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Under Armour Sets Restructuring Plan, Cuts Jobs as Sales Gain

Under Armour has a plan to improve efficiency, as international sales outpace domestic revenue.

In a Nutshell: Under Armour‘s board of directors 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. Kevin Plank, chairman chief executive officer, said the plan will lead to $110 million to $130 million in pretax restructuring charges this year. Of that total, $15 million will go to employee severance and $30 million to contract termination.

The company said it’s streamlining all aspects of its organization to improve operations and deliver against long-term strategic goals. As a part of this new alignment, a workforce reduction will impact about 2 percent, or roughly 300 people, of is global workforce of 15,000 employees.

Plank said of the plan, “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.”

Sales: Revenue for the second quarter ended June 30 was up 9 percent to $1.09 billion from $1 billion in the year-ago period. Sales to wholesale customers rose 3 percent to $655 million, while direct-to-consumer revenue gained 20 percent to $386 million. While a promotional retail environment in North America tempered results, international revenue was up 57 percent. Within categories, apparel revenue increased 11 percent to $681 million, footwear revenue was down 2 percent to $237 million and accessories revenue rose 22 percent to $123 million.

[Read more about Under Armour’s product development: Under Armour Unveils New Collection from US Innovation Hub]

Earnings: The operating loss was $5 million, but interest and expenses drove the net loss down to $12.31 million, narrowing from a net loss of $52.66 million a year earlier. Gross margin declined 190 basis points to 45.8%, 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 the company’s enterprise resource planning system implementation.

CEO’s Take: “Our second quarter performance validates the strength of our multiple growth levers to deliver solid results in today’s dynamic global environment,” Plank said. “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. As we stand up our category management structure within a consumer-led approach, we intend to meaningfully increase our go-to-market speed and amplify our digital capabilities. We’ve identified a number of areas to enhance our operational capabilities, drive process improvement and gain greater efficiencies.”

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