurring a modest decline following a dour disclosure. Indeed, the firm’s latest earnings report revealed a big drop in revenue. Under Armour also predicted that the circumstance will worsen throughout this fiscal year. The company is engaging a turnaround plan, but it won’t come without pain, with Under Armour layoffs representing part of the comeback effort.
According to CNBC, the apparel maker posted adjusted earnings of 11 cents per share in its fiscal fourth quarter. This figure beat the consensus target of 8 cents. Meanwhile, on the top line, revenue landed at $1.33 billion, matching expectations. However, the print also represented a 4.9% decline from the year-ago period’s sales of nearly $1.4 billion. In addition, profits also slipped by more than 96% year-over-year (YOY).
Likely exacerbating the Under Armour layoffs announcement was the fact that, during fiscal Q4, North America sales fell 10% to $772 million. This tally missed the analyst estimate of $780 million. Worse yet, management said it expects this market segment’s sales to worsen, anticipating a “drop between 15% and 17% in its current fiscal year.”
Founder and CEO Kevin Plank noted that a “confluence of factors” like “lower wholesale channel demand and inconsistent execution” contributed to the fallout.
Under Armour Layoffs Take Center Stage
Typically, wholesale declines in home markets warrant an implosion in the underlying enterprise’s equity valuation. However, Plank managed to assuage the market with plans to turn the business around. The CEO declared a seizing of “this critical moment to make proactive decisions to build a premium positioning” for Under Armour’s brand.
Taking center stage are the Under Armour layoffs. It’s unknown how many employees will be impacted by the job cuts. But Plank noted that, over the next year-and-a-half period, “there is a significant opportunity to reconstitute UAA brand strength through achieving more, by doing less and focusing on our core fundamentals.”
According to The Wall Street Journal, during a call with analysts, Plank also said that the company took on more than it can handle. “There are too many products, too many initiatives, too much of too much,” said the CEO. So, the idea is for the company to focus on quality per capita, or a less-is-more approach.
Without hard numbers disclosed, it would be speculative to present a forecast. Still, Plank’s tone suggests that the Under Armour layoffs could be sizable.
Why It Matters
According to Fortune Business Insights, the global sports apparel market reached a valuation of $203.26 billion last year. The market is also projected to expand to $298.06 billion by 2032, rising at a compound annual growth rate (CAGR) of 4.38%.
On the date of publication, Josh Enomoto did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
