Under Armour, Inc. raised its FY earnings guidance after reporting profits for the fiscal second quarter ended September 30 easily topped analyst targets. Sales were in line with expectations, declining 11 percent and dragged down by a 13 percent decline in North America.

Earnings on an adjusted basis in the quarter reached 30 cents, compared to analysts’ consensus target of 19 cents. Sales totaled $1.4 billion, compared to Wall Street’s average estimate of $1.39 billion.

“Our second quarter fiscal 2025 performance demonstrates that our strategy to reconstitute the Under Armour brand and establish a more premium position in the marketplace is gaining traction,” said Under Armour President and CEO Kevin Plank. “With better-than-expected results, we are pleased to raise our full-year profitability outlook while simultaneously increasing marketing investments to amplify our brand.”

Plank continued, “We are a fundamentally stronger business today with increasingly better execution across key dimensions. This includes more consistent marketplace discipline through meaningfully improved product, storytelling, and sales leadership, which will deliver a sharper, unique approach to our brand position in the years ahead.”

Second Quarter Fiscal 2025 Review

  • In line with UA expectations, revenue was down 11 percent to $1.4 billion (down 10 percent currency neutral).
    • North America revenue decreased 13 percent to $863 million, and international revenue decreased 6 percent to $538 million (down 5 percent currency neutral). In the International business, revenue in EMEA was down 1 percent (down 1 percent currency neutral), down 11 percent in Asia-Pacific (down 10 percent currency neutral) and down 13 percent in Latin America (down 4 percent currency neutral).
    • Wholesale revenue decreased 12 percent to $826 million, and DTC was down 8 percent to $550 million. Revenue from owned and operated stores remained flat. Due to planned decreases in promotional activities, eCommerce revenue decreased by 21 percent, representing 30 percent of the total DTC business for the quarter.
    • Apparel revenue decreased 12 percent to $947 million, Footwear revenue was down 11 percent to $313 million, and Accessories revenue was up 2 percent to $116 million.
  • Gross margin increased 200 basis points to 49.8 percent, driven primarily by lower product and freight costs, reduced discounting levels in its DTC business and a favorable channel mix.
  • SG&A expenses decreased 15 percent to $520 million. Adjusted SG&A expenses decreased 13 percent to $530 million, which excludes $13 million in benefits from a litigation-related insurance recovery and approximately $3 million in transformation expenses related to UA’s Fiscal 2025 restructuring program.
  • Restructuring charges were $3 million.
  • Operating income was $173 million. Adjusted operating income was $166 million, excluding insurance recovery, transformation expenses, and restructuring charges.
  • Net income was $170 million. Adjusted net income was $131 million.
  • Diluted earnings per share was $0.39. Adjusted diluted earnings per share was $0.30.
  • Inventory decreased 3 percent to $1.1 billion.
  • At the end of the quarter, cash and cash equivalents totaled $531 million, and no borrowings were outstanding under UA’s $1.1 billion revolving credit facility.

Fiscal 2025 Restructuring Plan
In May 2024, Under Armour announced a restructuring plan designed to strengthen and support the company’s financial and operational efficiencies. Following further evaluation, in September 2024, UA announced additional restructuring measures primarily related to the decision to exit one of its distribution facilities in Rialto, CA, increasing its restructuring plan range to $140 million to $160 million, of which up to $75 million of the charges were expected to be cash-related and up to $85 million to be non-cash charges. As of the second fiscal quarter of 2025, Under Armour has recognized $28 million in restructuring and impairment charges and $11 million in other related transformational expenses under the plan. Of the total $40 million incurred to date, $36 million is cash-related, and $4 million is non-cash-related. UA anticipates that the remainder of the charges under the updated restructuring plan will occur during fiscal 2025 and fiscal 2026.

Updated Fiscal 2025 Outlook
Key points related to UA’s fiscal 2025 outlook include:

  • Revenue remains expected to decline at a low double-digit percentage rate, which includes a 14 percent to 16 percent decline in North America as it works to reset the business. The company also expects a low single-digit percent decline in its international business, with flat results in EMEA offset by a high single-digit decline in its Asia-Pacific business due to macroeconomic pressures.
  • Gross margin is expected to increase by 125 to 150 basis points compared to the prior expectation of a 75 to 100 basis point improvement, driven primarily by reduced promotional and discounting activities in Under Armour’s DTC business and product costing benefits.
  • SG&A expenses are expected to increase in the mid- to high-single-digit percentage range, primarily due to litigation settlement expenses. Excluding those expenses, related insurance recoveries, and anticipated transformation expenses, adjusted SG&A is expected to decrease at a low- to mid-single-digit percentage rate, which includes approximately $25 million in additional marketing investments following better-than-expected year-to-date profitability performance that UA will use to build the brand over the long term.
  • Operating loss is expected to be $176 million to $196 million, compared to the previous expectation of $220 million to $240 million. Excluding the midpoint of anticipated restructuring charges and transformation expenses, litigation settlement expenses, and related insurance recoveries, adjusted operating income is expected to be $165 million to $185 million, compared to the prior expectation of $140 million to $160 million.
  • Diluted loss per share is expected to be between $0.48 and $0.51, compared to the prior expectation of $0.53 to $0.56. Adjusted diluted earnings per share is expected to be between $0.24 and $0.27, compared to the previous expectation of $0.19 to $0.21.
  • Capital expenditures are expected to be between $190 and $210 million, compared to the previous estimate of $200 to $220 million.

Image courtesy Under Armour