While Nike has been in the national spotlight for its ad campaigns and ensuing sales boost, one of its largest competitors, Under Armour, has been under pressure of another kind as it engineers a $200 million restructuring plan.
Under Armour unveiled the latest addition to this plan by announcing 400 job cuts, or approximately 3% of the company’s workforce. As part of the cuts, Under Armour will provide $10 million in severance payments. This is the second round of layoffs in the past year for the athletic brand, which cut nearly 280 jobs in 2017, including 140 at its Baltimore headquarters.
The cuts are expected to be completed by March 31, 2019 and represent the final component and update to the company’s 2018 restructuring plan. In total, the company now expects to incur approximately $200 million to $220 million of pre-tax restructuring and related charges in 2018. The restructuring also has included contract and facility lease terminations as well as inventory control efforts.
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With these job cuts in effect, Under Armour raised its estimates for operating income, but it anticipates operating losses will be on the deeper end. The company projected an operating loss of approximately $60 million for the full year of 2018, after previously forecasting losses in a range between $50 million and $60 million. Adjusted operating income could be slightly higher, between $140 million and $160 million, where the previous window had been between $130 million and $160 million.
In February, Under Armour said it expects “at least $75 million in savings annually beginning in 2019 and beyond” from restructuring plans implemented in 2017 and 2018.
The company is shifting to focus more on international expansion, rather than a U.S. market where its bigger rivals, Nike and Adidas, have asserted themselves as the top two players in athleticwear. Sales outside of North America accounted for 26% of the company’s total in Q2, and rose 28% year-over-year, compared with North American sales rising a mere 2%.
Both Nike and Adidas expect China to be a heavy growth market for sports apparel companies going forward. In particular, Under Armour believes that the Chinese market could hold the potential to become a billion-dollar plus market. In total, the APAC region represents 9.4% of the company’s total sales.
