Under Armour sales plummet 23% as coronavirus stalls turnaround plans

• Under Armour reported an adjusted loss of 34 cents per share in the first quarter on revenue of $930.2 million. 
• Apparel sales also dropped 23%, to $598 million, while footwear revenue was down 28% to $210 million and accessories revenue declined 17% to $68 million, the company said. 

An Under Armour store is seen on November 04, 2019 in Sunrise, Florida.

Joe Raedle | Getty Images

Under Armour on Monday reported a sales decline of 23% during its first quarter as its business took a blow from the coronavirus pandemic and its stores were forced shut, freezing its turnaround plans. 

The athletic apparel company said it plans to cut about $325 million in operating costs in 2020 to help it weather the crisis, including by temporarily laying off some retail employees. 

During a conference call with analysts, it said it expects revenue could be down as much as 50% to 60% during the second quarter, as demand for its merchandise remains constrained. The company said it predicts the second quarter to be the most challenging to work through, and the rest of the year will be highly promotional. 

Its shares were down more than 9% following the release. 

Here's how Under Armour did during its fiscal first quarter ended March 31: 

• Earnings per share: A loss of 34 cents, adjusted 
• Revenue: $930.2 million 

"Since mid-March, as the pandemic accelerated dramatically in North America ... and retail store closures ensued, we've experienced a significant decline in revenue across all markets," CEO Patrik Frisk said in a statement. 

Under Armour reported a net loss of $589.7 million, or $1.30 per share, compared with a profit of $22.5 million, or 5 cents per share, a year earlier. 

Excluding one-time charges, the company lost 34 cents per share. 

Under Armour said it expects to report $475 million to $525 million in pretax restructuring costs this year as it looks to revive its business. During the first quarter, it recorded $436 million in restructuring and impairment charges. 

Net revenue fell 23% during the first quarter, to $930.2 million from $1.20 billion. Under Armour said roughly 15 percentage points of the decline stemmed from the Covid-19 crisis. 

Apparel sales also dropped 23%, to $598 million, while footwear revenue was down 28% to $210 million and accessories revenue declined 17% to $68 million, it said. 

Analysts had been calling for the company to report an adjusted net loss of 19 cents per share, on revenue of $949 million, according to a poll by Refinitiv. However, it is difficult to compare reported earnings to analyst estimates for Under Armour's first quarter, as the coronavirus pandemic continues to hit global economies and makes earnings impact difficult to assess. 

The company said it ended the first quarter with cash and cash equivalents of $959 million. Inventories were up 7%. It also said it expects to spend about $100 million on capital expenditures this year compared with prior expectations of $160 million. 

Under Armour has been struggling to gain momentum on its home turf in the U.S., competing with the likes of Nike, Adidas and Lululemon. 

"With Under Armour having slower sales momentum than its competitors, we expect sales to be under greater pressure near-term and for its sales trend to take longer to recover," Telsey Advisory Group analyst Cristina Fernandez said in a post-earnings note to clients. 

The Baltimore-based company, known for its sweat-wicking workout gear, relies heavily on its wholesale partners, including some department store chains, which have also been hit hard by the coronavirus and forced to close their doors temporarily. 

Under Armour's wholesale revenue fell 28% to $592 million during the first quarter. 

In North America, which marks its largest business region and accounts for roughly 65% of total sales, revenue fell 28% to $609 million. International sales dropped 12% to $287 million. 

As some retailers such as Macy's and Gap are slowly beginning to get some of their locations back up and running, Under Armour said Monday, "the pace and timing of store openings, and traffic patterns when the stores re-open, remain highly uncertain." 

As of Friday's market close, Under Armour shares were down almost 54% this year. The company has a market cap of $4.5 billion. 

Find the full earnings report from Under Armour here.