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Under Armour Rolls Out Restructuring Plan, Focuses On Speed, Digital, Flexible Operations

Under Armour "posted a better-than-expected quarterly loss and announced a sweeping restructuring plan" today as the brand "continues to struggle in a competitive market," according to Lorraine Mirabella of the Baltimore SUN. The company reported a net loss of $12M for the three months that ended June 30, which "beat Wall Street estimates." Sales rose 9% to $1.1B, also "beating analysts’ estimates." The company "promised an overhaul of its operations designed to build a faster, more flexible organization and meet the demands of a changing consumer landscape." The plan is "designed to let the company increase the speed with which it brings new products to consumers, boost its digital and online business and operate more efficiently." UA Founder, Chair & CEO Kevin Plank in an announcement said the brand has had to make “significant investments” as the business has more than doubled over the last three years. A brand with "roots in the U.S. apparel market, it will focus on a more global portfolio of apparel and footwear and on online selling." Mirabella notes UA "expects restructuring charges" of about $110-130M in FY '17 (BALTIMORESUN.com, 8/1). In Baltimore, Holden Wilen notes UA "cites its rapid growth over the last three years" -- more than doubling revenue to $4.8B -- as a reason for "taking a step back and evaluating its operations." Meanwhile, UA's apparel revenue in Q2 increased 11% to $681M "driven by strength in men's and women's training and golf." On the downside, footwear revenue declined 2% to $237M against last year's same period. A year ago, footwear sales increased 58% due to "significant strength in basketball sales but sales" of Warriors G Stephen Curry's Curry 3 shoe have "been slow." In Asia, where the company recently embarked on tour of China and South Korea, sales increased 89% to $93.6M (BIZJOURNALS.com, 8/1). At presstime, shares of UA were trading at %18.48 per share, down 7.78% from the close of business yesterday (THE DAILY).

BREAK IT DOWN
: Retail analyst Jane Hali in a note to clients wrote, "We find [UA'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." UA said that it now "expected full-year revenue growth" of 9-11%, compared with its previous forecast of 11-12%. Meanwhile, UA Senior VP/Communications & Entertainment Diane Pelkey said that the company will cut 277 jobs, or 2% of its workforce across its operations, "half of which" will be at its Baltimore HQ (REUTERS, 8/1). YAHOO FINANCE's Daniel Roberts writes UA has "had to deal with strong headwinds: Adidas is having its strongest run in America in a decade and is stealing back market share; brick-and-mortar sporting goods chains have closed, chains on which Under Armour relied more heavily than some of its competitors; and the basketball footwear category has declined, a category in which Under Armour over-indexed" (FINANCE.YAHOO.com, 8/1). Canaccord Genuity Managing Dir Camilo Lyon said UA’s numbers “tell us that the North American market for athletic apparel is definitely a challenging marketplace to be in right now. There are a lot of promotions in the marketplace and Under Armour has certainly succumbed to that promotional activity.” Lyon: "It’s come to a point in time where that growth is now transitioning to a more profit-focused and their return-focused business and that happens when that maturity curve starts to reach another level in its life cycle and that’s where I think Under Armour is right now” (“Squawk Box,” CNBC, 8/1).

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