Under Armour Cuts Its Sales Forecast, Stock Slides

  • The former highflier lowers its guidance for the year
  • Company sees sluggish sales, heavy discounts in North America

Under Armour Tumbles on North American Weakness

Under Armour Inc. cut its annual sales forecast, a sign that finding a way out of its yearlong slump may be tougher than anticipated.

Citing sluggish results in North America -- where heavy competition and discounts are hurting sales -- the athletic brand trimmed the lower end of its guidance by two percentage points. That helped send the stock on its worst tumble in six months.

The company also posted its second straight quarterly loss and embarked on a restructuring plan that will add to the short-term pain.

The tepid outlook renews doubts over whether Under Armour can return to form as the highflying investor darling it once was. The shares had already plummeted almost 50 percent in the past year as growth slowed. Chief Executive Officer Kevin Plank has a plan to expand globally and rely less on the North American market, but it will take time to pay off. Only about a fifth of sales currently comes from overseas.

“We’ve identified a number of areas to enhance our operational capabilities,” Plank, 44, said in a statement Tuesday. “We remain steadfast in driving and building our brand.”

The shares fell as much as 8.5 percent to $18.31 after the results were released, marking the biggest intraday drop since Jan. 31.

Lower Forecast

The Baltimore-based company now expects revenue growth of 9 percent to 11 percent this year. It had previously called for a range of 11 percent to 12 percent -- and even that was far below its torrid growth in the not-so-distant past. Under Armour has posted an annual gain of 27 percent the last four years.

Plank’s global expansion plans also have hurt profit. The company posted its first loss as a public company in the first quarter, and it added to the red ink in the latest period.

Still, the second-quarter deficit was lower than Wall Street expected. Under Armour reported a 3-cent loss, compared with an estimate for 6 cents.

Revenue also was slightly better than projected, at $1.09 billion. Analysts predicted $1.08 billion.

As it plots a comeback, Under Amour announced a restructuring plan on Tuesday. The shake-up will bring pretax expenses of $110 million to $130 million as the company pays severance, terminates leases and writes down inventory.

Under Armour rose to prominence in the athletic market with products such as synthetic workout shirts, helping it make gains on Nike Inc. and other established players. The company went public in 2005 and from there expanded into categories such as running shoes and basketball sneakers.

But Under Armour has struggled over the past year as growth sputtered. The stock fell 23 percent in a single day in January when the company trimmed its 2017 forecast.

Consumers are increasingly spending their money online or on experiences, forcing retailers and athletic-gear companies to adjust. The industry also was roiled by last year’s liquidation of Sports Authority Inc. and the bankruptcy of smaller chains. In addition, Under Armour faces growing competition from startups and fashion brands.

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