Under Armour Inc. (NYSE:UA) reported a narrower-than-expected second-quarter loss and trimmed its sales forecast for the year in its latest earnings report. The company reported a loss of $0.03 per share for the quarter, less than the $0.12 loss reported in the same quarter the year prior. Analysts had expected a loss of 6 cents, according to Thomson Reuters
Sales for the quarter totaled $1.09 billion, up from $1 billion last year. Analysts had predicted sales of $1.08 billion. Apparel growth accelerated this quarter to 11 percent, while footwear went negative. Apparel sales reached $681 million, while footwear sales fell 2 percent to $237 million.
Under Armour said it opened 33 factory outlets and 23 Under Armour-branded stores over the course of the 12 months ended June 30. Department store operator Kohl’s began selling Under Armour products in its more than 1,000 stores in March. Sales to wholesale customers rose 3 percent to $655 million in the second quarter, while direct-to-consumer sales climbed 20 percent to $386 million.
Under Armour’s weakness in North America, its biggest market, is alarming to investors. Under Armour reported North American sales of $829.8 million, up 0.3 percent year-over-year. For the six months ending June 30, the region is down 0.4 percent to $1.7 billion. North America accounts for over three-quarters of Under Armour’s revenue.
Under Armour said it now expects adjusted earnings for the full year to fall within $0.37 and $0.40 per share, lower than analysts’ forecast of adjusted earnings of $0.42 a share in 2017. Revenue is now expected to grow 9 to 11 percent, lower than its previous forecast of 11 to 12 percent growth. The company’s shares tumbled 8.8 percent in afternoon trading Tuesday, heading toward a four-year low. Under Armour shares are down 37 percent for the year so far.
The retailer also announced a restructuring plan aimed at enhancing operations and increasing its speed in getting products to market, and expanding its digital capabilities. CEO Kevin Plank said in a statement, “We’ve identified a number of areas to enhance our operational capabilities, drive process improvement and gain greater efficiencies.” The plan will revolve around five product categories: men’s training, women’s run, basketball and lifestyle.
Under Armour expects to incur pretax charges of $110 million to $130 million in fiscal 2017 tied to the restructuring. Most of these charges, including expenses related to facility and lease terminations, employee severance and benefit costs and contract terminations, are expected to show up in the third quarter. The restructuring plan reportedly includes 280 job cuts, roughly 2 percent of its global workforce. No other details of the restructuring were provided in the company’s earnings release.