Under Armour, Inc. (UAA) has announced an expansion of its restructuring strategy for fiscal 2025, aimed at enhancing supply-chain operations and boosting business efficiency. The company initially estimated pre-tax restructuring expenses to be between $70-$90 million but has now revised this figure to $140-$160 million. This change is primarily driven by the decision to phase out one of its primary distribution centers in Rialto, California, by March 2026.
This restructuring signifies Under Armour’s commitment to streamlining its operations and optimizing its supply chain. While the updated plan will lead to increased short-term costs, the company aims to emerge as a more agile and financially robust entity in the long run.
Financial Impact of Restructuring
The financial impact of Under Armour’s restructuring plan is expected to be substantial, encompassing both cash-related and non-cash expenses. The company anticipates cash-related charges of up to $75 million, with $30 million allocated for severance and employee benefits, and an additional $45 million designated for various transformation initiatives aimed at improving operational efficiency. Additionally, non-cash charges are estimated to be around $85 million, including $7 million in severance-related costs and $78 million in impairments associated with 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 projects that approximately two-thirds of the total restructuring costs will be recognized by the end of fiscal 2025.
UAA’s Revised Financial Projections
Following the expanded restructuring efforts, Under Armour has adjusted its fiscal 2025 financial outlook. The company now projects an operating loss in the range of $220-$240 million, an increase from the previously anticipated 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. The company has also revised its expectations for loss per share, which is now estimated to be between 58 cents and 61 cents, compared to 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 represents a significant step forward in its efforts to streamline operations and reduce costs. The decision to exit a key distribution facility, alongside other transformational initiatives, has led to an increase in projected restructuring expenses. Despite the immediate financial impact, including higher projected losses, the company aims to create a more agile and efficient business structure for sustainable growth 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’s goal is to position itself for sustained profitability and growth in the coming years. The company’s shares have risen 9.4% in the past three months against the industry’s 10.9% decline.
