By Holden Wilen | Baltimore Business Journal
Under Armour Inc. CEO Kevin Plank was not ready to declare victory as shares of the sportswear maker surged after reporting third-quarter earnings.
It's no secret the last two years have been difficult for Baltimore-based Under Armour, as it has dealt with slowing sales growth in North America and a backlog of inventory. Former Aldo CEO Patrik Frisk came on board as president last year and has been working hand-in-hand with Plank on a "transformation" of Under Armour that has included employee turnover, layoffs, new systems and other changes aimed at making the company operate more efficiently.
Plank and Frisk had said this year that the company was making progress on its goals, but Wall Street finally started buying in after Under Armour reported strong third-quarter results. The company beat profit and revenue projections while reducing its inventory more than expected. Analyst after analyst congratulated Under Armour on its results during an Oct. 30 conference call.
The confidence showed in Under Armour's stock price, as shares surged more than 25 percent that day.
Despite the progress, Plank said Under Armour still has "a lot of work to do." Under Armour's sales rose 2 percent in the third quarter to $1.4 billion but remained sluggish in North America, where they declined 2 percent. The overall growth continued to be a far cry from the 20 percent or more sales growth Under Armour reported for 26 straight quarters. That streak ended in 2016.
Plank admitted no one is "jumping up and down about the size of the growth," though he praised the company's ability to increase sales while undergoing a "seismic shift."
"We are not crazy about the sort of overall position," Plank said. "If you asked me if I'd say is business great, I don't know if it's great. … I think we are just doing fine. If we can do this sort of restoration of filling and really making strong this team and this operating structure, I think we're really going to be something to deal with in about another 12 months or so."
To turn Under Armour around, management implemented a restructuring plan expected to cost between $200 million and $220 million this year. That plan includes closing underperforming facilities and retail locations while laying off employees.
Under Armour also made changes to its organizational structure to improve category management and has tightened up its supply chain.
Photo Credit: Sabina Moran/PressBox
Issue 249: November 2018