What Under Armour (UA) Said on Its Q2 Earnings Call

Key Points

• Fiscal Q2 revenue fell 7% to $1.2 billion, with declines across major regions and both wholesale and direct-to-consumer channels; e-commerce was down 12%. Weaker traffic, markdowns and freight costs pressured gross margin, which slipped 30 basis points to 47%.
• Under Armour cut its full-year gross margin expansion forecast to 170–220 basis points, citing higher fuel and freight costs, markdowns and a stronger dollar. It maintained its full-year revenue, adjusted operating income and adjusted EPS outlook, while warning North American sales may weaken more than previously expected.
• The company is reducing inventory purchases and narrowing its product range, targeting nearly 50% fewer SKUs than when CEO Kevin Plank returned in 2024. Its strategy also emphasizes clearer marketing and stronger full-price sales, alongside upcoming product launches and an expanded youth-apparel licensing arrangement.

Under Armour NYSE: UA reported a 7% decline in fiscal second-quarter revenue and lowered its full-year gross margin outlook, as weaker store traffic, inventory markdowns and higher freight costs weighed on the athletic apparel company.

The company maintained its fiscal 2027 revenue and adjusted earnings forecasts, even as it warned that North American sales could fall more than previously anticipated. Revenue for the quarter was $1.2 billion, while adjusted operating income of $25 million exceeded the company’s outlook, executives said on the Nov. 6 earnings call.

President and CEO Kevin Plank said Under Armour is focusing on fewer products, more coordinated marketing and stronger full-price sales to stabilize its largest market. “Marketing remains our largest opportunity as a brand to turn the trajectory of our business,” he said, adding that the company needs to explain its products’ benefits more clearly.

Sales Decline Across Major Markets and Channels

North America revenue fell 7%, reflecting pressure on direct-to-consumer traffic and softer wholesale sell-through, Chief Financial Officer Reza Taleghani said. Revenue declined 9% in both Europe, the Middle East and Africa, and Asia Pacific. Latin America revenue rose 3%, but fell 4% on a constant-currency basis.

Wholesale revenue decreased 6% to $725 million. Direct-to-consumer revenue fell 8% to $494 million, including a 7% decline in owned-and-operated stores and a 12% drop in e-commerce.

Apparel revenue declined 6% to $880 million, while footwear revenue fell 11% to $234 million. Plank said HeatGear and Vanish grew by double digits, as did the company’s American football cleat business. Running and select cleated footwear businesses also grew, partly offsetting broader footwear weakness.

Quarterly gross margin narrowed 30 basis points to 47%. Currency, channel and regional mix, and higher discounting outweighed supply-chain and product-mix benefits. Reported operating income was $15 million, and both reported and adjusted diluted loss per share were approximately break-even.

Margin Forecast Cut, Earnings Outlook Maintained

Under Armour continues to expect full-year revenue to decline at a mid-single-digit rate. Taleghani said North America could be down modestly more than the mid-single-digit decline previously anticipated for the region, but that the potential downside is included in the unchanged companywide outlook.

The company reduced its forecast for full-year gross margin expansion to 170 to 220 basis points from 220 to 270 basis points. The revised range includes approximately 150 basis points of benefit from IEEPA tariff refunds related to fiscal 2026 costs. Excluding that benefit, Under Armour expects margin expansion of roughly 20 to 70 basis points.

Taleghani attributed the 50-basis-point reduction to elevated fuel and freight costs, planned markdowns to better align inventory with sales, and a stronger U.S. dollar. During the question-and-answer session, he identified supply-chain costs as the largest negative factor.

Under Armour maintained its forecast for adjusted operating income of $140 million to $160 million and adjusted diluted earnings per share of $0.08 to $0.12. The operating income outlook includes about $70 million in tariff-refund benefits and approximately $45 million in headwinds associated with the ongoing Middle East conflict, up from a prior estimate of $35 million.

For the fiscal third quarter, the company expects revenue to decline approximately 8% to 9% and adjusted operating results to range from a $5 million loss to a $5 million profit. Its full-year outlook assumes a stronger fourth quarter, supported in part by shipment timing, youth-business transition activity and wholesale initiatives to reduce excess inventory.

Inventory and New Product Plans

Inventory rose 4% year over year to $1.1 billion. Taleghani said the approximately $200 million reduction in Under Armour’s revenue outlook in August left inventory above planned sales needs. The company is reducing future purchases and taking targeted actions to sell through inventory, with the expected margin impact included in its outlook.

Under Armour ended the quarter with $285 million in cash and $190 million in borrowings under its $1.1 billion revolving credit facility.

Plank said the company is targeting a nearly 50% reduction in product SKUs from the level when he returned in 2024 and has removed more than 60% of materials. The goal is to concentrate resources on stronger products and sell more of them at full price.

Upcoming launches include the $35 Tech Helix shirt later in November and the Armour Short in December. The compression short, which includes targeted groin padding but does not replace a hard protective cup, will be priced at $80 for adults and $55 for children. Plank said it will launch on Under Armour’s website and in 500 DICK’S Sporting Goods stores in the United States.

The company also plans to expand its youth apparel licensing arrangement with Centric Brands beginning in fall 2027. Taleghani said the transition covers North America and EMEA, while Under Armour will continue selling youth products through its own direct-to-consumer channels. He declined to provide the business’s revenue or profitability breakdown and said more detail would accompany the company’s fiscal 2028 outlook in May.

About Under Armour (NYSE:UA)

Under Armour, Inc is a global sports performance and lifestyle brand that develops, markets and distributes apparel, footwear and accessories. Its products are designed for athletes and active consumers and include performance shirts, shorts, outerwear, training gear, running shoes, athletic footwear and accessories such as bags and headwear.

Founded in 1996 by Kevin Plank, Under Armour built its early reputation with moisture-wicking performance apparel and has expanded its product offerings under technologies and collections including HeatGear and ColdGear.

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