CHANGE AHEAD: NOT "IF" BUT "WHEN"

One need only look at the deep divisions in the United States political infrastructure, our leadership, and the large-scale infiltration of Wall Street Wizards into the Administration and it becomes a real possibility that we will encounter what the financial pundits and prognosticators euphemistically call a "serious market correction." A time when valuations, especially of companies who earn little or no profits and must maintain their borrowings to survive, are readjusted -- maybe not to a rational reality, but maybe to a realistic expectation of reality.

I somewhat regard Tesla as sort of a canary in a coal mine. The story and hype drive the stock price ever higher with the only profits apparently coming from the sale of government-approved pollution credits. Take these away, and you have a company that has never produced a profit. Now, we see something else that is somewhat disturbing. Instead of selling equity or a combination of equity and debt, Tesla appears to be moving forward with a pure debt offering. Perhaps they think that they can repurchase much of this debt at dramatic discounts during the correction. In any event, investors who purchase debt tend to ignore the "story" and look for company dynamics which indicate that the debt can be serviced and then repaid.

Of course, you have the Federal Reserve as a wild card as Janet Yellen leaves her leadership post for someone new. Not that the policy will change all that much, but it will be a convenient signal to the markets. Like those who try to predict black swan events, one might ask what would happen if the worst case of the Fed selling their bonds into the broader market at a loss. Because of accounting rules, they are not even required to record those losses against their capital base. But, it doesn't matter because the Federal Reserve is backed by the full faith and credit of the United States.

So what I am saying is that something will happen in the future. It is not a matter of IF, but of WHEN. Therefore, one might decide to take a prudent course of action. One, reduce your standard of living and try to eliminate any high-interest debt. Two, downsize by converting unused or unwanted assets into cash. And three, work on developing multiple independent streams of revenue to compensate for the potential loss of your job through no fault of your own.
 

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SOLAR PANEL FORECAST: NO SO SUNNY

How many people remember President Obama’s high hopes for solar panel manufacturer Solyndra which was forced into Chapter-11 bankruptcy despite being the recipient of a $535 million U.S. Energy Department loan guarantee. The problem according to company officials, was cheaper solar panels produced by Chinese vendors who were alleged to benefit from price-fixing and currency manipulation. Moreover, a precipitous drop in the raw materials cost of competing solar panels rendered Solyndra’s technology incapable of competing in the world markets. The company laid off 1100 employees and mired in investigations never re-opened its doors.  

Now we have another solar panel manufacturer, Suniva, who has filed for bankruptcy protection and is asking the Trump Administration to impose a substantial tariff on foreign-made solar panels that are cheaper and now dominate the world markets. 

According to published reports, the uncertainties in the solar panel marketplace has forced companies to suspend project planning for new installation until the situation is clarified. The uncertainty is manifesting itself in higher prices, up to 20%, of solar panels. 

President Trump has repeatedly campaigned on the meme that China is ripping-off America using currency manipulation and trade restrictions on American-made goods. Trump justifies the fact that many of his projects were completed with foreign materials to hold down costs to competitive levels.

All that is certain in the current solar marketplace is uncertainty – as most solar projects are not cost effective when measured against traditional energy sources and cannot compete without subsidies and mandated usage. For those wanting a more comprehensive look at the solar panel issue, you may wish to look at an article published by St. Louis Today. 

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NO LOVE AT UNDER ARMOUR (05/19/24)

MAY 19, 2024 — LAYOFFS AHEAD

Kevin Plank, president and CEO, announced…

“Due to a confluence of factors, including lower wholesale channel demand and inconsistent execution across our business, we are seizing this critical moment to make proactive decision to build a premium positioning for our brand, which will pressure our top and bottom line in the near term.”

“Over the next 18 months, there is a significant opportunity to reconstitute Under Armour’s brand strength through achieving more, by doing less and focusing on our core fundamentals: Driving demand through better products and storytelling, running smarter plays like simplifying our operating model and elevating our consumer experience.

“In parallel, we’re focused on cost management and implementing the strategies necessary to grow our brand and improve shareholder value as we move forward.”

SEPTEMBER 8, 2020 — MORE RESTRUCTURING WITH 600 LAYOFFS

According to an SEC filing, the struggling company has added another $75 million in restructuring costs to support the company-wide layoff of another 600 employees.

APRIL 3, 2020 — A CRISIS IN TIME?

It appears that the company can continue its restructuring activities without intense scrutiny as people concentrate on the pandemic and forgive financial issues as the crisis unfolds.

