Just days after Under Armor jumped into the mask-making game as it realized its core business of selling sports leisure apparel in overseas and domestic markets collapsed because the virus pandemic has led to global quarantines and shuttering of non-essential businesses. The Baltimore-based sportswear maker announced Friday that its retail stores would remain closed indefinitely and lay off 6,700 employees, reported The Baltimore Sun.
"This unanticipated shock to our business has been acute, forcing us to make difficult decisions to ensure that Under Armour is positioned to participate in the eventual recovery of demand," Patrik Frisk, CEO and president, said in Friday's announcement.
"We do not take these decisions lightly and are doing all we can to minimize the impact on our teammates during this time," Frisk said.
Under Armour pulled its previous financial guidance for 2020 and initiated its restructuring plan that will cost $475 to $525 million for this fiscal year. The fate of its 188 North America stores is unknown at the moment, have been closed since March, and will remain closed "until further notice."
Frisk said the company is seeing a "significant decline in revenue" while its stores remain closed. With lockdowns expected across the country to last through late April, the financial blow to the company could be devastating.
Under Armour, likely so many other companies, have drawn on their credit lines to survive the virus crisis crashing the US economy into a depression for the second quarter. The company said it has taken out $700 million on a revolving credit facility "to increase its cash position and preserve liquidity."
We noted in February that Under Armour "estimated negative impact of the coronavirus outbreak in China of approximately $50 million to $60 million in sales related to the first quarter of 2020."
Under Armour's top executives have taken a 25% salary cut, along with the board of directors have had their compensation reduced by 25% during the crisis.
"There's not much else that Under Armour can do now since there's no way to know when the stores will reopen," said David Swartz, an analyst for Morningstar.
"Unfortunately, unlike Nike and Adidas, Under Armour is not an established brand in Asia, where a lot of stores have reopened. The restructuring and the abandonment of the flagship in NYC is reflective of the company's inability to turnaround its business even before the crisis," Swartz said.
"Because of the strength of our brand and the steps we have taken, we will weather this storm," Frisk said.
We guess the 'Under Armour bros' won't be having wild parties at Kevin Plank's Sagamore Farm this year – as it appears the company is on life support.