Under Armour Inc.’s North America sales tumbled 10 percent in the fiscal third quarter ended December 31, but Kevin Plank, president, CEO, and founder, told analysts the region is “beginning to turn the corner” and is on track to stabilize in fiscal 2027.

“North America is beginning to turn the corner. We believe December marks the bottom of the reset,” said Plank on the quarter’s analyst call. “Traffic, yes, remained soft, but underlying indicators are improving.”

He noted that online in North America, the brand continues its efforts to reduce promotions to attain a more “premium” positioning despite promotional pressures in the marketplace. Plank added that e-commerce conversion “is up” while the performance of Factory House stores is “improving.”

At North American wholesale, UA’s focus “remains on rebuilding the right partner relationships. And we’re making real progress.” Plank noted that a campaign during the quarter highlighting ColdGear Compression with Dick’s Sporting Goods “delivered solid results, and our partners gained confidence in our product and storytelling collaboration is growing.”

Plank further said the brand is “encouraged by how our fall order book is shaping up” in North America.

Under Armour’s North American sales are expected to fall 8 percent in the full fiscal year ended March 31 following declines of 11 percent in FY 2025 and 8 percent in FY 2024. The last positive quarter for the NA region was the fiscal fourth quarter ended March 31, 2023.

Asked in the Q&A session about his confidence in North America’s recovery, Plank cited the efforts over the last two years by Kara Trent, who was promoted in mid-January from president of the Americas to chief merchandising officer to lead category management and go-to-market initiatives

He said Trent “walked into a pretty tough situation,” with wholesale order backlogs running down steeply, but he implied the order rates are firming up. Plank said, “I can say, definitively for the first time in quite some time, we’re no longer looking at significant declines.”

He also cited the likelihood that Adam Peake, a 16-year UA veteran who replaced Trent to lead the Americas, will support a smooth transition and build on Trent’s progress. Peake returned to Under Armour roughly 11 months ago in the role of SVP, Strategy, Go-to-Market, Analytics. Plank said, “Structurally, we believe that we now have the right model in place. I think that we’re attacking the right issues.”

Plank also said he expects Under Armour in North America will benefit from a focus on “winning with the winners,” or prioritizing concepts that have seen the strongest demand.

He said the brand’s apparel base layers, highlighted by HeatGear and ColdGear, have seen higher average selling prices (ASPs) and strong double-digit growth, driven by updated designs and colorways. He said the brand will seek to maximize the strength around these products to help drive NA sales recovery.

“We’re famous for HeatGear and ColdGear,” said Plank. “Getting a clear segmentation within both of those categories is a massive opportunity for us, ensuring that we can be present in distribution at the appropriate price and making sure there’s a real reason for a consumer to spend more for it too.”

He further cited broader ongoing efforts to be “much more intentional” about product and channel segmentation, marked by reduced inventory levels and SKU rationalization. He noted that Under Armour has completed the process of eliminating 25 percent of SKUs started in fiscal 2025, with further streamlining of raw materials and design processes actively underway.

Among categories, the biggest reset is in footwear, as sales tumbled 12 percent in the fiscal third quarter. Plank said UA’s footwear growth has historically been led by over production across styles and price points, which have ultimately pressured margins and heightened inventory risks. Plank said, “We are addressing each of these. We’re exiting low productivity styles, reducing redundant SKUs and eliminating launches that lack a defined role.”

He added, “Strong margin profile or scalable growth opportunity, with the primary criteria being every product must have a reason to be built by Under Armour.”

He also expects footwear to stabilize in FY27.

Other highlights of progress stated in Plank’s formal comments included efforts to improve full-price selling, more disciplined channel segmentation, strength in new products, improved speed to market, and elevated storytelling. He pointed to a strong response to UA’s women’s flag football campaign, click to watch here or on the image above,  that debuted this past Wednesday, February 4, on National Girls and Women in Sports Day.

“Brand health in the U.S. continues to improve,” said Plank. “Awareness, consideration and engagement are trending higher, particularly among younger athletes. Digital engagement remains strong, and when products, storytelling and distribution align, we see a positive consumer response.”

Plank also said the company’s progress is evident in Under Armour’s third-quarter results, which “came in ahead of expectations across most line items” and topped analysts’ EPS targets. The results prompted Under Armour to modestly raise its full-year adjusted operating income outlook.

Said Plank, “This is a good proof point that our underlying business is becoming steadier and we’re seeing fewer surprises and greater predictability. Which is where we believe we should be at this stage of our turnaround.”

In trading Friday, shares of Under Armour were up $1.29, or 20.5 percent, to close at $7.57.

Third-Quarter Sales
Total revenue decreased 5 percent to $1.33 billion, or down 6 percent on a currency-neutral basis. Sales were about even with analysts’ consensus estimate of $1.32 billion.

North America revenue declined 10 percent to $757 million. The decline was primarily due to a decrease in wholesale, with a slightly smaller decline in its DTC business. International revenue grew 3 percent to $577 million, up 1 percent on a currency-neutral basis.

