Under Armour disappointed investors by lowering its sales outlook for the fiscal year due to deteriorating traffic trends in North America and Asia Pacific amid an increasingly promotional marketplace. However, Kevin Plank, UA’s CEO, told analysts the brand remains committed to full-price selling and won’t be turning to markdowns to drive volume.

Under Armour also reported earnings for its fiscal first quarter ended June 30 that slightly topped analyst estimates and maintained its guidance for adjusted earnings for the year.

Plank said on his company’s quarterly call, “We’re lowering our revenue outlook for the year while maintaining our adjusted operating income expectation. That’s not the outcome we wanted on the top line, but it does reflect a business that is more disciplined and flexible than it was just a year ago.”

The founder noted that over the last two years since returning to the CEO role in March 2024, Under Armour has “simplified the organization by removing excess weight to create greater focus and agility.” The steps have included reducing SKUs within its Fall/Winter 2026 assortment by 25 percent versus two years ago, with plans for a further 25 percent SKU reduction over the next 18 months. Plank said, “That is not about doing less, it’s about giving our teams room to build products that matter and concentrating investment behind the franchises and innovation platforms with the strongest potential to create separation.” 

Under Armour has also taken steps to strengthen the connection between product, marketing, and sales, including moving this past June to close its footwear offices in Portland, shifting some operations and jobs to its headquarters in Baltimore and New York offices. The move is expected to help speed up decision-making and better focus on bringing differentiated products to the marketplace.

Plank said, “A few years ago, we were too often managing for quantity, more products, more complexity and volume that did not always strengthen the brand. Today, we’re managing for quality.”

Under Armour has also become “more rigorous in how we allocate capital and manage expenses” over the last two years, according to Plank. As part of that continuing effort, Under Armour management said it plans to keep marketing at the lower end of its 10 percent to 11 percent of revenue range this year in a shift from plans to increase marketing to stimulate demand announced last quarter.

Plank said, “On our last call, we expected marketing investment to move higher as part of rebuilding consumer pull. Since then, we’ve gone deeper into the plan and identified opportunities to rebalance spend, reduce waste, and improve returns. Given this amplified focus, we’re taking marketing lowers percentage of revenue this year. To be clear, this is not a retreat from the brand. It’s a reset in how we invest.”

Finally, Plank said the brand has overall has been “too reliant on promotion,” and is testing more full-price environments within its DTC channels. Plank said, “What we know is that when the product is differentiated and the value proposition is clear, the sell-through follows.”

However, Plank acknowledged that the brand has faced challenges reviving demand enough to drive top-line growth. Under Armour has shown thirteen straight quarters of revenue declines. He added, “That brings us to the central question: How do we turn a healthier business into stronger consumer demand?”

Plank cited four “priorities” to stimulate demand:

  • Rationalize the product range: Plank said, “Investment goes beyond the highest potential franchises and innovation platforms with a clear role in the portfolio. You can see that in the SKU reductions underway and the priority behind platforms like HeatGear, Velociti, and StealthForm.”
  • Refocus marketing around “fewer, bigger” stories: Plank said, “Fewer, bigger activations, tighter ties to product and retail, clearer measurement, and a higher bar for funding.”
  • Improving commercialization: Plank said consumers need to “see it, understand it, and buy into it across our own channels and wholesale partners, making it easier for the consumer to say ‘yes’ to the UA brand. That means tighter launch planning and stronger retail and digital execution so our biggest campaigns convert.”
  • Disciplined inventory management: Plank said this involves a more consistent inventory focus to reduce the need for discounts. He said, “That means being willing to walk away from lower quality volume, tighten inventory buys, and reduce the amount of product that ultimately has to be cleared through promotion.”

Plank offered several examples of where Under Armour is making progress. He noted that the HeatGear base layer business has “remained strong across regions and channels,” and the Velociti baselayer range “continues to validate our technical innovation with runners.”

In newer apparel concepts, the Bouncy Tee “has exceeded expectations while selling at its full $65.” Plank said, “These are signals we can learn from and scale deliberately.”