"In these unprecedented and challenging times, the majority of stores where Under Armour is available remain closed, contributing to a significant decline in revenue," said Under Armour President and Chief Executive Officer Patrik Frisk.

While we're thankful for the meaningful balance sheet improvements we've driven over the past two years and we are seeing some early signs of recovery in our APAC region, 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.

We do not take these decisions lightly and are doing all we can to minimize the impact on our teammates during this time. Because of the strength of our brand and the steps we have taken, we will weather this storm."

The actions announced today include:

• The extension of current store closures until further notice.

• The company will continue to monitor the situation globally, and will make re-opening decisions on a country-by-country basis based on guidance provided by local health authorities.

• Beginning April 12th, the company will temporarily lay off the teammates that work in its U.S. Brand (full price) and Factory House (outlet) stores, and approximately 600 teammates that work at its U.S.-based distribution centers.

• Additionally, the company will begin paying premium bonuses to its distribution center teammates continuing to work during the crisis. The company will have provided up to four weeks of full pay for these retail store and distribution center teammates since this crisis started.

• Effective immediately, the company's Board of Directors will be reducing its compensation by 25% and all of the company's Executive Vice Presidents and above will be taking a 25% salary cut through the duration of the crisis.

• The company will cover full health benefits for benefit-eligible teammates for approximately two months during this temporary layoff period. Due to varying degrees of pandemic impact outside of the U.S. and differing local employment laws, regulations and government relief considerations, the company will address employment status and potential considerations on a country-by-country, local basis for retail teammates.

Under Armour continues to monitor this fluid situation closely, and will take decisive and measured action as appropriate. 2020 Restructuring Plan

On February 11, 2020, Under Armour announced it was assessing a potential 2020 restructuring plan designed to rebalance the company's cost base to further improve profitability and cash flow generation, and on March 31, 2020, its Board of Directors approved this restructuring plan.

This restructuring plan was developed prior to assessing the potential impacts of the COVID-19 pandemic on the company's business and it continues to evaluate what actions may be necessary related to this rapidly developing situation.”

MARCH 2, 2019 — HEADQUARTERS TO SHED 50

Continuing with the previous announced reduction in force, the company has notified the State of Maryland that it will be laying off 50 employees at its Baltimore, Maryland headquarters as the restructuring effort winds down.

UPDATE: September 26, 2018 ADDITIONAL LAYOFFS ANTICIPATED

In an update on its 2018 restructuring plan, the company has announced that it will be reducing its global workforce by approximately 400 jobs representing approximately 3% of its workforce, 400 jobs.

The company claims that “The reduction in workforce is expected to be completed by March 31, 2019 and represents the final component and update to the company's 2018 restructuring plan.”

Chief Financial Officer David Bergman noted, "This redesign will help simplify the organization for smarter, faster execution, capture additional cost efficiencies, and shift resources to drive greater operating leverage as we move into 2019 and beyond."

Original Post…

As they say, fashion is fickle, and in the performance sportswear market, it is all about reputation, badge-value status, and gross margins. Unfortunately, relative newcomer Under Armour is announcing a restructuring that will result in approximately 280 lost jobs. It appears that the brand is losing market share to iconic sports manufacturers such as Nike, Adidas, and Puma. 

The attempt to extend the company’s fortunes on so-called “athleisure” wear ("street brands" and “lifestyle brands”) appears to be fading fast as fads and fashions are wont to do on a periodic basis. The company has put forth the usual answers, “restructuring,” “better positioned for future growth,” yadda, yadda, yadda. 

The problem with branded fashions is that they require a substantial up-front investment in product and advertising while catering to a fickle customer base whose opinion of any given product hinges on which sports figures and influencers are flogging the brand. I have a hard time believing that 280 or so jobs will make a difference to the bottom line of this billion-dollar company if customers continue to shun the company after its CEO appeared to endorse controversial President Donald Trump. An attempt to rebound by condemning Trump’s withdrawal from the Paris climate accords seemed to fall on deaf ears. 

There is still considerable brand-equity in the Under Armor name, but their reputation relates to performance wear, not street or lifestyle brands.

This tale should serve as a cautionary red flag to employees of companies whose CEOs and other leadership attempts to endorse politicians and political causes that are associated with controversy. Shoemakers should stick to their last, knitters to their knitting. 

Change is coming. There will always be a tomorrow, no matter how much you may try to ignore it. There are no guarantees in life, or promises for a bright future. Just because something bad hasn't happened yet, doesn't mean it won't. It can happen to anyone, anytime, anywhere ... are you now wondering, Am I Next?
 

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