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Under Armour Restructuring to Include Job Cuts, Store Closings

Image: Under Armour Restructuring to Include Job Cuts, Store Closings

An Under Armour logo is seen on a running shoe on display at an store in Chicago, Illinois, on Oct. 25, 2016. (Jim Young/Reuters)

Tuesday, 01 Aug 2017 10:36 AM

Under Armour Inc. announced restructuring plans, including store closings and job cuts, and trimmed its full-year sales forecast amid fierce competition in the North American athletic apparel market.

Shares of Under Armour, which has been ceding market share to Nike Inc and Germany's Adidas AG in North America, fell 6 percent to hit a record low. The stock has already lost 28 percent of its value this year.

The maker of Stephen Curry basketball gear and Bandit running shoes, which wooed investors with its quick-paced growth until a few quarters ago, has struggled as its newer shoes have failed to entice shoppers in a shrinking market as "athleisure" products go out of favor.

"We find (Under Armour's) apparel lacking in fashion. While brands like Nike, Adidas and Puma are thriving from retro revivals and casual looks, UA has struggled to develop an appealing shoe," Jane Hali, CEO of retail investment research firm Jane Hali & Associates LLC, wrote in a client note.

Analysts have also said Under Armour's strategy of wanting to dominate many segments of the sports performance category, even as consumers become more selective about what they buy, has worked against its favor.

Second-quarter sales in North America rose an anemic 0.3 percent, a far cry from the double-digit growth the company used to post until last year.

"Given that North America still accounts for over three-quarters of Under Armour's revenue, a chilly performance here means the company as a whole has caught a cold," GlobalData Retail analyst Anthony Riva wrote in a note.

Under Armour said it now expected full-year revenue growth of 9 percent to 11 percent, compared with its previous forecast of 11 percent to 12 percent.

The company will cut 277 jobs, or 2 percent of its workforce across its operations, half of which will be at its headquarters in Baltimore, Under Armour spokeswoman Diane Pelkey said.

The company expects pre-tax charges of up to $130 million in fiscal 2017, related to store closures and severance costs.

Nike also announced in June that it would cut about 2 percent of its global workforce and eliminate a quarter of its shoe styles, to better compete in a slowing market.

Under Armour's net revenue rose 8.7 percent to $1.09 billion in the June quarter. It posted a net loss of 3 cents on its class C shares which represent its common stock.

(Reporting by Gayathree Ganesan and Siddharth Cavale in Bengaluru; Editing by Saumyadeb Chakrabarty)

© 2017 Thomson/Reuters. All rights reserved.

 
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Under Armour Inc. announced restructuring plans, including store closings and job cuts, and trimmed its full-year sales forecast amid fierce competition in the North American athletic apparel market.
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Tuesday, 01 Aug 2017 10:36 AM
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