Outside baselayers, the SlipSpeed training shoe, StealthForm hats, and the No Way backpack are all seeing healthy demand. Under Armour is also “refreshing” the Tech Tee, one of the brand’s largest volume programs but “candidly, it’s discounted too often. A Helix Tee, priced at $35, is coming out later this year at a retail price of $35 “with a more complete UA performance story, stretch, recyclable, and an outrageously quick dry time – with the marketing and retail support required to earn that premium.”

On marketing, Plank inferred that the brand has a bigger opportunity to leverage the successes of its athletes, including Sharon Lokedi winning the Boston Marathon in a Velociti Elite 3 racing shoe, marking her second consecutive Boston victory in Under Armour. Ferran Torres also scored the World Cup winning goal for Spain in the Under Armour Shadow Elite 4 boot at the World Cup final.

Plank said, “These are the moments this brand was built for, products performing on the biggest stages under the greatest pressure with the world’s best athletes. They show what happens when we build from the athlete back. Incredible performance moments that should, can, and will create stronger demand for both the literal product worn on pitch or course, but especially the commercial expressions we convert into brand demand and wearing beyond sport.”

He also cited the attention the recent signing of François Arnaud, a star of the Heated Rivalry HBOMax series, as an ambassador has earned. Plank stated, “The opportunity now is to make those stories travel farther and connect more consistently with consumers.”

Finally, Plank said stronger alignment on execution with retail partners “remain central to our turnaround.” An example of a successful executiion cited was a back-to-school takeover at Dick’s House of Sport doors that showcased elevated presentations of HeatGear fleece and tees and StealthForm hats. Plank said, “The goal is to build more of these executions across the marketplace where differentiated product and strong storytelling can drive healthier full-price demand.”

Plank nonetheless noted that Under Armour lowered its sales guidance for the year as traffic has softened since late May, especially in North America and Asia Pacific, while the marketplace became increasingly promotional. Shares of Under Armour in late-afternoon trading Friday were down 35 cents, or 5.6 percent, to $5.92 on the lowered outlook.

“Given what we’re seeing today, we’ve taken a more cautious view of revenue for the balance of the year,” said Plank. “Still, this does not change our strategy. It reinforces it.”

He added, “If consumers are going to choose Under Armour at a premium, we must earn that through more compelling reasons to buy, the right product choices, and a tighter connection between what we make and why athletes should care. One of the biggest lessons for us has been that athletes don’t need more choices. They need better ones.”

Under Armour’s First Quarter Results
Revenue in the first quarter decreased 3 percent to $1.1 billion (down 4 percent constant currency). Sales were slightly lower than Wall Street’s consensus estimate of $1.11 billion.

By region, North America revenue declined 9 percent to $610 million, with declines in wholesale due to softer spring/summer orders and traffic headwinds that put pressure on its e-commerce and retail store business.

International revenue increased 5 percent to $490 million (up 2 percent constant currency). Within international markets, EMEA revenue increased 12 percent (up 10 percent constant currency), driven by strength in the distributor business, partially offset by slight declines in its DTC and full price wholesale businesses.

Asia-Pacific decreased 7 percent (down 10 percent constant currency), reflecting greater-than-anticipated softness in China and Southeast Asia. Chief Financial Officer Reza Taleghani said, “In China, results were also affected by stockouts in key styles and sizes, as well as demand cannibalization from certain licensees that discounted aggressively in a promotional market. We are addressing those issues through better inventory availability and closer alignment with licensing partners.”

Latin America increased 8 percent (up 1 percent constant currency), driven by favorable foreign exchange as constant currency revenue was up 1% in the quarter.

Wholesale revenue decreased 2 percent to $638 million due to declines in full-price wholesale revenue and in sales to third-party off-price channel versus the prior year. This was partially offset by growth in the distributor business. Direct-to-consumer (DTC) revenue decreased 6 percent to $437 million. Within DTC, owned-and-operated store revenue declined 3 percent, and e-commerce revenue decreased 12 percent, representing 29 percent of total DTC revenue for the quarter.

By category, apparel revenue decreased 2 percent to $734 million, with declines across most sport categories partially offset by growth in sportswear. Footwear revenue declined 8 percent to $245 million. Taleghani said the footwear declines were “due to the combination of general demand softness and actions we’ve taken to optimize and edit our product assortment, with the largest declines in team sports, sportswear, and train. Increases in outdoor and golf partially offset this, while our run business was flat in the quarter.”

