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The Under Armour Stock Price is Expected to Rise as Founder Kevin Plank Promises to Focus More on Men as He Returns to the Company

May 16, 2024
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Under Armour Inc.'s stock rose on Thursday after the athletic apparel company revealed a restructuring plan aimed at revitalizing growth and rekindling enthusiasm for the brand. Despite warning that its fiscal 2025 earnings would fall short of Wall Street expectations, Under Armour's stock UA, +2.78% increased by 1.2%.

In a call with analysts, newly reinstated Chief Executive Kevin Plank shared his vision for the company's future. Plank, who founded Under Armour in his grandmother's basement during college, led the company until 2019 before stepping down amidst investigations by the U.S. Securities and Exchange Commission and the Justice Department into the company’s accounting practices. He returned as CEO in March, succeeding Stephanie Linnartz, who had a brief tenure of one year.

Linnartz made history as the first woman to lead a major U.S. sports brand and brought in key talent, including a chief commercial officer, chief communications officer, chief product officer, chief design officer, chief supply-chain officer, president of Americas, president of Europe, the Middle East and Africa, and chief marketing officer. Her "House 3" strategy aimed to enhance product design and reignite growth in the U.S. market.

Plank emphasized his top priority: providing clarity and stability to the business. "We must make the complex simple and the simple compelling," he told analysts, according to a FactSet transcript.

Plank outlined a cautious outlook for fiscal 2025, anticipating another low double-digit decline in revenue due to macroeconomic factors and past execution issues. Under Armour’s fourth-quarter profit dropped to $6.57 million, or 2 cents a share, from $170.57 million, or 38 cents a share, the previous year. Adjusted fourth-quarter profit of 11 cents per share beat the FactSet consensus estimate of 8 cents. Revenue fell 5% to $1.33 billion, aligning with analyst estimates.

For fiscal 2025, Under Armour expects adjusted earnings of 18 to 21 cents per share, significantly below the FactSet consensus estimate of 59 cents. The company plans to incur up to $50 million in cash-related restructuring charges and $40 million in noncash charges, including $22 million in employee severance costs. However, no specific headcount reduction figures were provided.

Plank stated that the company must focus on creating innovative products that address athletes' needs and effectively communicate their benefits. He announced a refocus on Under Armour's core men's apparel business, moving away from the previous emphasis on growing its female audience. This shift had led to the men's apparel business becoming "promotional and commoditized," negatively impacting the brand's perception. Plank committed to rectifying this issue.

Given the new leadership and product development timelines, Under Armour does not expect to launch new products until its fall-winter 2025 collection, which corresponds to the second half of fiscal 2026. The company will also reduce promotional activities, cutting the number of sitewide promotional days by more than 50% and decreasing discount depths.

Plank clarified that the goal is not solely to position Under Armour as a premium brand but to maintain an open-minded approach. Additionally, Under Armour plans to repurchase up to $500 million of its common stock over the next three years.

Before Thursday's trading, Under Armour's stock had declined by 20% in 2024, compared to an 11.5% gain by the Nasdaq COMP. This restructuring plan and Plank's return aim to steer the company back towards growth and stability, addressing both market challenges and internal execution issues.

Valentyna Semerenko
Eric Ng
John Liu
Editorial Board
Bryan Curtis
Adan Harris
Managing Editor
Cathy Hills
Associate Editor

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