Under Armour details big restructuring charges; to furlough employees
Citing the “acute shock” to its business resulting from COVID-19, Under Armour outlined a series of cost-cutting measures as the financial toll of the pandemic rises.
In separate news, the athletic apparel brand detailed a previously (pre-pandemic) planned restructuring initiative that is designed to reduce costs and improve future profitability and cash flow generation. It includes one-time charges of between $475 million to $525 million this year.
Some $300 million of the costs have been incurred by March 31, including approximately $290 million in impairment charges related to the company’s decision to not open a New York City flagship. The remaining restructuring and related charges will occur by the end of 2020.
Under Armour is extending its store closures until further notice, and will make re-opening decisions on a country-by-country basis based on guidance provided by local health authorities. Beginning April 12, the company will temporarily lay off employees at its U.S. full-price stores and outlet stores, along with approximately 600 employees at its U.S.-based distribution centers. (Under Armour noted it will have provided up to four weeks of full pay for these retail store and DC employees since the pandemic started.)
Additionally, the company will begin paying premium bonuses to its distribution center employees who are still on the job.
In other moves, and effective immediately, Under Armour’s board will reduce its compensation by 25% and the company's executive VPs and above will be taking a 25% salary cut through the duration of the crisis.
"While we're thankful for the meaningful balance sheet improvements we've driven over the past two years and we are seeing some early signs of recovery in our APAC region, this unanticipated shock to our business has been acute, forcing us to make difficult decisions to ensure that Under Armour is positioned to participate in the eventual recovery of demand," said Under Armour president and CEO Patrik Frisk. “We do not take these decisions lightly and are doing all we can to minimize the impact on our teammates during this time. Because of the strength of our brand and the steps we have taken, we will weather this storm."
Citing the ongoing disruption and uncertainty related to the global COVID-19 pandemic, Under Armour has withdrawn its first quarter and full-year 2020 outlook provided and will not offer an updated outlook at this time.