Sporting goods giant cuts full-year outlook and jobs amid Q2 loss

After several years of explosive growth, Under Armour is hunkering down amid increased competition and weaker demand. And the brand, best known for its performance edge, is putting a new emphasis on lifestyle.



On Tuesday, Under Armour reported its second consecutive quarterly loss and announced a restructuring program that includes a 2% reduction in its global workforce (approximately 280 jobs), an increased go-to-market speed for its products, and expanded digital capabilities. On an earnings call, CEO Kevin Plank said Under Armour will focus on five areas moving forward: men's training, women's, running, basketball and lifestyle.



"We've represented performance and that gives us permission to go into lifestyle, and we feel that there's a lot of people that are in our space and category right now that don't exactly have the staying power — the ability to be there," Plank said.



In conjunction with its restructuring plan, Under Armour expects to incur estimated charges of approximately $110 million-130 million in fiscal 2017. This includes up to $70 million in cash-related charges, consisting of up to $25 million in facility and lease terminations, $15 million in employee severance and benefits costs and $30 million in contract termination and other restructuring charges.



"We've identified a number of areas to enhance our operational capabilities, drive process improvement and gain greater efficiencies," said Plank. "We remain steadfast in driving and building our brand while shifting our operational focus to become more return-on-investment and cost of capital centric — institutionalizing discipline to deliver more consistent, long-term shareholder value."



Under Armour reported a second-quarter loss of $12.3 million, or 3 cents per share, compared with a loss of $52.7 million, or 12 cents per share, in the year-ago period. The loss was not as big as analysts estimates.



Revenue in the quarter rose 9% to $1.1 billion, also better than expected, boosted by international results. In North America - previously Under Armour's main engine of growth - sales growth has become sluggish, with an uptick of only 0.3% in the quarter.



According to Anthony Riva, analyst at GlobalData Retail, Under Armour is suffering from a lack of focus, especially in its core American market.



"While the overall brand remains visible, there is evidence to suggest that it does not have the clarity or a sense of purpose in the way that Lululemon or even Nike does," he said. "Our consumer data indicate that many people are increasingly uncertain of what Under Armour stands for, or which parts of the sports market it specializes in. This is partly a consequence of Under Armour wanting to 'own' many different segments of the sports performance category, but in a softer demand environment where consumers are more selective about what they buy, such a lack of focus is harmful.



Under Armour cut its full-year look. It now expects adjusted earnings for the full year to fall within 37 cents and 40 cents per share, excluding any impacts from restructuring. Analysts had been forecasting the company to earn 42 cents a share in 2017. Revenue is now expected to grow 9- to 11%, lower than its previous forecast of 11- to 12% growth.