Under Armour Inc. said the company’s restructuring program will now cost more than the company previously expected, as the company plans to cut about 400 jobs, or about 3 percent of the company’s global workforce, by March. At the same time, the company raised the lower end of the fiscal 2018 earnings forecast.
In a statement, Under Armour said the update to its 2018 restructuring plan was based on an organizational and process redesign intended to optimize the company’s strategic growth initiatives and overall business performance.
Previously, the company expected to incur total estimated pre-tax restructuring and related charges of approximately $190 million to $210 million in connection with its 2018 restructuring plan. Following further evaluation, the company has identified approximately $10 million of cash severance charges related to an approximate 3 percent reduction in its global workforce. Accordingly, it now expects approximately $200 million to $220 million of pre-tax restructuring and related charges to be incurred in 2018. The reduction in workforce is expected to be completed by March 31, 2019 and represents the final component and update to the company’s 2018 restructuring plan.
“In our relentless pursuit of running a more operationally excellent company, we continue to make difficult decisions to ensure we are best positioned to succeed,” said Under Armour Chief Financial Officer David Bergman. “This redesign will help simplify the organization for smarter, faster execution, capture additional cost efficiencies and shift resources to drive greater operating leverage as we move into 2019 and beyond.”
Updated Fiscal 2018 Outlook
Based on the operational efficiencies driven by this action, the company updated the following expectations for its full year 2018 outlook:
- Operating loss is now expected to be approximately $60 million versus the previous range of $50 million to $60 million. Excluding the impact of the restructuring plan, adjusted operating income is now expected to be $140 million to $160 million versus the prior expectation of $130 million to $160 million.
- Excluding the impact of the restructuring efforts, adjusted diluted earnings per share is now expected to be in the range of 16 cents to 19 cents versus the previously expected range of 14 cents to 19 cents .
The company had also ramped up its restructuring efforts when it reported second-quarter earnings on July 26. When the program was first announced on February 13, pre-tax restructuring and related charges were pegged at approximately $110 million to $130 million.
On July 26, the company said another $80 million of additional restructuring initiatives have been identified, and restructuring costs could expand to a range of $190 million to $210 million for 2018. In the second quarter, pre-tax costs totaling $85 million consisting of $64 million in cash related charges and $21 million in non-cash charges were recognized.
Based on the updated restructuring plan at the time, the costs of $190 million to $210 million was expected to include:
- Up to $155 million in cash related charges, consisting of up to $75 million in facility and lease terminations and up to $80 million in contract termination and other restructuring charges and
- Up to $55 million in non-cash charges comprised of up to $20 million of inventory related charges and up to $35 million of asset related impairments.
Photo courtesy Under Armour