Under Armour’s Shares Surge as Restructuring Shows Progress

Under Armour Inc. reported results that exceeded analysts’ expectations and raised its guidance as the athletic-wear brand shows signs of improvement under returning founder Kevin Plank.

The company, in the midst of a restructuring effort, raised its annual forecast for adjusted earnings per share to as much as 22 cents a share. Analysts expected 20 cents.

“There’s not a lot of high-fives yet, but there’s definitely a sense of what we’ve accomplished to date,” Plank said on a conference call with investors and analysts.

Under Armour’s shares rose 15 percent at 9:31 AM in New York on Thursday. The stock had been down 26 percent this year through Wednesday’s close.

Plank, who retook the chief executive role in April after stepping aside in 2019, is overhauling Under Armour’s operating model and realigning its supply chain processes in search of cost savings. The plan also includes staff cuts and those reductions are now complete, though it’s unclear how many jobs have been affected.

The shakeup spans from Under Armour’s supply chain to its merchandising strategy. The company has started a multi-year modernisation initiative to improve logistics and distribution. Plank said he’s automating more tasks and using AI for data analysis and operations.

Under Armour had too many products, Plank said, and will reduce the number of different items that it sells by 25 percent over the next 18 months. That process has already begun in its men’s apparel business.

The company wants to get away from using promotions to drive sales. It expects that reducing discounts will help boost gross margin as much as 100 basis points this fiscal year.

“Under Armour is moving in the right direction to rebuild the business,” Poonam Goyal, an analyst at Bloomberg Intelligence, said in a note. “As promotions remain curbed, gross margin could expand.”

In the first quarter, which ran through June, the company reported $1.18 billion in sales, above the average analyst estimate of $1.14 billion.

Under Armour’s leadership ranks have also begun to shift upon Plank’s return. The company said this week that former Adidas president Eric Liedtke would join as executive vice president of brand strategy, to work on corporate strategy and marketing.

Management is realigning marketing efforts with Liedtke on board. The brand is investing more in influencers and plans to double its roster while Stephen Curry, its top endorser, will tour China in September.

“We must become more deliberate in everything we do,” Plank said. “We’ve invested meaningfully in experienced leaders to supercharge our ability to execute differently than in years past.”

By Kim Bhasin

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