Under Armour reported adjusted profits in the fiscal second quarter ended September 30 plunged 88.3 percent due to a 5 percent revenue decline and the impact of tariffs. Results exceeded guidance, and Under Armour stated that its North America business is showing signs of stabilization.

Sales in the quarter were down 5 percent, versus guidance in the range of a 6 percent to 7 percent decline. North American revenue declined 8 percent, versus guidance calling for a decline in the low double digits. Adjusted EPS was 4 cents versus guidance calling for earnings between 1 cent and 2 cents.

Under Armour also reinstated its guidance for the year after withdrawing it in May due to uncertainties related to trade policies.

“We delivered results ahead of our prior outlook this quarter and are encouraged to see signs of brand momentum in North America — an important milestone in our turnaround,” said Under Armour President and CEO Kevin Plank. “With our strategy, operating model and go-to-market approach firmly in place, we’re staying disciplined and focused. The response from consumers and partners reflects this execution, driven by stronger product, sharper storytelling and a renewed belief in the Under Armour brand.”

Second Quarter Fiscal 2026 Review

  • Revenue decreased 5 percent to $1.3 billion (down 6 percent currency neutral).
    • North American revenue declined 8 percent to $792 million, while International revenue grew 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).
    • Wholesale revenue decreased 6 percent to $775 million, and direct-to-consumer revenue declined 2 percent to $538 million. Revenue from owned and operated stores remained steady, while eCommerce revenue decreased 8 percent and accounted for 28 percent of the total direct-to-consumer business for the quarter.
    • 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.
  • 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.
  • Restructuring charges totaled $32 million.
  • Operating income was $17.0 million, down from $173.1 million in the same period last year. Excluding transformation expenses and restructuring charges, adjusted operating income was $53 million, down 68.1 percent from $166.1 million a year ago.
  • Net loss was $18.8 million, or 4 cents a share, down from earnings of $170.4 million, or 39 cents, a year ago. Adjusted net income was $15.3 million, or 4 cents, down 88.3 percent from $131.1 million, or 30 cents.
  • Inventory declined 6 percent to $1.0 billion.
  • Cash and cash equivalents totaled $396 million. During the quarter, using the net proceeds from issuing the Senior Notes due 2030, along with borrowings from the company’s revolving credit facility and existing cash on hand, the company satisfied and discharged its $600 million Senior Notes due 2026. The funds were placed into a restricted investment account to cover all remaining principal and interest payments on those notes. As of September 30, 2025, the company had $200 million in borrowings outstanding under its $1.1 billion revolving credit facility.

Share Buyback Program
Under Armour repurchased $25 million of its Class C common stock in the second quarter, retiring 5.2 million shares. As of September 30, 2025, a total of 18 million shares had been repurchased for $115 million as part of a three-year, $500 million program approved by the Board of Directors in May 2024.

Fiscal 2025 Restructuring Plan
In May 2024, Under Armour announced a restructuring plan aimed at improving the company’s financial and operational efficiencies. The plan is estimated to cost up to $160 million, with up to $90 million expected to be cash-related and as much as $70 million projected as non-cash charges. By the end of the second fiscal quarter of 2026, the plan had resulted in the company recording $103 million in restructuring and impairment charges, as well as $44 million in other related transformational expenses. Of the total $147 million incurred so far, $82 million is cash-related, and $65 million is non-cash-related. The company expects that the remaining charges outlined in the updated restructuring plan will be recognized by the end of fiscal 2026.

Fiscal 2026 Outlook
Compared to fiscal 2025, key highlights of the company’s outlook for fiscal year 2026 include:

  • Revenue is expected to decrease 4 to 5 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 is expected to decline by 190 to 210 basis points, primarily due to higher U.S. tariffs, as well as an 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 are expected 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 17 cents. Adjusted diluted earnings per share is expected to be from 3 cents to 5 cents.

Guidance for adjusted EPS between 3 cents to 5 cents was just below analysts’ consensus target of 6 cents. Analysts on average were expecting sales for the year to decline 4.1 percent.

 

 

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Image courtesy Under Armour