Under Armour today reported a sales decline of 23% for Q1 as its business "took a blow from the coronavirus pandemic and its stores were forced shut, freezing its turnaround plans," according to Lauren Thomas of CNBC.com. The company said that it plans to cut about $325M in operating costs in '20 to "help it weather the crisis, including by temporarily laying off some retail employees." UA "expects revenue could be down" as much as 50-60% in Q2, as "demand for its merchandise remains constrained." UA predicts that Q2 will be the "most challenging to work through, and the rest of the year will be highly promotional." The company reported a net loss of $589.7M, compared with a profit of $22.5M in Q1 '19. Net revenue fell 23% to $930.2M, and UA said that "roughly 15 percentage points of the decline stemmed from the COVID-19 crisis" (CNBC.com, 5/11). CNBC’s Sara Eisen: “They've already been in cost-cutting mode. ... This is a company that was struggling to turn around going into the crisis.” However, Eisen added UA President & CEO Patrik Frisk “stressed that the ecommerce business has really been on fire, which is helping them” (“Squawk on the Street,” CNBC, 5/11). CNBC’s Becky Quick noted revenue was "below what Wall Street was forecasting" (“Squawk Box,” CNBC, 5/11). At presstime, shares of UA were trading at $8.98, down 9.66% (THE DAILY).
THE ROAD BACK: In Baltimore, Holden Wilen noted observers are wondering how UA "will look on the other side" of this pandemic. Earlier this year, when the coronavirus was still only in Asia, UA projected a $50-60M hit. After the disease spread to the U.S., the company "closed all 188 of its stores in North America and temporarily laid off 6,700 employees." These struggles have caused some to contemplate whether UA "could end up filing for bankruptcy protection or being sold." Cowen analyst John Kernan said, "The biggest problem is Under Armour is not in control of its own destiny. The partners that comprise a huge portion of Under Armour's business are wholesale partners and they are not going to be ordering much inventory." UA has a "much smaller international business than Nike and Adidas, so it is more adversely impacted by declines in the U.S." While it was once "unthinkable" that UA could be acquires, some industry watchers have "speculated VF Corp. could attempt to buy Under Armour and add it" to its portfolio of brands (BIZJOURNALS.com, 5/8).
