It was a mixed bag for Under Armour in the second quarter.
Before the market opened Thursday, the Baltimore-based brand reported earnings per share of 4 cents, 2 cents higher than Wall Street projections, on a 5 percent decline in sales to $1.33 billion, slightly above expectations of $1.31 billion. The net loss totaled $18.8 million.
But the company said full-year EPS will come in at 3 to 5 cents, below analysts’ expectations of 6 cents.
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At the same time, the company said its longtime chief financial officer David Bergman will be leaving the company early next year and will be succeeded by Reza Taleghani. Bergman, who has been with Under Armour for 21 years, will remain with the company through the first quarter of next year to help with the transition.
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Taleghani has more than 25 years of experience in global finance and joins Under Armour from the Samsonite Group where he has served as executive vice president and CFO since 2018.
In its earnings call Thursday morning, Kevin Plank, Under Armour’s president and CEO, started his remarks by praising Bergman’s partnership and “steady hand” over the course of his career.
Turning to the results, Plank acknowledged that Under Armour’s turnaround “won’t happen through force alone. It’s about balance and precision. Staying focused is critical because credibility and trust are lost quickly, but regained slowly.”
That was evident in the numbers that showed the company’s North American sales fell 8 percent to $792 million while international revenue increased 2 percent to $551 million. That included a 12 percent sales jump in the EMEA, a 14 percent decline in Asia-Pacific and a 15 percent increase in Latin America.
The North American decline was attributed to a decline in full-price wholesale business and lower e-commerce sales, Bergman said.
Wholesale revenue was down 6 percent to $775 million and direct-to-consumer sales dipped 2 percent to $538 million. The latter figure included flat revenues at Under Armour’s owned and operated stores and an 8 percent decline online, a category that accounted for 28 percent of the total DTC business in the quarter.
Apparel revenue was down 1 percent to $936 million with softness in run, outdoor and golf and growth in training product and sportswear. Footwear sales declined 16 percent to $264 million and accessories sales were down 3 percent to $113 million.
Gross margin declined 250 basis points to 47.3 percent due primarily to higher tariffs.
Plank said since returning to the CEO post in April 2024, he has overseen a major restructuring that included cutting 25 percent of the assortment, “raising the bar on design” and working to “bring innovation and style back to the center of what we do.”
He said the results of this revamp will begin to be evident in fall 2025, where some of its franchise products, including HeatGear and ColdGear, Unstoppable, Vanish, Meridian and Icon in its apparel assortment are “beginning to drive demand with key specialty and sporting goods partners.”
In footwear, he said the company will not be “accepting the current state of the business,” and will work to return to growth. He pointed to one bright spot, Sharon Lokedi’s second-place finish in Sunday’s New York City Marathon wearing the Velociti Elite 3.
He also said accessories are gaining momentum thanks to a couple of “breakout hits” such as the $45 StealthForm hat and the $140 No Weigh Backpack.
Plank said he expects momentum to build with new footwear and accessories products ready to hit the market early next year.
He also teased a Neolast product that will launch in the spring that he boasted will be “the best expression of UA.” Neolast is a performance fiber the company developed with Celanese Corp. for stretch fabrics that is intended to replace spandex.
“The evolution of our products reflects the transformation happening across our business worldwide, with focused and disciplined marketplace management in each region driving progress,” Plank said. “EMEA is experiencing healthy, profitable growth. APAC is rebuilding back to growth over the next 12 months and North America is the proof point we are decidedly getting behind to redirect our global trajectory and believe we have a positive line of sight, focusing on North America and recognizing that it’s not fully reflected in our financials yet.”
The brand’s wholesale customers are also getting back on board, he said. “We’re seeing positive momentum with many of these accounts in some of our core programs as we continue to sharpen our focus on stronger partnerships, more targeted assortments, elevated merchandising and a premium retail brand experience.”
Plank said he does not believe Under Armour has either a product or a brand issue. But the brand hasn’t been loud enough with its messaging of late. “What we do have is a storytelling opportunity. That’s exactly where we’re concentrating because consistent, compelling storytelling that personifies our brand turns great products into icons, athletes into advocates and moments into momentum.”
Plank also addressed the disconnect between the company’s $5 billion in revenue and it’s $1.8 billion market capitalization. “That gap drives our sense of urgency,” he said, adding that he believes Under Armour has the right team in place, the right strategy and a clear focus to effect the desired transformation.
Looking ahead to the third quarter, sales are expected to decline between 6 and 7 percent, Bergman said, with a low double-digit drop anticipated in North America due to continued wholesale softness, particularly in footwear. EMEA is expected to be up in the high-single digits while Asia-Pacific is expected to be down in the high single digits. Gross margin is seen declining 310 basis points due to the tariffs.
For the full year, the company said revenue is expected to decline 4 to 5 percent in fiscal 2026, which will include a high-single-digit decrease in North America and Asia-Pacific and a high-single-digit increase in EMEA. Gross margins for the year is expected to decline by 190 basis points due primarily to higher U.S. tariffs.
Analysts were taking a watch-and-wait approach to the earnings on Thursday. Tom Nikic of Needham & Co. said despite the optimistic message from Under Armour management, he maintained his “hold” rating on the stock “pending greater clarity into the state of the turnaround.”
Zachary Warring of CFRA Research also has a “hold” recommendation on the stock, noting that the share price was down slightly after the earnings were released and pointing out that despite strength in the EMEA, Under Armour’s “ongoing struggles are exacerbated by the tariff environment.”
And Joseph Civello of Truist Securities said he remains “on the sidelines” until the company begins to show “durable topline improvements. “We believe retailers will likely remain more hesitant on orderbooks for less-proven sellers given the macro uncertainty ahead (especially as the company and peers look to raise prices in future seasons),” he wrote in a report on Thursday.
Under Armour stock closed down 1.1 percent to $4.56 on Thursday.