Under Armour Laying Off 140 Baltimore Employees Amid Restructuring Plan

South Baltimore’s Under Armour will be laying off 280 total employees, including 140 Baltimore-based employees, as part of a restructuring plan. The company has 3,500 Baltimore employees and a total of 15,000 around the world. The restructuring plan comes amid Under Armour’s net loss of $12 million in the second quarter of 2017.

Under Armour said the following in a statement:

“Under Armour has experienced extraordinary growth over the last three years where we have more than doubled our revenue from $2.3 billion to $4.8 billion and our teammate headcount from 8,000 to 15,000 worldwide. Amid a rapidly changing global retail landscape, we evaluated several areas of our business where we could improve efficiency and ensure increased agility to continue to deliver best-in-class product to serve the needs of today’s consumer. As a result, we are streamlining all aspects of our organization to improve our business operations and deliver against our long-term strategic goals. As a part of this new alignment, a workforce reduction will impact approximately 2 percent of our global workforce. As we execute against these difficult and necessary steps to evolve from good to great operations, our vision remains the same – making all athletes better through passion, design and the relentless pursuit of innovation.”

About the restructuring plan from an Under Armour press release:

Under Armour’s Board of Directors has approved a restructuring plan to more closely align its financial resources to support the company’s efforts to better serve the evolving needs of the changing consumer and customer landscape.

“As we stand up our category management structure within a consumer-led approach, we intend to meaningfully increase our go-to-market speed and amplify our digital capabilities,” continued Plank. “We’ve identified a number of areas to enhance our operational capabilities, drive process improvement and gain greater efficiencies. We remain steadfast in driving and building our brand while shifting our operational focus to become more return-on-investment and cost of capital centric – institutionalizing discipline to deliver more consistent, long-term shareholder value.”

In conjunction with this plan, the company expects to incur total estimated pre-tax restructuring and related charges of approximately $110-130 million in fiscal 2017, including approximately:

• Up to $70 million in cash related charges, consisting of up to: $25 million in facility and lease terminations, $15 million in employee severance and benefits costs, and $30 million in contract termination and other restructuring charges; and,
• Up to $60 million in non-cash charges comprised of approximately $20 million of inventory related charges and approximately $40 million of intangibles and other asset related impairments.

While revenue was up for Under Armour in the second quarter, the company experienced an operating loss. From the press release:

Second Quarter Review

• Revenue was up 9 percent to $1.1 billion, up 8 percent currency neutral.
  • Revenue to wholesale customers rose 3 percent to $655 million and direct-to-consumer revenue was up 20 percent to $386 million.
  • A dynamic and promotional retail environment in North America continued to temper results with revenue in line with last year’s same period. Outside North America, the strong momentum continued with international revenue up 57 percent (up 54 percent currency neutral), representing 22 percent of total revenue. Within our international business, revenue in EMEA was up 57 percent (up 53 percent currency neutral), up 89 percent in Asia-Pacific (up 87 percent currency neutral) and up 10 percent in Latin America (up 9 percent currency neutral).
  • Apparel revenue increased 11 percent to $681 million including strength in men’s and women’s training, and golf. Footwear revenue was down 2 percent to $237 million, against last year’s same period which was up 58 percent due to significant strength in basketball sales. Accessories revenue increased 22 percent to $123 million with strength in men’s and women’s training, and youth performance.
• Gross margin declined 190 basis points to 45.8 percent as benefits from channel and product mix were offset by inventory management initiatives, changes in foreign currency rates, and higher air freight in connection with our enterprise resource planning (ERP) system implementation, which impacted the timing of shipments to certain key customers.
• Selling, general and administrative expenses increased 10 percent to $503 million, or 46.2 percent of revenue (up 40 basis points), due to continued investments in the direct-to-consumer, footwear and international businesses.
• Operating loss was $5 million. Including other interest and expense, there was a net loss of $12 million in the second quarter and a $0.03 loss in diluted earnings per share.
• Inventory increased 8 percent to $1.2 billion.
• Cash and cash equivalents increased 37 percent to $166 million.

“Our second quarter performance validates the strength of our multiple growth levers to deliver solid results in today’s dynamic global environment,” said Under Armour Chairman and CEO Kevin Plank in the press release. “More than doubling our business over the last three years has required significant investments and resources to build our brand. We are utilizing 2017 to ensure that operations across our diverse portfolio of sport categories, distribution channels and geographies are optimized as we are building a stronger, faster and smarter company.”

Under Armour expects 9 to 11 percent net revenue growth in 2017, according to its 2017 outlooks.

Under Armour hired Patrik Frisk as its new President and COO in July.

Under Armour, which is currently headquartered at Tide Point in Locust Point, is planning a new 50-acre, 3.9 million sq. ft. campus at the former Port Covington Shopping Center. Under Armour gave the following statement to Baltimore Business Journal:

Under Armour spokeswoman Diane Pelkey said that the first phase of a 3.9 million-square-foot development for a global corporate centerpiece at Port Covington “will progress as required to accommodate this pace.”

“Under Armour is maximizing the value and efficiency of its existing portfolio of assets, including Tide Point and Port Covington,” said Pelkey, senior vice president for communications for Under Armour. “This direction is consistent with UA’s strategic approach, where the company is focusing investment in its core business growth and expansion. UA remains committed to Baltimore and the future expansion in Port Covington.”

Under Armour completed what it calls “Phase Zero” in January 2016. This included the conversion of the former Sam’s Club into Building 37, a 170,000 sq. ft. office, café, and amenity space. The former Walmart has also been used for Under Armour sample sales.

Phase One was expected to begin in 2017 but a construction start date has not yet been announced. This phase will feature buildings, totaling more than 500,000 sq. ft. of space, and a 1,500-space parking garage, which will be expanded to 5,000 spaces in the future. The buildings include two nine-story office buildings totaling more than 300,000 sq. ft. of space, and two one-story “plinths” adjacent to the buildings. Under Armour will also construct a new visitor center.

Under Armour’s campus is part of a $5.5 billion, 266-acre proposed redevelopment of Port Covington by Kevin Plank’s Sagamore Development Company.

Renderings courtesy of Under Armour

About the Author: Kevin Lynch

Founder and Publisher of SouthBmore.com, longtime resident of South Baltimore, and a graduate of Towson University. Diehard Ravens and O's fan, father of three, amateur pizza chef, skateboarder, and "bar food" foodie. Email me at Kevin@InceptMM.com and follow me on Twitter at @SoBoKevin.