Under Armour's next round of layoffs is protecting its business

  • Under Armour announced Thursday a new round of layoffs as part of its strategic growth initiatives.
  • The layoffs will increase operational efficiencies and benefit its bottom line, the company said, raising its full-year profit guidance.
  • Under Armour’s restructuring plans can protect its business, making its bottom-line guidance “achievable,” JPMorgan analysts said.
  • Watch Under Armour shares trade in real time here.

Under Armour‘s restructuring plans, including its next round of layoffs will provide a boost to its bottom line, according to JPMorgan analysts.

The sporting-apparel maker announced Thursday that it will cut its global workforce by 3%, or about 400 jobs, as part of its 2018 restructuring plan. It’s the second round of layoffs in the past year for the struggling athletic brand, which cut about 140 jobs at its Baltimore headquarters last August.

The layoffs will increase operational efficiencies and benefit its bottom line, Under Armour said. To reflect this, the company lifted its full-year guidance, and now sees its adjusted diluted earnings per share to be in the range of $US0.16-$US0.19 versus the previously expected range of $US0.14-$US0.19.

The company also said its adjusted operating income could be slightly higher, between $US140 million and $US160 million. It had previously forecast that number to between $US130 million and $US160 million.

“For FY19 our $US0.30 EPS estimate more/less matches the Street based on +4.0% revenue growth (below Street at +5.7%) with embedded +$US70M EBIT dollar expansion inclusive of $US75M+ restructuring savings outlined to date potentially proving conservative in our view,” JPMorgan analysts said.

Under Armour shares tumbled as much as 79% since their peak in September 2015. They bottomed out in the second half of 2017 when the company was having issues getting its inventory under control. Since then, the athletic brand undertook an ambitious its restructuring plan.

Under Armour’s bottom-line guides are “achievable” and the strategic growth initiatives are helpful, according to JPMorgan.

The JPMorgan team upgraded their rating to “neutral” from “underweight” and has a price target of $US20 – right around where shares were trading on Friday. The firm’s previous price target was $US16.

Under Armour shares are up 36% this year.

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