During Under Armour’s second-quarter analyst call, Kevin Plank, chairman, president, and CEO, stated the company’s North American business is finally showing signs of recovery, with replenishment orders improving. The company now sees a path to bring U.S. wholesale back to growth, with stabilization expected to arrive during fiscal 2027.

“I think probably the best way for me to qualify this is that we now have a stable order book,” said Plank of the improving trend he sees in North America. “Where in the past, we’ve seen a lot more returns, we’ve seen a lot more cancellations, we’re not seeing that right now. This isn’t just cold weather, either. It’s some of the brand heat, I believe, that we’ve been driving here, you know, in the U.S. specifically.”

Plank’s comments come as Under Armour reported sales in North America declined 8 percent in its fiscal second quarter ended September 30, primarily due to a decline in full-price wholesale business and lower e-commerce sales.

For the current fiscal third quarter, ended December 31, North America sales declines are expected to worsen, sliding in the low double-digit range due to continued wholesale softness, especially in footwear. The latest quarter benefited from revenue shifting from Q3 into Q2 due to shipment timing. For the full fiscal year, North American sales are expected to decline by a high single-digit percentage, following declines of 11 percent in FY25 and 8 percent in FY24.

Under Armour overall reported earnings and sales topped guidance due in part to the shift in the timing of product delivery, while providing guidance for the fourth quarter below analyst targets. Shares of Under Armour closed Thursday at $4.56, down 5 cents, or 1.1 percent.

The Plan to Return to North American Wholesale Growth
In his scripted comments, Plank said that while the North America marketplace is undergoing a “disciplined rebuild,” he’s encouraged by improvement in core programs at many key accounts as the brand continues to invest in strengthening retail partnerships, more targeted assortments, elevated merchandising, and establishing a premium retail brand experience. Plank said, “The focus on top-to-top relationship building at our most important retailers has been key and effective.”

He said that while orders remain challenging in the near term, replenishment demand in North America has improved, which he attributed to brand heat created from its “We Are Football” campaign as well as to the recent arrival of colder weather.

“Conversations with our major wholesale partners have moved from caution to collaboration. And from hesitation to optimism,” said Plank. “The message is clear. They see the progress. They feel the energy, and they want to be part of our next chapter. In ongoing discussions with these key partners, we’re creating multiyear plans to bring U.S. wholesale back to growth, aiming for stabilization during fiscal 2027. And paving the way for expansion beyond.”

Asked in the Q&A session what gives him confidence that the North America market will stabilize before the end of FY27, which ends in March 2027, he elaborated that for Under Armour, stabilization means “getting the business to where it’s a plus 1 or 2 or plus or minus 1 or 2. So in that healthy version.”

Plank said he believes Under Amour has “the right team, the right operating model, business plan and go-to-market in place” to execute the recovery and feels his team is energized. He said, “Our teammates have this renewed sense of energy and the metaphor of moving in this new headquarters of a little less than a year ago is great action toward that.”

He also cited progress being made within Under Armour’s broader playbook to revive demand for the brand.

In product, Planks cited an “incredible overall elevation that we’ve had in design and the deliverable innovation, meaning innovation that we can actually monetize and drive volume with.” He cited a focus on “leaning on the winners,” highlighting the HeatGear, ColdGear, Unstoppable pant collection, Vanish training franchises, as well as newer ranges coming soon, backed by cutting-edge technologies such as its proprietary Neolast fiber.

Plank further cited efforts to “premiumize” the brand largely through innovation, including the $250 Velocity Elite 3 that Sharon Lokedi wore this past weekend in securing a third-place finish in the New York City Marathon. Other “breakout hits” at lofty price levels include the $45 Stealthform hat and $140 No Way backpack.

“We’re demonstrating that the consumer is open for innovation. More importantly, they’re open for innovation and higher price points from Under Armour when we deliver that,” said Plank.

At the same time, he noted that Under Armour has “a lot of legacy programs and things like our top 10 volume drivers that we’re focused on ASP,” pointing to the $75 Assert 11 as a strong seller. Plank said, “We like the amount of good level product, but we want to focus on better and best. And that’s what’ll help us premiumize the brand and help us frankly, drive some of the more of the sell-through, at all three levels wherever the consumer sees us.”

Plank also cited the benefit of improved “storytelling.” He said, “We don’t have a brand problem. We just haven’t talked to the consumer in a while. And we don’t believe we have a product problem. You’ll see that coming through in the evolution of what the brand is and how we show up at retail. But we certainly have a story opportunity. We haven’t connected those things.”

He added, “We simply relied on brand heat, and that’s something that wanes with the market. But the good news is, it’s fixable.”

A recent successful marketing execution was the “We Are Football” campaign, which helped increase brand awareness among 18- to 34-year-olds from the mid-sixties to over eighty percent just six months ago. Plank said, “That is not normal. It simply demonstrates that the brand is present. It’s just ready to be unleashed for us and gives us an opportunity.”

Finally, Plank cited progress in rebuilding relationships with wholesale partners through numerous discussions over the last 18 months, and as the brand has been “consistently beating plan now as we’re moving forward.” He added that some of those plans didn’t involve increasing sales year-over-year, “it’s doing more than we said we were going to do. So, we’re earning this one drop at a time.”

