Under Armour faces major cash problem
On Thursday, Under Armour announced that it will add $80 million to its previous $130 restructuring plan. The sports apparel company also announced losses of almost $96 million last quarter, compared to just $12.3 million last year.
The company is shifting its focus away from expensive shoes and apparel and leaning into cheaper sneakers and more casual clothing. This is certainly working, as last quarter’s sales rose over one percent year-over-year.
CEO Kevin Plank told investors, “We are tracking well against our multi-year transformation to build a stronger, leaner and more operationally excellent company…[But] no one is at any way declaring victory.”
Although the company’s sales are looking up, this might not be enough to counteract the seemingly never-ending mountain of debt they’re building. If they have to keep funneling cash into their development just to compete against Nike and Adidas, then they will not survive long.
Nevertheless, even after the announcement, Under Armour’s stock rose over 4 percent on Thursday. This likely stems from sales having beaten expectations in Q2.
The company may be turning things in the short term, but they will need to figure out a new strategy besides dumping money onto their problems. While this strategy may work now, it is not sustainable and could prove to cause the company’s collapse.
Featured image via Flickr/Maryland GovPics