Moody’s Ratings downgraded Under Armour, Inc.’s debt ratings, citing expectations that its “operational turnaround will be more challenging than previously anticipated as a result of cautious retailer orders, slow consumer discretionary spending and higher tariffs.”
The ratings lowered include Under Armour’s corporate family rating (CFR) to B1 from Ba3, probability of default rating (PDR) to B1-PD from Ba3-PD and senior unsecured notes rating to B2 from B1. The company’s speculative grade liquidity rating (SGL) was upgraded to SGL-2 from SGL-3. The outlook was changed to stable from negative.
The upgrade in SGL to SGL-2 reflects the recent refinancing of Under Armour’s $600 million notes due 2026, which addressed its near-term debt maturity. It also reflects Moody’s expectation for modestly positive free cash flow, discretionary balance sheet cash and good excess availability under its $1.1 billion revolving credit facility due June 2030.
Moody’s said in its analysis, “Under Armour’s B1 CFR reflects the company’s well-recognized brand and diversified global distribution in the athletic apparel and footwear market. The comprehensive turnaround led by CEO and founder Kevin Plank aims to elevate the brand and revamp the company’s product, marketing and market segmentation. Under Armour’s strategic initiatives have resulted in improved gross margin prior to the impact of tariffs through lower promotions, and early signs of stronger consumer engagement benefiting from the introduction of new, premium products and more effective marketing. The company’s relatively low level of funded debt and good liquidity profile also provide key credit support while it addresses its underperformance.
“At the same time, the credit profile is constrained by the company’s weak operating performance and low operating margin. We expect revenues and earnings to continue to decline in the second half of fiscal 2026, as the company’s strategic initiatives are offset by higher tariffs and cautious discretionary spending. While we expect Under Armour’s turnaround to generate earnings growth over time, there is significant execution risk, given intense competition and the company’s prior struggles to improve brand health. We project Moody’s-adjusted debt/EBITDA (which does not add back significant restructuring and one-time charges) to increase to high-5x at year-end FYE March 2026 from 4.3x as of September 30, 2025 and subsequently decline to low- to mid-3x in FY 2027. In FY 2027, we project earnings growth in the second half, driven by lower restructuring charges and higher gross profit as the company starts to mitigate tariffs with higher pricing and its revamped products gain more traction with retail partners. However, we project Moody’s-adjusted EBITA/interest expense to remain relatively low, in the low 2x range in FY 2027. Additionally, we view Under Armour’s executive turnover, including four CEO transitions in the past 4 years and significant recent key executive changes, as a moderate governance concern.
“The stable outlook reflects our expectations for good liquidity and significant earnings improvement in fiscal 2027.”