Fiscal Q2 Results Top Plan
In the second quarter ended September 30, Under Armour reported adjusted profits plunged 88.3 percent, to $15.3 million, or 4 cents, but surpassed guidance calling for earnings between 1 cent and 2 cents.

The net loss was $18.8 million, or 4 cents a share, down from earnings of $170.4 million, or 39 cents, a year ago. Restructuring charges totaled $32 million in the latest quarter.

Sales declined 5 percent to $1.3 billion (down 6 percent on a currency-neutral basis), exceeding guidance that called for sales to decline in the range of 6 to 7 percent. Sales were slightly better than plan due to a 1-point benefit from timing shifts that moved some shipments from Q3 into Q2, which will normalize in the back half of the year.

North American revenue declined 8 percent to $792 million, while international revenue increased 2 percent to $551 million (down 1 percent currency-neutral). Within the international business, revenue in EMEA increased 12 percent (up 7 percent currency-neutral), decreased 14 percent in Asia-Pacific (down 14 percent currency-neutral), and grew 15 percent in Latin America (up 14 percent currency-neutral).

From a channel perspective, wholesale revenue declined 6 percent due to lower full-price sales, partly offset by growth in the off-price channel driven by the timing of sales to third-party partners as well as an increase in distributor sales.

Direct-to-consumer revenue declined 2 percent, primarily due to an 8 percent decrease in e-commerce sales, driven in part by efforts to more strategically manage discounts in a more promotional North American environment. Sales within its owned and operated stores remained flat in the quarter. Licensing revenues increased by 17 percent, driven by the strength of its international business.

Apparel revenue decreased 1 percent to $936 million; footwear revenue declined 16 percent to $264 million; and accessories revenue decreased 3 percent to $113 million.

By product type, apparel revenue declined 1 percent to $936 million, with softness in the run, outdoor, and golf categories, partially offset by growth in training and sportswear.

Footwear revenue declined 16 percent this quarter to $264 million, reflecting ongoing pressure from a challenging consumer demand environment and deliberate efforts to recalibrate key parts of the footwear portfolio. Dave Bergman, CFO, noted, “We believe these steps will help us improve efficiency, strengthen brand value and maximize the impact of several high-potential launches planned for upcoming seasons.”

Accessories revenue decreased 3 percent to $113 million.

Gross margin declined by 250 basis points to 47.3 percent, primarily due to supply chain headwinds stemming from increased tariffs and a less favorable channel and regional mix. Gains from foreign exchange and pricing helped offset some of these impacts.

Selling, general, and administrative (SG&A) expenses increased 12 percent to $582 million. Adjusted SG&A expenses, which exclude approximately $4 million in transformation expenses related to the company’s Fiscal 2025 Restructuring Plan, increased 9 percent to $577 million. Adjusted SG&A in last year’s second quarter included a $27 million benefit from the insurance recovery of prior period legal fees. The absence of this benefit in the second quarter of fiscal 2026 accounted for roughly 5 percentage points of the year-over-year growth. The remainder of the increase was primarily due to higher marketing expenses resulting from timing shifts, with most of last year’s spending concentrated in the second half.

Outlook
Guidance for the full year calls for:

  • Revenue to decrease 4 to 5 percent compared to analysts’ expectation for a decline, on average, of 4.1 percent. This includes anticipated high-single-digit percentage declines in North America and Asia-Pacific, and a high-single-digit percentage increase in EMEA.
  • Gross margin to decline 190 to 210 basis points, mainly due to higher U.S. tariffs, along with unfavorable channel and regional mix. Positive impacts from foreign currency exchange, product mix, and pricing are expected to partially offset these declines.
  • SG&A expenses to decrease by a mid-teens percentage rate. Excluding transformation expenses related to the company’s Fiscal 2025 Restructuring Plan, as well as last year’s litigation settlement expenses and impairment charges, adjusted SG&A is projected to decline at a mid-single-digit rate, primarily driven by lower marketing costs, restructuring savings, and other cost management initiatives.
  • Operating income is expected to range from $19 million to $34 million. Excluding expected restructuring charges and transformation expenses, adjusted operating income is forecasted to be between $90 million and $105 million.
  • Diluted loss per share is expected to be from 15 cents to $0.17. Adjusted diluted earnings per share is expected to be from $0.03 to $0.05.

Guidance for adjusted EPS was just below analysts’ consensus target of 6 cents.

For the current third quarter, guidance calls for:

  • Revenue to decline 6 percent to 7 percent compared to analysts’ expectation for a decline of 4.3 percent. North America is expected to see a low double-digit decline, EMEA to grow at a high single-digit rate, and APAC to decline by a high single-digit rate.
  • Gross margin to decline 310 to 330 basis points due to a full quarter impact of new U.S. tariff costs. Adjusted SG&A is expected to decline by a mid-single-digit percentage compared to last year, when marketing spend was distorted to the second half of the year.
  • Adjusted operating income ranging from a $5 million profit to a $5 million loss.
  • EPS between 2 cents and 3 cents, down from analysts’ consensus estimate of 5 cents.

Image courtesy Under Armour