Is This the Turnaround for Under Armour?

Under Armour Inc. (NYSE: UAA) reported its fourth-quarter financial results before the markets opened on Tuesday. The company said that it had less than $0.01 in earnings per share (EPS) on $1.37 billion in revenue, which compares with consensus analyst price targets that are calling for breakeven earnings and $1.31 billion in revenue. In the same period of last year, the company said it had EPS of $0.23 and $1.31 billion in revenue.

Previously, Under Armour had reported a restructuring plan, and after additional review, it has announced an additional 2018 restructuring plan identifying further opportunities to optimize operations. In conjunction with this plan, roughly $110 million to $130 million of pretax restructuring and related charges are expected to be incurred, including the following:

• Up to $105 million in cash-related charges, consisting of up to $55 million in facility and lease terminations and up to $50 million in contract termination and other restructuring charges
• Up to $25 million in noncash charges, comprised of up to $10 million of inventory-related charges and up to $15 million of asset-related impairments

Separately, Under Armour’s segments for the fourth quarter were reported as follows:

• Apparel net revenues increased 2.5% year over year to $951.67 million.
• Footwear net revenues grew 9.5% to $246.2 million.
• Accessories net revenues increased 6.1% to $110.67 million.

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Looking ahead to the 2018 full year, the company expects to see adjusted operating income in the range of $130 million to $160 million and revenues up in the low single-digit range. The consensus estimates call for $0.22 in EPS on $5.13 billion in revenue for the year.

On the books, Under Armour cash and cash equivalents totaled $312.48 million at the end of the quarter, up from $250.47 million in the same period of last year.

Kevin Plank, Under Armour board chair and chief executive, commented:

After years of rapid growth and building a globally recognized brand, the dynamic landscape of 2017 was a catalyst for us to begin strategically transforming Under Armour into an operationally excellent company. A year into this journey, our fourth quarter and full year results demonstrate that the tough decisions we’re making are generating the stability necessary to create a more consistent and predictable path to deliver long-term value to our shareholders.

Shares of Under Armour closed Monday at $14.23, with a consensus analyst price target of $13.08 and a 52-week range of $11.40 to $23.46. Following the announcement, the stock was up about 11% at $15.86 in early trading indications Tuesday.

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