Under Armour received one downgrade and several downward price adjustments from Wall Street after providing a forecast for sales and earnings for its current fiscal year below targets due to a stalled North American recovery. A few analysts were encouraged by signs of further sales stabilization.
In reporting fourth-quarter results on Tuesday, Under Armour guided revenues to be slightly down for its fiscal year ended March 31, 2007 compared to the growth of 1.7 percent the Street had been anticipating. North American revenues are projected to decline in the low-single digits – representing the region’s fifth consecutive year of declines – while Wall Street was anticipating a return to growth.
Annual adjusted profit per share for the current fiscal year is projected to come in between 8 cents and 12 cents, compared with analysts’ average expectation of 23 cents. The shortfall is partly due to $30 million in strategic marketing investments planned to strengthen brand momentum as sales begin to stabilize.
Under Armour reported sales in the fiscal fourth quarter that were in line with expectations, but a small loss that was slightly below analyst targets due to promotional pressures and a higher tax rate. North American sales were down 7 percent in the quarter, improving sequentially from a 10 percent decline in the fiscal third quarter, although analysts were targeting a 5 percent decline.
Shares of Under Armour closed Tuesday down 98 cents, or 16.67 percent, to $4.90.
At Stifel, Peter McGoldrick reduced his rating on Under Armour to “Hold” from “Buy” and trimmed his price target to $6 from $9 following Under Armour’s report. He wrote in a note, “Our updated view contemplates a more challenging risk/reward profile related to 1) higher than previously anticipated SG&A expense, 2) inflection to a normalized net debt position, and 3) persistent challenges to topline growth. A step-up in investments supports the brand premiumization strategy, but raises the leverage point for revenue to translate to growth-driven value creation. We continue to view Under Armour as a credible brand that deserves more credit for pioneering athletic apparel, but balanced against structural realities (global competition, decelerating international contribution, higher investments) we take a more cautious view on shares.”
BNP Paribas Equity Research analyst Laurent Vasilescu reiterated his “Neutral” rating on Under Armour and reduce his price target to $5 from $7. The analyst stated, “On the heels of Sharon Lokedi’s victory in the Boston Marathon, wearing Under Armour Velociti Elite 3’s, UA outlined incremental marketing investments behind the brand to drive topline velocity. We appreciate this but acknowledge it could take time to pay off.”
Williams Trading’s Sam Poser kept his “Buy” rating on Under Armour while cutting his price target from $10 to $6.50. He wrote in a note, “The 4Q26 results were okay, nothing to shout about. The guidance was disappointing, because most all analysts, including us, incorrectly modeled FY27. However, UAA management is making the correct decisions to drive a turnaround, which will become more evident by 3Q27.”
Poser was encouraged that Under Armour’s business is showing signs of stabilizing. Poser stated, “1Q27 will likely represent the bottom for UAA across geographies and merchandise categories, UAA management’s actions continue to reflect a brand first point of view, and YoY sales trends are poised to sequentially improve throughout FY27. We expect revenue to be up YoY beginning in 3Q27.”
Citi Research’s Paul Lejuez in February downgraded Under Armour to “Sell” from “Neutral,” warning that the North America (NAM) turnaround faces challenges against heightened competition and a reliance on promotions. He reiterated the “Sell” rating following the earnings results and reduced his price target to $4.75 from $6.20.
Lejuez wrote in his latest note on Under Armour, “We believe mgmt is making the right move but investing in mktg (in an effort to stop the significant share losses that have been occurring for several years), but UAA plays in a highly competitive sector with several brands such as Hoka and On (among others) vying for shelf space with wholesale partners (and these brands have much greater momentum). In addition, the industry backdrop for UAA is choppy across most regions, making a turnaround more challenging to achieve. Despite the 17 percent stock decline on the day, we believe risk/reward continues to skew negative.”
At Tesley Advisory Group, Cristina Fernández kept her “Market Perform” rating on Under Armour and trimmed her price target to $5.50 from $6.00 following the release of fourth-quarter results. She wrote in a note, “Overall, Under Armour is making progress on aspects of its turnaround like rationalizing SKUs, reducing promotions, and cutting costs. However, the turnaround is progressing at a slow pace and FY27 marks the fourth consecutive year of revenue declines. Order books for Fall 2026/Winter 2027 provide some encouragement, but Under Armour still seems to be underperforming peers and gaining shelf space back at wholesale accounts could prove difficult in this environment. As such, we believe more evidence of building brand momentum is needed.”
At Needham & Company, Tom Nikic reiterated his “Hold” rating on Under Armour following the earnings report. He doesn’t have a price target on the stock. Nikic wrote in a post-earnings note, “We are seeking more evidence of a turnaround in North America and an ability to sustain higher margins.”
He noted that Under Armour’s moves to reduce SKU count by 25 percent over the last two years “should result in a more succinct offering to the consumer and healthier margins (less supply chain complexity, less discounting, etc.) They are also focusing on innovative, premium products like the new $65 ‘Bouncy Tee’, which they highlighted as a versatile offering that can be worn in the gym or can be worn out on the weekends.”
Nikic further noted that gross margins are expected to be boosted by tariff refunds and efforts to emphasize full-price selling and more premium products. However, the stabilization of its biggest region is taking longer than investors hoped. Nikic wrote, “Management did note early signs of improved sell-throughs, cleaner inventory, and stronger engagement with wholesale partners. As a result, they believe there is more visibility into the region than in recent years, with less risk of ‘surprises.'”
Image courtesy Under Armour
