Under Armour Says Revenue Could Fall 60% This Quarter
Date: Tuesday, May 12, 2020
Source: The Wall Street Journal
Sports-apparel maker is hit by store closures during pandemic; shares tumble
The athletic-apparel retailer on Monday reported first-quarter revenue of $930.2 million, down 23% from a year earlier. The Covid-19 crisis caused the bulk of the decline, or 15 percentage points, according to the company. Revenue may drop as much as 60% in the second quarter, executives said on a call with investors.
Under Armour said it planned to cut $325 million from expected operating expenses for the year. Last month, the company said it would furlough about 6,600 employees beginning April 12. It also said Monday it plans to cut back on incentive pay, tighten spending on contracted services and reduce its planned capital spending by about $100 million.
“Since mid-March about 80% of our global business has been at a standstill,” Under Armour Chief Executive Patrik Frisk told investors on the call.
Shares of the Baltimore company were down 10% in midafternoon trading and are off about 58% year to date.
The challenge posed by Covid-19 comes as Under Armour operates under relatively new leadership. Mr. Frisk, formerly Under Armour’s operations chief, took over the top job in January, succeeding company founder Kevin Plank.
Apparel chains that have closed their doors to comply with social-distancing measures have turned to their e-commerce operations, but they have struggled without their main points of contact with shoppers. American Eagle Outfitters Inc., for example, said last month that it experienced a major drop in customer traffic and demand as it closed stores amid the pandemic.
Under Armour’s first-quarter revenue fell off starting in mid-March, when shops in markets including the U.S., Canada and Europe shut down, according to Mr. Frisk.
The company said its e-commerce operation, which typically delivers a low double-digit percentage of total revenue, has experienced better demand in North America and elsewhere since the start of the second quarter.
Under Armour recorded about $436 million in cash and noncash charges for the first quarter, including those tied to its flagship store in New York.
Overall, the company reported a net loss for the quarter of $589.7 million, or $1.30 a share, compared with a profit of $22.5 million, or 5 cents a share, in last year’s first quarter.
On an adjusted basis, the retailer’s loss on a per-share basis was 34 cents for the quarter.
Inventories at Under Armour at the end of March were up 7% from a year earlier.