Under Armour to lay off 400 more workers as restructuring continues

Under Armour plans to slash its global workforce by 400 workers by early next year, a move the Baltimore-based brand said is necessary as it seeks to rejuvenate sales of athletic apparel and shoes in a market dominated by rival Nike.

The layoffs of 3 percent of its employees is the latest phase in Under Armour’s restructuring that began last year after the fast-growing company stumbled toward the end of 2016 amid intense competition, closures of key retailers and changing consumer tastes in the sports apparel category.

As sales growth stalled, Under Armour brought in a new president to help founder and CEO Kevin Plank. It subsequently announced layoffs of 2 percent of its workforce in August 2017 and a round of cost-cutting in February that included ending leases and other contracts.

The latest round of job cuts shows that Plank and Under Armour are serious about the turnaround, some analysts said Thursday.

The company’s shares jumped more than 5 percent Thursday to close at $18.15 each.

“It’s really in line with the vision they set out a little while back,” said Jason Moser, a senior analyst with Motley Fool. “Instead of trying to grow top line revenue, it was about getting back to basics and becoming lean and efficient and delivering the profitability on the revenue they are capable of generating today. This is a perfect indicator that they are following through on that promise.”

Moser said the company had become bloated over years of fast growth.

“It stinks that people are losing their jobs,” he said, “but for the company this is the right thing to do.”

The company declined to say where the layoffs announced Thursday are planned or how the cuts would affect the Baltimore headquarters, where 1,953 people are employed in corporate jobs. Under Armour has another 800 workers in Maryland in stores and distribution centers.

Last year’s round of 280 layoffs included cuts at the Locust Point headquarters, a distribution center in Curtis Bay, an outlet store near the warehouse and a brand House store in Harbor East.

“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 David Bergman, Under Armour’s chief financial officer, in the announcement. “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.”

Under Armour, at 22 years old, is younger and smaller than rivals Nike and Adidas. But the brand had experienced sales growth of 20 percent or more for nearly seven years before the end of 2016, as Plank vowed to overtake the rivals.

Since sales faltered, the company has worked to reverse a slide in sales and stock price.

In a way, the brand is struggling with its very identity, said Peter Lorenzi, professor of management Loyola University’s Sellinger School of Business. It started out strong as an athletic brand and is trying now to maintain that focus while also establishing itself as a lifestyle brand.

“The fact that [Under Armour] is selling to a store like Kohl’s tells us something about the brand and the way the customer sees it, in a way Nike doesn’t have to deal with,” Lorenzi said.

Nike has benefited from Under Armour’s struggles, he added.

Under Armour’s began shifting its growth strategy after bringing in longtime footwear and apparel executive Patrik Frisk as president in July 2017. The company has revamped its structure and operations while remaking the way it designs and delivers products across the globe. The turnaround is aimed at improving product distribution and bringing excess levels of inventory under control.

Still, one analyst said Thursday, key measures such as compound annual growth rate and profit margins have not improved despite the ongoing restructuring.

Large retailers such as Dick’s Sporting Goods and Hibbett Sports have been cutting back on Under Armour business, wrote Sam Poser, an analyst with Susquehanna Financial Group, in a report. He noted that Dick’s plans to reduce Under Armour shelf space in fiscal 2018 because of brand dilution that has come from its expansion into Kohl’s, a department store chain known for its promotional discounting.