Shares of Under Armour, Inc . UAA gained 6.6% during the trading session on Sep 20, following its announcement to reduce 3% of its global workforce as part of 2018 restructuring process. The move, which is likely to impact jobs of 400 employees, is expected to be concluded by March 2019.
On account of this restructuring process, Under Armour expects to incur charges of $200-$220 million, reflecting an increase of $10 million from its prior estimate of $190-$210 million. The increase in charges is due to severance expenses.
Through this restructuring plan, the company intends to simplify its organizational structure, attain cost effectiveness and operational efficiencies, and allocate resources in best alternatives. This allowed management to raise the lower end of its fiscal 2018 earnings view. Management now projects adjusted earnings to be 16-19 cents per share, up from 14-19 cents expected earlier.
Management now envisions operating loss to be approximately $60 million compared with the earlier forecast of $50-$60 million. However, excluding the impact of the restructuring plan, adjusted operating income is likely to come between $140 million and $160 million compared with the prior projection of $130-$160 million.
The aforementioned announcement has provided cushion to this Zacks Rank #3 (Hold) stock, which otherwise has declined 10.6% in the past three months against the industry
's growth of 2.7%.
We believe that Under Armour's sustained focus on brand development, and expansion of DTC and technology-based fitness businesses bode well. Apart from rolling out e-commerce platforms, the company constantly seeks opportunities to expand footprint. It remains focused on international expansion to offset sluggish sales from the North America segment. Management expects revenues from the region to decline in low to mid-single digit in 2018.
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