Accessories revenue decreased 4 percent to $96 million with softess in train, outdoor, and golf, while sportswear was an area of growth.

Gross margin increased 590 basis points to 54.1 percent, primarily due to refunds received associated with the recovery of IEEPA tariff costs expensed in fiscal 2026. This was partially offset by unfavorable foreign exchange impacts, unfavorable regional and channel mix, and pricing headwinds.

SG&A expenses increased 2 percent to $543 million, primarily due to targeted investments to strengthen the brand as well as continued disciplined operating expense management. Excluding $2 million in transformation expenses related to the fiscal 2025 restructuring plan, adjusted SG&A increased 4 percent to $541 million.

Operating income was $46.7 million against $3.3 million the prior year. Excluding transformation as well as restructuring charges, adjusted operating income was $52.4 million compared with $24.4 million a year ago.

 Net income was $545,000 against a loss of $2.6 million. Adjusted net income, which excludes transformation and restructuring charges. was $21 million against $8.6 million.

Diluted earnings per share was break even against a loss of 1 cents; adjusted diluted earnings per share was 5 cents versus 2 cents a year ago and topping analysts’ consensus target of 2 cents.

Fiscal 2025 Restructuring Plan
In the first quarter, the company recorded $4 million in restructuring charges and $2 million in transformation-related SG&A expenses, for a total of $6 million under its Fiscal 2025 Restructuring Plan. To date, the company has incurred $266 million in total restructuring and transformation costs, including $116 million in cash and $150 million in non-cash charges. Total program costs under the plan are anticipated to be approximately $305 million. The company expects the plan to be substantially complete by December 31, 2026.

Updated Fiscal 2027 Outlook
The company has updated its fiscal 2027 outlook. Compared with fiscal 2026, key highlights of the company’s outlook include:

  • Revenue is now expected to decline at a mid-single-digit percentage rate compared with the prior outlook of a slight decline. The revised outlook is driven by softer demand, particularly in North America and Asia-Pacific. The company remains focused on balancing near-term revenue opportunities with actions that strengthen long-term brand health, including disciplined marketplace management and protection of full-price selling. The updated outlook incorporates a mid-single-digit percent decline in North America (prior low-single-digit decline), and low-single-digit declines in both Asia-Pacific (prior low-single-digit increase) and EMEA (prior low-single-digit increase).
  • Gross Margin is still expected to increase 220 to 270 basis points versus the prior year’s gross margin. Approximately 150 basis points of this improvement is due to the recovery of IEEPA-related tariff costs expensed in fiscal 2026 realized in the first quarter. Excluding this benefit, the company continues to expect gross margin expansion driven by pricing actions, lower discounting, and a more favorable channel mix, partially offset by supply chain headwinds related to the conflict in the Middle East and unfavorable foreign exchange impacts.
  • SG&A expense, including transformation expenses related to the Fiscal 2025 Restructuring Plan, is now expected to decrease at a high-single-digit rate versus the prior expectation for a low-single-digit decline. Excluding transformation expenses, Adjusted SG&A is now expected to decrease at a low-single-digit rate (prior low-single-digit rate increase). The updated outlook reflects actions to align operating expenses with the current demand environment while continuing to prioritize the company’s highest-return strategic investments.
  • Operating Income is still expected to be in the range of $96 million to $116 million. Excluding expected transformation expenses and restructuring charges, Adjusted Operating Income is still expected to be $140 million to $160 million. To achieve this, the company expects to substantially offset the impact of lower revenue through disciplined expense management and a more agile and disciplined operating model while continuing to invest in the areas most critical to strengthening the brand. This outlook includes an approximate $70 million benefit from the realization of refunds from prior-year IEEPA tariff expenses and approximately $35 million in headwinds related to the conflict in the Middle East.
  • Diluted Loss Per Share is now expected to range from 1 cent to 5 cents versus the prior expectation of breakeven to a loss per share of 4 cents. Excluding anticipated transformation expenses and restructuring charges, the expectation for Adjusted Diluted Earnings Per Share remains 8 cents to 12 cents.

Image courtesy Under Armour