May 16 (Reuters) - Under Armour forecast a surprise drop in annual sales and projected profit below analysts' estimates on Thursday, as the apparel maker laid out a plan to simplify its business in the face of weak demand for its sportswear in the United States.
Shares of Under Armour were down 10% in premarket trading, after having fallen about 22% so far this year.
The company outlined a restructuring plan and said it expects to incur total pre-tax charges of up to $90 million, which include employee severance costs. It, however, did not disclose how many jobs would be affected.
"Due to a confluence of factors, including lower wholesale channel demand and inconsistent execution across our business, we are seizing this critical moment to make proactive decisions ... which will pressure our top and bottom line in the near term," said CEO Kevin Plank.
The company said it would focus on its core products and simplify its operations over the next 18 months as it looks to restore brand strength in the U.S.
The company expects its fiscal 2025 revenue to be down at a low double-digit percentage rate, compared with analysts' average expectation of a 2.1% rise to $5.83 billion, according to LSEG data.
It expects fiscal 2025 earnings to be between 18 cents and 21 cents per share, compared with analysts' expectation of 59 cents per share.
Under Armour's downbeat targets also echoed disappointing forecasts from sportswear peers Nike and Lululemon Athletica.
Shoppers in the United States have been looking for best bargains on their non-essential purchases as they tackle higher prices of food and rent.
Under Armour's revenue in its largest market, North America, fell 10% in the fourth quarter, with CEO Plank saying that 2024 was marked by "high inventories and a consistent drumbeat of promotions."
The company said it expects to reduce promotions and discounts in its direct-to-consumer business in fiscal 2025 to support margin growth.
Comments