Under Armour forecasts underwhelm on patchy demand, unveils restructuring

In this Nov. 29, 2019, file photo Under Armour clothes are displayed at a Kohl's store in Colma, Calif. (AP Photo/Jeff Chiu, File)

Under Armour on Thursday forecast a surprise fall in sales for the year and laid out plans to overhaul its business, as the sportswear maker looks to revive demand for its brand in the United States.

Shares of the company reversed course from premarket losses to rise about two per cent, after CEO Kevin Plank said he plans to pare back heightened promotions and control inventory, as well cut jobs to streamline operations.

"Too many areas of our product strategy have been designated as priorities. This has caused operational inefficiency and a strain on resources, which has diluted our ability to have a consumer-centric point of view," Plank, who returned as CEO in April after leaving the role in 2019, said on a post-earnings call.

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Peers Nike and Lululemon Athletica also provided disappointing forecasts as weak discretionary spending casts a shadow on demand for sportswear in the U.S.

Under Armour said it would add more premium price points in its direct-to-consumer channel, as it looks to revive brand appeal and counter a hit from the wholesale business that is grappling with weak demand from retailers.

It would also aim to reduce its style count by roughly 25 per cent over the next 18 months.

"The changes being made are the most aggressive we have seen to overhaul Under Armour, showing management is willing to forego the short-term for the long-term health of the brand," said Telsey Advisory Group analyst Cristina Fernandez.

As part of the restructuring plan, Under Armour expects to incur total pre-tax charges of up to US$90 million, including employee severance costs.

The company expects fiscal 2025 revenue to be down at a low double-digit percentage rate, versus LSEG estimates of a 2.1 per cent rise. It sees annual adjusted earnings to be between 18 cents US and 21 cents US per share, below estimates of 59 cents US.

Under Armour's fourth-quarter adjusted earnings per share of 11 cents US beat estimates of eight cents US. Its revenue of US$1.33 billion also edged past expectations.