In EMEA, revenue increased 6 percent on a reported basis and 2 percent on a currency-neutral basis, with growth in both wholesale and DTC during the quarter. APAC revenue slid 5 percent on both a reported and a currency-neutral basis, marking a sequential improvement from the year-over-year declines seen in the first half of the fiscal year. The Q3 decline was driven primarily by its full-price wholesale business, while DTC revenue was down only slightly, partially offset by positive licensing growth.

Latin America revenue increased 20 percent or 13 percent on a currency-neutral basis, driven by balanced growth throughout the business.

From a channel perspective, wholesale revenue decreased 6 percent to $660 million, driven by lower full-price and third-party off-price sales, partially offset by growth in its distributor business. DTC revenue decreased 4 percent to $647 million primarily due to a 7 percent decline in e-commerce revenue. E-commerce accounted for 38 percent of total DTC revenue in the quarter. Sales in owned and operated stores were down 2 percent in the quarter.

Licensing revenue increased 14 percent to $27 million, driven by the strength of international licensees and modest growth in North America.

By product type, apparel revenue decreased 3 percent to $934 million, largely due to softness in train, golf, and run, while sportswear was flat for the quarter.

Footwear revenue decreased 12 percent to $265 million, reflecting declines across most categories, partially offset by growth in outdoor. Accessories revenue decreased 3 percent to $108 million, driven largely by declines in golf, outdoor, and team sports, with a partial offset from growth in sportswear.

Third-Quarter Profitability & Expenses
Gross margin declined 310 basis points to 44.4 percent, primarily due to higher tariffs. Other factors included pricing headwinds and an unfavorable channel and regional mix. Foreign exchange gains and a favorable product mix partially offset these impacts.

SG&A expenses increased 4 percent to $665 million. Excluding a $99 million litigation reserve expense related to a previously disclosed insurance carrier dispute and $3 million in transformation expenses related to Under Armour’s fiscal 2025 restructuring plan, adjusted SG&A declined 7 percent to $563 million, primarily reflecting lower marketing spend due to timing shifts, with most prior-year spending occurring in the second half.

Operating loss was $150 million, also including restructuring charges of $75 million. Excluding the litigation reserve expense and transformation and restructuring charges, adjusted operating income was $26 million.

The net loss of $431 million, or $1.01 a share, included a $247 million valuation allowance on its U.S. federal deferred tax assets.

Under Armour said that in accordance with GAAP, it was required to reduce the value of its U.S. Federal deferred tax assets and record a corresponding non-cash tax expense due to cumulative GAAP U.S. losses over the past three years. These losses have been driven largely by restructuring and impairment charges, litigation reserve expenses, and other non-operating items. This valuation allowance has no impact on Under Armour’s cash flow or tax filings and should reverse once the U.S. business returns to sustained profitability.

Adjusted net income, excluding the litigation reserve expense, transformation and restructuring charges and the valuation allowance, was $37 million, or 9 cents a share, exceeding analysts’ consensus estimate calling for a loss or 2 cents. In the year-ago quarter, adjusted net income was $35 million, or 8 cents.

Fiscal 2025 Restructuring Plan
Under Armour’s restructuring plan, first announced in May 2024, is now expected to cost up to $255 million, up from the $160 million estimated when it reported second-quarter results. Cost expectations include up to $107 million in cash charges and up to $148 million in non-cash charges.

Through the end of the third quarter of fiscal 2026, the company recorded $178 million in restructuring and impairment charges and $47 million in other transformation-related expenses. The company expects to recognize the remaining charges under the updated plan by the end of fiscal 2026.

Fiscal 2026 Outlook
Compared with fiscal 2025, key highlights of Under Armour’s fiscal 2026 outlook are:

  • Revenue is expected to decline approximately 4 percent, compared with the prior outlook of a 4 percent to 5 percent decline, which includes an approximate 8 percent decline in North America and a 6 percent decline in Asia-Pacific, each compared with a previously expected high-single-digit decline, partially offset by an approximate 9 percent increase in EMEA revenue, compared with a previously expected high-single-digit increase.
  • Gross margin is expected to decline roughly 190 basis points, compared with the prior outlook of a 190 to 210 basis point decline, primarily due to higher U.S. tariffs, unfavorable channel and regional mix and pricing headwinds, partially offset by favorable foreign exchange and product mix.
  • SG&A expenses are expected to decline at a low-double-digit rate, compared with the prior outlook of a mid-teen percentage decline. Adjusted SG&A, which excludes litigation reserve expenses, transformation expenses related to the company’s Fiscal 2025 Restructuring Plan, and impairment charges, is expected to decline at a mid-single-digit rate, unchanged from the prior outlook, driven by lower marketing costs, restructuring savings and other cost management initiatives.
  • Operating loss is expected to be approximately $154 million, compared with the prior outlook of a $56 million to $71 million loss. Excluding the litigation reserve expense and expected transformation and restructuring charges, adjusted operating income is expected to be approximately $110 million, compared with the prior outlook of $95 million to $110 million.
  • Diluted loss per share is expected to range from $1.24 to $1.25. Adjusted diluted EPS is expected to range from 10 cents to 11 cents, compared with the prior outlook of 3 cents to 5 cents.

 Images courtesy Under Armour / Video courtesy YouTube