Updated 4:21 p.m. ET on Feb. 6
Despite continuing headwinds, particularly in its home market of North America, Under Armour managed to exceed analyst expectations in the third quarter and raised its profit guidance for the fiscal year.
The Baltimore-based sports brand on Friday reported adjusted diluted earnings per share of 9 cents, surpassing analyst expectations of a 2-cent loss. It also reported an operating loss of $150 million. Excluding litigation reserve expense and transformation and restructuring charges, adjusted operating income was $26 million.
Related Articles
Sales fell 5 percent to $1.33 billion, slightly above analyst projections of $1.31 billion.
You May Also Like
By region, North America, the company’s largest market, continued to struggle, with a sales decline of 10 percent to $757 million, due primarily to a decrease in the wholesale business.
International revenue, led by Latin America and the EMEA, increased 3 percent to $577 million. Latin America sales were up 20 percent in the period and the EMEA was up 6 percent. Asia-Pacific sales, however, declined 5 percent.
Wholesale revenues were also down, dropping 6 percent to $660 million. Direct-to-consumer sales fell 4 percent overall to $647 million, with Under Armour owned and operated store revenue falling 2 percent and e-commerce down 7 percent.
By category, apparel revenue decreased 3 percent to $934 million with softness in train, golf and run, while sportswear was flat. Footwear declined 12 percent to $265 million, and accessories decreased 3 percent to $108 million.
Despite the continued struggles, Under Armour founder and chief executive officer Kevin Plank remained optimistic: “Our third-quarter adjusted operating results exceeded expectations, and despite a few unfortunate, nonrecurring impacts, we’re encouraged by the progress we’re making in the business to reignite brand momentum,” he said. “In North America, we believe the December quarter marked the most challenging phase of our business reset, and we expect greater stability ahead as we build on this progress globally.”
In a conference call with analysts after the earnings were released, Plank acknowledged that while there’s still work to be done, the company is moving in the right direction. “[We] are making real progress with a disciplined strategy, [and with] structure and team now in place, that progress is becoming more consistent,” he said. “Inventory is down year-over-year, assortments are tighter, planning is more precise, and we have additional opportunity to continue to improve.”
He added: “Brand health in the U.S. continues to improve. 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.”
He said that in the quarter, the company saw “fewer surprises and greater predictability, which is where we believe we should be at this stage of our turnaround.”
In May 2024, Under Armour unveiled a restructuring plan to improve financial and operational efficiency. The plan, which has been updated since then, is now expected to cost up to $255 million, including up to $107 million in cash charges and up to $148 million in noncash 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. Of the $224 million incurred to date, $89 million is cash-related and $135 million is noncash. The company expects to recognize the remaining charges under the updated plan by the end of fiscal 2026.
Plank said the company’s game plan will remain the same going forward into fiscal 2027. That includes selling fewer goods at promotional prices and creating a “much more intentional line of products across apparel, footwear and accessories.” In fiscal 2025, the company moved to eliminate some 25 percent of its product offering, a process that is now complete, and Under Armour will now turn its attention to the raw materials used to make its products, he said.
He singled out some of the company’s most successful products, including its base layer, HeatGear and ColdGear merchandise that have been updated with new styles and colorways that are driving double-digit growth. Icon fleece and the women’s Meridian offering were also popular and a new women’s Vanish Elite collection will soon be introduced.
In accessories, the StealthForm and No Weight Backpack pushed the “price ceiling,” he said, with strong consumer response.
Turning to footwear, a category in which Under Armour has long struggled, Plank said sales year-to-date are down 14 percent as the company sought unsuccessfully to grow sales by expanding the assortment. That strategy will change going forward, he said.
“We are exiting low productivity styles, reducing redundant skus and eliminating launches that lack a defined role, strong margin profile or scalable growth opportunity,” he said, adding that effort will be directed behind “fewer, higher impact franchises” across training, running and sportswear categories.
Turning to the company’s North American performance, Plank said he believes the brand has hit bottom and the future looks brighter.
“Traffic, yes, remains soft, but underlying indicators are improving,” he said. “We continue efforts to strengthen our premium online position, even amid a promotional environment. E-commerce conversion is up, and Factory House performance is improving. Digital and gaming engagement tools such as SMS and TikTok shop are delivering strong growth.”
In wholesale, the plan is to rebuild the business with the right partners, he said, pointing to Dick’s Sporting Goods as an example. “And we are encouraged by how our fall order book is shaping up.”
On Thursday, Under Armour also updated its projections for fiscal 2026. The company is now projecting adjusted diluted earnings per share of 10 cents to 11 cents, compared to its prior outlook of 3 cents to five cents and above analyst expectations of 5 cents.
Revenue is now expected to decline about 4 percent, compared to the prior outlook of a 4 to 5 percent decline. This includes an approximate 8 percent decline in North America and a 6 percent drop 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.
The operating loss is expected to be about $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 about $110 million, compared with the prior outlook of $95 million to $110 million.
Analysts for the most part were positive about the company’s progress — with reservations. Cristina Fernandez of Telsey Group said the revised guidance for the fiscal year “implies a weaker-than-expected outlook” for the fourth quarter which creates some concern. That concern was echoed by Laurent Vasilescu of BNP Paribas Equity Research, who said that although revenues are stabilizing, a tepid fourth quarter “could suggest that the turnaround might take a bit longer.”
Dylan Carden of William Blair was more positive, writing in his report on Friday: “While headline performance remains weak, particularly across North America and footwear, we view the quarter and updated outlook as further evidence that management is moving decisively to reset the business and rebuild the brand.”
Under Armour stock closed up 19.35 percent on Friday.