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Under Armour Q2 sales rise on strong international growth

Under Armour’s rebound is proving costlier than expected.

The athletic gear and apparel brand, which is in the midst of a turnaround plan to pump up sales, saw its net loss widen to $95.5 million, or 21 cents per share, in the period ended June 30, from $12.3 million, or 3 cents per share, a year ago. Excluding the impact of the restructuring plan, adjusted net loss was $34 million, or 8 cents a share, in line with analysts' estimates.

Revenue rose 8% to $1.2 billion, slightly above expectations. International revenue rose 28%, which included a 34% jump in Asia. But sales in North America only increased 2%.

Analyst Neil Saunders, managing director of GlobalData Retail, said that Under Armour continues to suffer from an erosion of customers, many of which are migrating to other brands.

“More and more consumers are confused about Under Armour's proposition,” he said. “Given the rather fragmented range, a lack of focus on any particular sport, and a scattergun approach to product development, this is hardly surprising. In our view, the brand needs to have a much clearer identity -- possibly by using sub-brands - to gain wider acceptance and grow customer numbers.” For more, click here.

Gross margin decreased approximately 110 basis points to 44.8% due to inventory management initiatives and a $6 million impact related to restructuring efforts. Adjusted gross margin decreased 60 basis points to 45.3% driven predominantly by inventory management initiatives.

In February, Under Armour announced a 2018 restructuring plan, which detailed expectations to incur total estimated pre-tax restructuring and related charges of approximately $110 million to $130 million. After further review, the company said it has identified approximately $80 million of additional restructuring initiatives and now expects to incur approximately $190 million to $210 million of pre-tax restructuring and related charges in 2018.

Based on the updated restructuring plan, in 2018 the company expects to incur up to $155 million in cash related charges, consisting of up to $75 million in facility and lease terminations and up to $80 million in contract termination and other restructuring charges. And pp to $55 million in non-cash charges comprised of up to $20 million of inventory related charges and up to $35 million of asset related impairments.

"As we work through our multi-year transformation, we continue to proactively attack underperforming areas of our business including our SG&A cost structure and inventory,” said Kevin Plank, CEO. “All of this will help create a better and stronger Under Armour through even greater operational efficiencies. We are unwavering in building our global brand and confident we're on the right track."

Looking to the full year, Under Armour is now expecting to incur roughly $190 million to $210 million of pre-tax restructuring and related charges, up from a prior forecast of $110 million to $130 million.
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