Moody's cuts Under Armour

Moody's Investors Service said it downgraded Under Armour, Inc.'s senior unsecured rating to Ba1 from Baa3. Moody's also assigned a Ba1 corporate family rating, Ba1-PD probability of default rating and a speculative grade liquidity rating of SGL-1. The long-term ratings were placed on review for downgrade.

“The downgrade and review reflect Under Armour's ongoing challenges reinvigorating growth in its core North American market,” said Mike Zuccaro, a Moody's vice president, in a press release. “While Under Armour has taken significant action over the past two years to improve its overall profit margins, balance sheet and cash flow, accelerated sales declines in 2020 will lead to further de-leveraging of costs, and when coupled with the need to continue investing in growth and marketing, the company's profitability and credit metrics will materially deteriorate in 2020.”

Under Armour is assessing a potential 2020 restructuring plan that could include about $325 million to $425 million of pre-tax restructuring-related charges. If adopted, the plan could drive about $30 million to $50 million in pre-tax benefits in 2020.

The review will focus on the scope of the potential 2020 restructuring plan, and its effect on the company in terms of expected savings, timing and cost to achieve the savings, including any effect on cash and cash flow.

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