Under Armour's Restructuring to Improve Supply Chain, Long-Term Growth

Under Armour, Inc. UAA has revised its fiscal 2025 restructuring strategy to include additional steps aimed at enhancing supply-chain operations and business efficiency. Originally, the company estimated pre-tax restructuring expenses to be in the range of $70-$90 million. After reevaluation, pre-tax restructuring expenses are anticipated to be in the range of $140-$160 million.

A major driver of this adjustment is the decision to phase out one of its primary distribution centers in Rialto, CA, by March 2026. This restructuring reflects Under Armour's broader goal of streamlining operations and refining its supply chain. While the updated plan will increase short-term costs, the company aims to emerge more agile and financially stronger in the long run.

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Financial Impact of Restructuring on Under Armour

The financial impact of Under Armour's restructuring plan is expected to be significant, involving both cash-related and non-cash expenses. The company projects cash-related charges of up to $75 million, with $30 million allocated for severance and employee benefits and an additional $45 million for various transformation initiatives aimed at improving operational efficiency. 

In addition, non-cash charges are anticipated to be almost $85 million. This includes $7 million in severance-related costs and $78 million in impairments tied to assets such as facilities, software and other resources. By the end of the first quarter of fiscal 2025, Under Armour had already incurred $34 million in restructuring costs, consisting of $19 million in cash-related charges and $15 million in non-cash expenses. The company estimates that approximately two-thirds of the total restructuring costs will be recognized by the end of fiscal 2025.

UAA's Revised Financial Projections

As a result of the expanded restructuring efforts, Under Armour has updated its fiscal 2025 financial outlook. The company now forecasts operating loss to be in the range of $220-$240 million, an increase from the previously expected range of $194-$214 million. However, excluding restructuring and litigation-related charges, adjusted operating income is projected to be between $140 million and $160 million.

Additionally, the company has revised its expectations for loss per share, which is now estimated to be between 58 cents and 61 cents, up from the earlier guided range  of 53 - 56 cents. On an adjusted basis, excluding the impact of restructuring expenses, Under Armour anticipates earnings per share to be in the range of 19 - 22 cents. These updated projections reflect the financial implications of the restructuring plan.

Conclusion

Under Armour's updated fiscal 2025 restructuring plan marks a significant shift in its efforts to streamline operations and cut costs. The decision to exit a key distribution facility, alongside other transformational initiatives, has led to an increase in anticipated restructuring expenses. Despite the immediate financial impact, including higher projected losses, the company aims to create a more agile and efficient business in the long term.

While the expanded restructuring will result in increased short-term costs, the adjusted earnings outlook, excluding these charges, remains positive. Under Armour aims to be better positioned for sustained profitability and growth in the years to come.

This Zacks Rank #3 (Hold) company's shares have risen 9.4% in the past three months against the industry's 10.9% decline.

Key Picks

Some better-ranked stocks are Boot Barn Holdings, Inc. BOOT, Abercrombie & Fitch Co. and Steven Madden, Ltd. SHOO.

Boot Barn operates as a lifestyle retail chain devoted to western and work-related footwear, apparel and accessories. It currently sports a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for Boot Barn's fiscal 2025 earnings and sales indicates growth of 8.9% and 10.7%, respectively, from the fiscal 2023 figures. BOOT has a trailing four-quarter average earnings surprise of 7.1%.

Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. ANF delivered a 16.8% earnings surprise in the last reported quarter.

The consensus estimate for Abercrombie's fiscal 2025 earnings and sales indicates growth of 61% and 12.6%, respectively, from the fiscal 2024 levels. ANF has a trailing four-quarter average earnings surprise of 28%.

Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Steven Madden's 2024 earnings and sales indicates growth of 6.9% and 12.6%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.5%.

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