Barclays lowered its stock rating on Under Armour to “Underweight” from “Equal Weight” due to the brand’s delayed recovery and heightened competition.
The downgrade comes after Under Armour on August 7 reduced its sales guidance for the year due to weak sales trends in North America and Asia-Pacific, now expecting a decline in the mid-single digits versus a slight decline previously. Under Armour maintained its adjusted earnings outlook.
The company updated its guidance while reporting sales in the fiscal first quarter ended June 30 that came in below analyst expectations, while earnings exceeded estimates with the help of tariff refunds.
Barclays’ analyst Adrienne Yih wrote in a note said the downgrade reflects “heightened competition” in the athletic apparel and footwear space, insufficient brand pricing power to offset higher tariff/input costs, and long lead times that will remain hurdles to the brand’s turnaround.
She wrote, “In our view, Under Armour over the past several years has relied on aggressive promotional activity and is now correcting these issues in its go-forward strategy. However, resetting brands is difficult and made more so by a challenging global macro backdrop. As such, we see this limiting UAA’s near-term ability to realize higher prices (through higher ticket or lower discounting) as consumer perception of the brand will take time to elevate in a competitive athletic apparel market.”
Yih noted that the updated guidance now calls for sales in its core North American market to decline in the mid-single digits from a forecast of low-single digit decline previously, although Under Armour officials had indicated sales in the region were stabilizing on its fiscal fourth-quarter analyst call.
Yih also pointed out that operating earnings benefited from reduced operating expenses, including a cutback in marketing spend. The analyst added, “Given UAA’s long product development cycle and the early stages of its turnaround initiatives, meaningful impact on sell- through and margins is unlikely in FY27, and we see limited visibility into when these efforts may begin to drive a sustained top-line recovery.”
Yih said that within her coverage, she prefers retailers and brands “with increased pricing power and early-stage growth,” citing Ralph Lauren, Tapestry, Amer Sports, Deckers Outdoor and Dick’s Sporting Goods.
Images courtesy Under Armour
