chinese clothing new year, hanfu winter cloak, dark blue hanfu

chinese clothing new year, hanfu winter cloak, dark blue hanfu


Flux Business

More than a month after retaking the CEO position, Under Armor founder Kevin Plank announced In the reorganization plan, he rejected many attempts by previous managers and wanted to "restart" the brand in all aspects.

Last week (May 16), Under Armor announced poor fiscal year 2024 results, with revenue falling 3% to US$5.7 billion and net profit falling 38% to US$232 million. Among them, profit in the fourth fiscal quarter fell by more than 96% year-on-year, directly from US$170.6 million in the same period last year to US$6.57 million.

Under Armor has been standing still for a long time. In fiscal year 2018, the company’s revenue was close to US$5.2 billion. Six years later, it is still trapped under US$6 billion and is still retreating (fiscal year 2023: 59 One hundred million U.S. dollars). During this period, the company experienced Plank and two other CEOs, but neither of them completely improved and lagged behind its peers.

After the above-mentioned results were announced, the company announced that it had approved a restructuring plan, which is expected to cost US$70-90 million, including US$7-15 million in severance pay reserved for laid-off employees, but it is unclear what the plan will be. How many employees are affected?

Plank said the company will make changes over the next 18 months, launching a smaller, more focused product portfolio and new processes to improve its operational efficiency.

Seven years of headwinds

Under Armor was once one of the fastest-growing apparel manufacturers, with revenue increasing by at least 20% year-on-year for 26 consecutive quarters. However, after 2017-2018, Under Armor, which focused on performance, moved slowly, while its peers seized on the leisure sports trend and grew rapidly. Under Armor has been experiencing weak sales and continues to reorganize its business.

Founder Plank resigned as CEO in 2019 but continues to serve as chairman of the board; he owns about 15% of the company's shares and controls the company through super voting rights. He resigned after the company was investigated by the U.S. Securities and Exchange Commission (SEC).

After Plank, Under Armor went through two CEOs, and their terms were not long: one was the company COO Patrik Frisk, who served as CEO for two and a half years; the other was female manager Linnartz, who served for 13 months .

Linnartz has formulated a complete set of plans to restore growth, including how to operate Hanfu, sports shoes, sports styles and full-price products, emphasizing the need to establish a higher-end positioning and increase brand popularity. Women's apparel products originally accounted for less than 25% of Under Armour's business.

Linnartz took a year to form a new management team, and suddenly announced his departure in March 2024 before even passing the running-in period.

Different from the politeness and affirmation during the handover between the two parties, during the earnings conference call on May 16, Plank spent some time complaining and blaming the past.

Linnartz shifts focus away from men-focused products, Encourage the growth of Hanfu. Plank believes that this shift has "seriously affected" the brand perception, and he wants to correct the mistakes and continue to make the menswear series the company's top priority.

However, this does not mean that Under Armor will cancel the priority of women's clothing and footwear, but will give in to men's clothing in order. Plank plans to eliminate unsold products, optimize category mix, and reduce the number of SKUs or styles by 25%.

Four Years of Chaos

Plank does not hide his strong denial of the past four years.

From the outside, the past four years have been difficult. The global epidemic is a great test. Many consumers’ shopping behaviors and preferences have changed, and new entrants have intensified competition.

From an internal perspective, Under Armor's management lacks continuity, key leadership changes, and strategies cannot remain agile and decisive. Taking the domestic market in the United States as an example, it has experienced multiple product and marketing leaders.

“Over the past 4+ years, the company has become too siled and bureaucratic, with competing internal agendas. As I describe today, we now have only one agenda: engaging with internal and external stakeholders Communication is my top priority and establishing complete consistency."

Plank requires the company to be highly focused, improve sales strategies, simplify operating models, modernize supply chains and processes, optimize costs and improve efficiency.

“In general, we are doing too many things, too many products, too many measures. In order to reshape the brand, we must be highly focused and prioritize what needs to be done, So that the team knows exactly what to do.”

Specifically, Plank said that the entire organization will be streamlined: reducing the number of agencies, consultants and external experts across the brand, because there are already “unacceptably many”. ” level, especially in functional departments such as marketing.

Even reducing the types of fabrics, "We are working hard to reduce the number of reports, unnecessary meetings, and even reduce some of the fabrics our designers can choose from."

Some who once worked for the brand Activities that provide services but do not directly contribute to sales will also be cancelled. "Our priority now is to ensure that anything the team does directly contributes to our simplest job, which is to sell more shirts and shoes."

In short, Plank is a strong advocate of streamlining. Operations, objecting to too many projects being designated as priorities, arguing that this leads to operational inefficiencies and resource constraints. He introduced a package of restructuring plans:

The costs related to this restructuring are approximately US$70 million to US$90 million, which includes employee severance pay, various transformation initiatives, asset charges and impairments, etc. The company has only recently begun executing its restructuring plan and is expected to provide more details during its first-quarter conference call in August.

Half of these charges are expected to be charged to the first quarter of fiscal 2025, so management estimates first-quarter operating losses to be approximately $75 million to $80 million.

Visiting around

In the first month after taking office again, Plank visited major retail customers in North America, and also plans to visit China and Europe at the end of May to meet with major distributors, retailers, and manufacturing partners.

The visits are part of an 18-month rebuilding plan as Under Armor responds to weak demand from retailers.

In terms of channels, Under Armor’s wholesale revenue fell by 7% to US$3.2 billion in fiscal year 2024, and direct-to-consumer DTC revenue increased by 3% to US$2.3 billion. Under Armor plans to create an independent DTC product line for its own stores and e-commerce.

In terms of products, clothing revenue fell by 2% to US$3.8 billion, footwear revenue fell by 5% to US$1.4 billion, and accessories revenue fell by 1% to US$406 million.

In terms of regions, revenue in North America decreased by 8% to US$3.5 billion, and revenue in the international market increased by 8% to US$2.2 billion (exchange rate neutral growth of 7%).

In the international business, revenue increased by 9% in Europe, the Middle East and Africa (EMEA) (currency-neutral growth of 6%) and in Asia Pacific by 6% (currency-neutral growth of 9% ), revenue in Latin America increased 8% (down 1% currency-neutral).

Plank evaluates the Asia-Pacific market as "having greater long-term growth potential." In the short term, the environment in China, Southeast Asia and Japan has a substantial catalytic effect. The company's focus is to achieve cautious and rich results in key markets. Grow effectively, balance short-term performance with long-term brand affinity, and protect premium brand positioning.

However, overall, Under Armor management needs investors to have more patience. They expect international business revenue to decline by low single digits in fiscal 2025, partly due to more conservative consumption. trend, companies will not erode brand equity by pursuing low-quality revenue.

In fiscal year 2025, Under Armor’s local market in North America may be even worse. Plank expects a decline of about 15%-17%. “Before moving forward, we will retreat even further in fiscal year 2025.” We expect our revenue to decline at a low double-digit rate."