Under Armour Inc. said it was revising its previously issued outlook for the full year and second quarter of 2016 following recent developments related to the bankruptcy proceedings of The Sports Authority.
“During the first quarter of 2016, the company became aware of the potential restructuring of The Sports Authority,” officials said. “As previously stated, at that time the Under Armour did not believe that the exposure to its receivables from The Sports Authority was materially impacted and the company announced its intention to continue to support The Sports Authority as it proceeded through its restructuring, including support through continued sales in 2016.”
Given the recent decision of the bankruptcy court to approve the liquidation of The Sport Authority’s business rather than a restructuring or sale of the ongoing business, Under Armour now expects to recognize an impairment charge of approximately $23 million related to The Sports Authority during the second quarter of 2016. In addition, due to the bankruptcy, the company was only able to recognize $43 million of the originally planned $163 million in revenues with The Sports Authority for 2016.
As a result of this impairment as well as the loss of further planned sales to The Sports Authority, the company now expects 2016 net revenues of approximately $4.925 billion, representing growth of 24 percent over 2015, and 2016 operating income of approximately $440 million to $445 million.
With regard to the second quarter of 2016, the Under Armour continues to expect revenue growth to be in the high 20s percent range, consistent with previously issued guidance. However, as a result of the impairment noted above, operating income is now expected to range from $17 million to $19 million, and the company’s tax rate for the second quarter is expected to be approximately 70 percent.
Kevin Plank, chairman and CEO of Under Armour, stated, “While The Sports Authority’s bankruptcy impacts our 2016 outlook, our brand’s momentum is stronger than ever as we continue to see growth and increased demand across all categories and geographies. This one-time event will not impact our focus on making the best decisions for Under Armour through investments that protect and drive our growth.”
Photo Courtesy Under Armour
