Athletic apparel manufacturer Under Armour (UAA) (UA) lowered its FY25 guidance as the company now expects higher restructuring costs related to the closure of a distribution facility in a bid to strengthen its supply chain. CFO David Bergman expects the company’s restructuring measures to make Under Armour a “more efficient, uncomplicated, and agile company.”
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
UAA shares dipped 1.5% in after-hours trading on the news. Shares already closed down 4.2% in Monday’s regular trading.
Under Armour Faces Higher Restructuring Costs
Under Armour now forecasts pre-tax restructuring costs in the range of $140 million to $160 million for FY25 and FY26, up from the range of $70 million to $90 million guided earlier. After thorough consideration, the company decided to close one of its primary distribution facilities located in Rialto, California, by March 2026 to optimize its supply chain capabilities.
The higher costs will include $75 million in cash charges toward employee severance, benefits costs, and transformational initiatives. UAA expects to incur roughly 75% of the revised charges by the end of FY25. The company has already incurred $34 million in restructuring charges in the three months ended June 30, 2024.
Impact on UAA’s FY25 Guidance
Under Armour is in the midst of repositioning itself as a premium brand and cutting down on unnecessary promotions, inventory, and workforce expenses. Owing to the higher restructuring costs, the operating loss estimate for FY25 is widened to be between $220 and $240 million, up from $194 to $214 million.
Accordingly, the company expects a higher diluted loss per share in the range of $0.58 to $0.61 compared to the previous outlook of $0.53 to $0.56. It expects adjusted earnings per share (EPS) between $0.19 and $0.22 for the full year.
In its Q1 FY25 results reported in August, UAA beat both revenue and EPS expectations. Revenue fell 10% year-over-year to $1.18 billion but exceeded the consensus of $1.14 billion. Similarly, UAA recorded a surprise adjusted profit of $0.01 per share, while the Street had expected a loss of $0.08 per share.
Website Traffic Trends Hint at UAA’s Growing Business
Under Armour’s restructuring efforts to position itself as a premium brand seem to be working as the company is witnessing growing brand loyalty. According to TipRanks’ Website Traffic tool, the total estimated visits to all of Under Armour’s apps and websites worldwide increased by 19.71% in the year-to-date period compared to last year.
Is Under Armour Stock a Buy, Sell, or Hold?
Wall Street prefers to remain sidelined on the stock as Under Armour’s share price remains under pressure due to the ongoing macro headwinds. On TipRanks, UAA stock has a Hold consensus rating based on four Buys, 12 Holds, and three Sell ratings. The average Under Armour Class A price target of $7.40 implies that shares are almost fully valued at current levels. Notably, UAA shares have lost 15.1% so far this year.
