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The Upside of Under Armor's Second Round of Layoffs

By Motley Fool Staff - Sep 26, 2018 at 10:45AM

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It’s never good to hear about people losing their jobs, but the athletic-gear maker really needed to adjust its strategy and its headcount.

In this segment from the Motley Fool Money podcast, host Chris Hill and his guests, Fool senior analysts Jason Moser, Matt Argersinger, and Ron Gross, talk about former Wall Street darling Under Armour ( UA 1.50% ) ( UAA 1.71% ), which has in recent years lost its mojo with both consumers and investors. The athletic-apparel company's CFO and the executive team have been pushing for a pivot to near-term profitability rather than revenue growth, and CEO Kevin Plank is listening. The Fools talk about where the company will be headed in the next year, its long-term plans, its direct-to-consumer sales channel, and more.

A full transcript follows the video.

This video was recorded on Sept. 21 , 2018.

Chris Hill: The restructuring continues for Under Armour. The sports apparel company announced its second round of layoffs in the past year. Jason, we don't like seeing people lose their jobs. Hopefully Under Armour is, if nothing else, getting smarter about how to run their business.

Jason Moser: On the headlines, it is more people losing jobs. But from the investor's perspective, this really is an indicator that CEO and founder Kevin Plank is listening to his team and acting on their advice. In this case, CFO David Bergman. They laid this goal out earlier in the year. Instead of focusing on top line revenue and growing this business as fast as they can, to get back to where they are at this stage of the game. Focus on what they have, trim the company down, get rid of the fat, focus on profitability, become more efficient, become leaner. And then, over time, if you run a good business, it will grow. If you have a brand that people want, it will grow. If you make products that people want, they will buy them, and your business will grow. This really is in line with that goal. I think it makes a lot more sense.

I think that one of the biggest mistakes Kevin Plank made -- with all of his success -- I think the mistake that he made was always pinning his desire to supplant Nike as the No. 1 athletic brand of the world. I think you can do that, but you can't ignore the fact, it took Nike a while to get there. You can't just say you want to do that then do it overnight. Time is a part of that equation. Under Armour is going to have to put in some time to do that. I think that they've got some decision-making going now that has this company headed back in the right direction.

Hill: In terms of the next 12 months for Under Armour, how big is the e-commerce channel? One of the things we've seen recently with Nike is, they've done a good job of building that out.

Moser: With Under Armour, it's very much the same story. We see, with Sports Authority going under, with Dick's Sporting Goods having its own challenges, Nike and Under Armour continue to push that direct-to-consumer channel. It's responsible for about a third of Under Armour sales today. I expect it will become more as time goes on. Definitely, they will continue to invest in that channel.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Under Armour, Inc. Stock Quote
Under Armour, Inc.
UAA
$24.39 (1.71%) $0.41
Under Armour, Inc. Stock Quote
Under Armour, Inc.
UA
$20.94 (1.50%) $0.31

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