Under Armour Inc., announced it was working to cut costs as store shutdowns related to the ongoing global health nightmare dealt a heavy blow on sales, and the firm warned it sees more hardships down the road.
On Monday, the sports apparel retailer posted sales of $930.2 million in the first quarter, down 23 percent from the previous year. Under Armour said the Covid-19 crisis has triggered the bulk of the downturn, or 15 percentage points. Revenue in the second quarter could fall as much as 60 percent, executives bared in a call with stakeholders.
The company pointed out that it plans to slash operating costs by about $325 million this year to help it weather the storm, including temporarily laying off some retail workers.
Under Armour reported that demand for its goods remains limited during a conference call with analysts. The business said it expects the second quarter to be the most difficult to work through, and will be highly promotional for the rest of the year.
The company's stock dropped 3.3 percent in Monday's pre-market session after reporting wider-than-projected first-quarter losses. Net losses totaled $559.7 million, or a loss of $1.30 per share, following last year's net sales of $22.5 million, or 5 cents per share.
Under Armour has been seeing losses in its North American stores and this quarter was no different. Revenues from this region were down 27 percent while global sales were 11 percent lower year on year. Total sales fell 22 percent to $930 million, with about 15 percentage points of the drop linked to the pandemic.
Gross margin in the quarter positively increased 110 basis points as the company gained from lower off-price revenues, but labor expenses grew even as revenue dropped and the company ended the quarter with a $122 million adjusted operating loss. In the end, it posted an adjusted loss per share of $0.34, which is worse than estimates of a loss of $0.19.
As an unprecedented economic and human damages linked to the pandemic continue to unfold all over the world, the company said it is putting more premium on the health and welfare of its workers and customers, Under Armour president and chief executive officer Patrik Frisk, disclosed in a statement.
Under Armour had been on course with a planned rebound in January and February, the CEO said, even as shops across China starting to shut down in late January. The outbreak was first reported in Wuhan, China, and makes up slightly over 50 percent of the brand's sales in the Asia-Pacific region.
