Under Armour, Inc. (NYSE:UAA) reported results that surpassed analysts’ expectations and raised its guidance as the athletic-wear brand demonstrates improvement under returning founder Kevin Plank. The company, currently undergoing a restructuring process, has increased its annual forecast for adjusted earnings per share to as much as 22 cents a share, compared to the anticipated 20 cents.
Under Armour’s shares rose by 15% at 9:31 a.m. in New York on Thursday. This uptick follows a 26% decline in the stock’s value earlier in the year through Wednesday’s close. Plank, who reassumed the role of chief executive in April after stepping down in 2019, is overhauling Under Armour’s operational model and realigning its supply chain processes to achieve cost savings. This plan also includes staff reductions, though the exact number of affected jobs remains unclear.
Strategic Changes and Operational Overhaul
The restructuring effort at Under Armour encompasses its supply chain and merchandising strategy. The company has initiated a multi-year modernization project to enhance logistics and distribution. Plank mentioned that the company is automating more tasks and utilizing artificial intelligence for data analysis and operations. Additionally, Under Armour plans to reduce the number of products it sells by 25% over the next 18 months, starting with its men’s apparel segment.
The company is also shifting away from using promotions to drive sales, aiming to enhance its gross margin by up to 100 basis points this fiscal year. According to Poonam Goyal, an analyst at Bloomberg Intelligence, “Under Armour is moving in the right direction to rebuild the business.” Goyal suggests that reducing promotions could lead to an expansion in gross margin.
Sales Performance and Leadership Changes
In the first quarter, which ended in June, Under Armour reported $1.18 billion in sales, exceeding the average analyst estimate of $1.14 billion. The leadership team at Under Armour has also started to evolve with Plank’s return. This week, the company announced that former Adidas president Eric Liedtke would join as executive vice president of brand strategy to focus on corporate strategy and marketing.
Under Armour is realigning its marketing strategies with Liedtke’s involvement. The brand is increasing investment in influencers and plans to double its roster, while Stephen Curry, its top endorser, is scheduled to tour China in September. Plank emphasized the need for a more deliberate approach, stating that the company has invested significantly in experienced leaders to enhance its execution capabilities.
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