Under Armour reports Q2 net loss of 12 mn dollars

Under Armour reported revenue increase of 9 percent or 8 percent currency neutral to 1.1 billion dollars for the second quarter of 2017. Revenue to wholesale customers rose 3 percent to 655 million dollars and direct-to-consumer revenue was up 20 percent to 386 million dollars. Operating loss was 5 million dollars and including other interest and expense, there was a net loss of 12 million dollars in the second quarter and a 0.03 dollar loss in diluted earnings per share. The company has also announced a restructuring plan, which includes cutting 2 percent of its workforce.

"Our second quarter performance validates the strength of our multiple growth levers to deliver solid results in today's dynamic global environment," said Under Armour Chairman and CEO Kevin Plank in a statement, adding, "We are utilizing 2017 to ensure that operations across our diverse portfolio of sport categories, distribution channels and geographies are optimized as we are building a stronger, faster and smarter company."

Under Armour undertakes restructuring plan

Under Armour's board of directors has approved a restructuring plan to more closely align its financial resources to support the company's efforts to better serve the evolving needs of the changing consumer and customer landscape.

"We've identified a number of areas to enhance our operational capabilities, drive process improvement and gain greater efficiencies. 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," added Plank.

In conjunction with this plan, the company expects to incur total estimated pre-tax restructuring and related charges of approximately 110-130 million dollars in fiscal 2017, including approximately up to 70 million dollars in cash related charges, consisting of up to 25 million dollars in facility and lease terminations, 15 million dollars in employee severance and benefits costs, and 30 million dollars in contract termination and other restructuring charges; and up to 60 million dollars in non-cash charges.

Review of Under Armour’s Q2 performance

The company said, a dynamic and promotional retail environment in North America continued to temper results with revenue in line with last year's same period. Outside North America, the strong momentum continued with international revenue up 57 percent or 54 percent currency neutral, representing 22 percent of total revenue. Within the international business, revenue in EMEA was up 57 percent or 53 percent currency neutral, up 89 percent or 87percent currency neutral in Asia-Pacific and up 10 percent or 9 percent currency neutral in Latin America.

Apparel revenue increased 11 percent to 681 million dollars including strength in men's and women's training, and golf, while footwear revenue was down 2 percent to 237 million dollars, against last year's same period which was up 58 percent due to significant strength in basketball sales. Accessories revenue increased 22 percent to 123 million dollars with strength in men's and women's training, and youth performance.

Gross margin Under Armour said, declined 190 basis points to 45.8 percent as benefits from channel and product mix were offset by inventory management initiatives, changes in foreign currency rates, and higher air freight in connection with our enterprise resource planning (ERP) system implementation, which impacted the timing of shipments to certain key customers.

Under Armour downgrades FY17 outlook

Net revenues expected to grow 9 to 11 percent versus the previous expectation of 11 to 12 percent growth, reflecting moderation in the company's North American business.

Gross margin, on a reported basis, is expected to be down approximately 160 basis points compared to 46.4 percent in 2016 as benefits from product costs and sales mix are offset by impacts from the restructuring plan, changes in foreign currency and increased efforts to manage inventory. Excluding the impact of the restructuring, adjusted gross margin is expected to be down at least 120 basis points compared to 46.4 percent in 2016.

On a reported basis, operating income, is expected to reach approximately 160-180 million dollars. Excluding the impact of the restructuring plan, adjusted operating income is expected to be approximately 280 million dollars to 300 million dollars. On a reported basis, full year diluted earnings per share is expected to be 0.18 dollar to 0.21 dollar. Excluding the impact of the restructuring plan, full year adjusted diluted earnings per share is expected to reach 0.37 dollar to 0.40 dollar.

Picture:Under Armour website


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