Under Armour's stock buoyed by hopes for restructuring as founder Kevin Plank returns, pledges renewed focus on men

By Steve GelsiCiara Linnane

Sports-apparel maker's reinstalled CEO is tearing up the rulebook implemented by his female predecessor

Under Armour Inc.'s stock rose Thursday after the athletic-apparel maker unveiled a restructuring plan that aims to restore it to growth and recreate enthusiasm for the troubled brand.

The stock (UA) rose 1.2% as investors shrugged off a warning from the company that its fiscal 2025 earnings would miss Wall Street projections.

On a call with analysts, freshly reinstalled Chief Executive Kevin Plank outlined his latest vision for the company, conceding missteps in the past that has made Under Armour a brand that chiefly competes on price.

Plank founded the company in his grandmother's basement while he was still in college and ran it until 2019 when he stepped down amid reports that the U.S. Securities and Exchange Commission and the Justice Department were investigating the company's accounting practices.

The executive was reinstated in March, replacing Stephanie Linnartz who had spent just one year in the role.

Linnartz's appointment made history, as she was the first woman to lead a major U.S. sports brand. She brought in some talent, including a chief commercial officer, chief communications officer, chief product officer, chief design officer, chief supply-chain officer, president of Americas, president of Europe, the Middle East and Africa, and chief marketing officer.

Under her "House 3" strategy, which aimed to increase brand heat, Linnartz sought to improve product design and return the U.S. business to growth.

"With several of our executive team being new to their roles, my top priority is bring clarity and stability to our business," Plank told analysts on the call, according to a FactSet transcript. "Said better, we must make the complex simple and the simple compelling."

The company will first take a step back with the expectation that fiscal 2025 will see another low double-digit decline in revenue, said Plank. That's partly due to macro trends and a troubled consumer, but also "an environment made more challenging by our execution in the past," he said.

The company will seek to re-elevate the brand to a premium position, reducing SKU counts by up to 25% and limiting discounts, especially on its e-commerce site.

The company will scale back promotional activities, reducing by more than 50% the number of sitewide promotional days from last year and reducing the depth of discounts.

"We must become a brand of launches, creating products that solve athlete problems, while communicating the story of how and why our products deliver," said Plank.

The company will refocus on its core men's apparel business, moving away from the emphasis that Linnartz had put on growing its female audience, said Plank. Taking its eye off men's apparel meant allowing the business to become more "promotional and commoditized," he said.

"That has significantly impacted our brand's perception. We will rectify this," he said.

Given the newness of the leadership and product lead times, the company does not expect to launch its new offerings until its fall-winter 2025 collection, the second half of fiscal 2026, he said.

"We're not falling on a sword saying we just have to be premium. Our eyes are wide open," said Plank.

Wedbush analyst Tom Nikic, who has an outperform rating on the stock, the equivalent of buy, said that while the guidance is bad, "the bright side is that we don't see a lot of risk to the outlook, and if risk/reward on EPS is skewed to the upside, then perhaps risk/reward on the stock is also skewed to the upside."

Still, in the near term, the stock may be held in a range until some improvement is apparent, he said.

Plank acknowledged that the North American business has fallen behind and that it must restore its position there, said Nikic. He also said international sales are likely to fall by low-single-digits in fiscal 2025. That's partly due to higher inventory levels in EMEA, but also a highly promotional environment in China.

Under Armour's fourth-quarter profit fell to $6.57 million, or 2 cents a share, from $170.57 million, or 38 cents a share, in the year-ago quarter. Adjusted fourth-quarter profit of 11 cents a share beat the FactSet consensus estimate of 8 cents a share.

Revenue dropped 5% to $1.33 billion, from just under $1.4 billion in the year-ago quarter, and matched analyst estimates.

Under Armour now expects adjusted 2025 earnings of 18 cents to 21 cents a share, below the FactSet consensus estimate of 59 cents a share.

The company plans to book up to $50 million in cash-related restructuring charges and $40 million in noncash charges.

The charges include $22 million in employee severance costs. The company's statement did not include any headcount-reduction figures. A company spokesperson did not comment.

The Baltimore-based company currently employs 15,000 people.

Under Armour's stock is down by 19% in 2024, while the S&P 500 SPX has gained 11.5%.

Additional reporting by Bill Peters

-Steve Gelsi -Ciara Linnane

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05-16-24 1154ET

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