Under Armour's sales in North America this year are expected to drop in the mid- to high-single-digit rangeGETTY IMAGES
Under Armour expects its sales numbers to "decline this year as the brand struggles to regain traction in its key U.S. market and feels the financial brunt of the deadly new coronavirus outbreak in China," according to Lorraine Mirabella of the BALTIMORE SUN. UA yesterday "lowered its full-year sales estimates" as it reported a Q4 loss of $15M. Sales for the quarter rose 4% to $1.4B, but "missed estimates" of $1.47B, prompting UA shares to fall more than 18% in morning trading. UA is "bracing for impact from the virus outbreak in China," where 600 of its stores "remain closed." The company "expects a sales loss" of about $50-60M in Q1 alone. UA yesterday said that its "efforts to regain sales in the U.S., its biggest market, are taking longer than expected." Sales in North America this year are "expected to drop in the mid- to high-single-digit range." Overall '19 sales rose 1% to $5.3B, but the company projected that sales will be "down in the low single-digit percent range for this year." UA President & CEO Patrik Frisk said he is "not satisfied with where we are today" (not satisfied with where we are today" (not satisfied with where we are today" (BALTIMORE SUN, 2/12). At presstime, shares of UA were trading at $16.75 up .96% (THE DAILY).
TOUGH CUTS: The WALL STREET JOURNAL's Khadeeja Safdar notes UA "laid out a restructuring program" for '20 that will result in up to $425M in "charges, including potentially abandoning plans to open a flagship store" in N.Y. The company said that the moves could save up to $50M this year alone. Frisk said, "The realization of milestones and progress within certain areas of our business is taking longer than we anticipated." Frisk blamed past promotional activity, saying that they had a "greater-than-expected impact on consumers' willingness to pay full price" (WALL STREET JOURNAL, 2/12). UA yesterday said that as important as a N.Y. "flagship store might be, its focus must remain with smaller, more profitable stores and online sales" (AP,2/11).
STILL FINDING ITS FOOTING: In Baltimore, Holden Wilen noted Frisk joined UA in July '17 as President & COO, helping Founder, Chair and then-CEO Kevin Plank "oversee an overhaul of the company." UA's inventory had "ballooned while sales in North America slowed amid a decline in demand." Under Frisk, UA "reorganized its management structure, cleaned up the supply chain to make it more efficient and implemented a new strategy for bringing products to market." Frisk's changes resulted in a "decline in inventory and wider profit margins." But yesterday's earnings report showed UA "still has a long way to go before it returns to the glory of a few years ago" (BIZJOURNALS.com, 2/11).
NOT BUYING IT: CNBC's Jim Cramer "expressed dismay" at UA's Q4 numbers, suggesting that there is "little reason to invest." Cramer said, "Maybe Nike is just too powerful. This is one of the rare times where I've seen, (Under Armour) may have the better product but it doesn't matter." He added the company "gave you no reason to own it, whatsoever." Cramer: "It's very rare that you have that." Cramer said that UA's recent struggles are "'stunning,' given the quality of the company's leadership." He added, "I've never met a single person who has a bad word about Kevin Plank and this Patrik Frisk. They're going to have to bring someone in completely from outside. They have to steal someone from Nike. They cannot continue this trajectory. This is terrible" (CNBC.com, 2/11).
