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01/10 00:29
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a mixed outlook. While revenue and operating losses are concerning, improved gross margins, share repurchase, and positive adjustments to guidance offer some optimism. The Q&A reveals positive traction in the DTC business and a focus on premium offerings, but uncertainties about tariffs and e-commerce decline remain. Given the small-cap status, the stock might see some volatility but likely remain within a neutral range of -2% to 2%.
Revenue $1.2 billion, down 11% year-over-year. The decline was primarily due to a decrease in DTC business driven by lower e-commerce sales and a decline in revenue from owned and operated stores.
Gross Margin 46.7%, increased by 170 basis points year-over-year. The increase was driven by 150 basis points from supply chain benefits due to lower product and freight costs, 80 basis points from pricing benefits due to lower discounting, and 20 basis points from favorable foreign currency impacts.
SG&A Expenses $607 million, up 1% year-over-year. Adjusted SG&A was $586 million, up 7% year-over-year, driven by higher marketing expenses and incentive compensation, partially offset by savings from ongoing cost management efforts.
Operating Loss $72 million, with an adjusted operating loss of $36 million. The loss was influenced by transformation expenses and restructuring charges.
Diluted Loss per Share $0.16 reported, with an adjusted diluted loss per share of $0.08.
Inventory $946 million, down 1% year-over-year, aligning with expectations.
Cash Balance $501 million, with no amounts outstanding on the $1.1 billion revolving credit facility.
Share Repurchase $25 million worth of Class C stock repurchased, retiring 4.1 million shares.
Full-Year Revenue $5.2 billion, down 9% year-over-year, slightly better than the expected 10% decline.
Full-Year Gross Margin 47.9%, increased by 180 basis points year-over-year, driven by reduced freight and product costs and lower discounting.
Full-Year SG&A Expenses $2.6 billion, up 8% year-over-year. Adjusted SG&A decreased by 2% to $2.3 billion, attributed to cost management initiatives.
Full-Year Operating Loss $185 million, with adjusted operating income of $198 million, slightly ahead of prior outlook.
Full-Year Diluted Loss per Share $0.47 reported, with adjusted diluted earnings per share of $0.31, above previous outlook.
New Product Launches: Introduced the boldest SlipSpeed yet, ECHO, launched with Stephan Curry at the 2025 NBA All-Star Weekend through a collaboration with luxury car designer, MANSORY. A premium apparel collection will debut this fall, uniting performance, sport, and style.
Innovative Accessories: Launched the No Weigh backpack with patent pending auxetic suspension straps, priced at $140, aimed at a market typically priced at $40 to $65.
Footwear Expansion: Curry brand continues to expand with new colorways and exclusive designs, including the new Curry 12 and De’Aaron’s Fox 1.
Sustainable Product Development: Introduced a regenerative plant-based sportswear collection crafted from natural fibers designed to decompose without leaving toxic residue.
Market Positioning: Focusing on high return categories, markets, and initiatives, simplifying the portfolio, and streamlining operations to enhance brand strength.
E-commerce Strategy: Redefining e-commerce to become a brand flagship, reducing promotional days to prioritize brand equity and profitability.
Global Market Focus: Concentrating on key growth markets like France, Spain, and Germany in EMEA, while resetting the marketplace in APAC for sustainable growth.
Operational Efficiencies: Achieved a 170 basis point increase in gross margin due to lower product and freight costs, and reduced discounting in DTC.
Inventory Management: Maintained disciplined inventory management with a 25% SKU reduction over the past year.
Cost Management: Focused on enhancing organizational efficiency, tightening discretionary spending, and reducing travel and third-party costs.
Strategic Shift: Transitioning to a category management operating model to align product, marketing, and regional teams around key categories.
Leadership Changes: Welcomed three new Board members to support strategic priorities and accelerate financial performance.
Brand Narrative Reshaping: Established a distinct storytelling strategy aligned with product vision to enhance brand relevance and differentiation.
Competitive Pressures: The company is facing a highly competitive and promotional environment, particularly in the APAC region, which has led to a 27% decline in revenue.
Regulatory Issues: Changes in trade policy are expected to have a significant impact on the company's operations, prompting a reevaluation of strategies to mitigate risks.
Supply Chain Challenges: Approximately 30% of Under Armour's volume is sourced from Vietnam, 20% from Jordan, and 15% from Indonesia, creating potential exposure to geopolitical and supply chain complexities.
Economic Factors: The company anticipates a modest top line contraction for fiscal ’26 due to ongoing economic pressures and the need to prioritize higher quality revenue.
Inventory Management: The company is focused on disciplined inventory management to create space for a stronger product architecture, which is critical in a declining revenue environment.
SG&A Expenses: SG&A expenses increased by 1% in Q4, driven by higher marketing expenses and incentive compensation, which could impact profitability.
Market Demand: The company expects a decline in revenue for the first quarter of fiscal ’26, indicating potential challenges in consumer demand.
Strategic Initiatives: Under Armour is focusing on building agility within the organization, enhancing brand positioning through higher quality revenue decisions, and improving SG&A efficiencies. The company is streamlining operations and exiting lower value activities to sharpen execution and boost efficiency.
Product Innovation: The company is prioritizing product innovation, with upcoming collections like the UA Halo and NEOLAST material fiber breakthrough aimed at enhancing performance and sustainability.
Category Management Model: Under Armour is shifting to a category management operating model to align product, marketing, and regional teams around key categories, enhancing decision-making speed and impact.
E-commerce Transformation: The company is redefining its e-commerce channel to prioritize brand equity and profitability, reducing promotional activities to enhance full-price sales.
Global Expansion: Under Armour is focusing on key growth markets in EMEA and APAC, with strategies to streamline inventory and reduce discounting.
Revenue Expectations: For Q1 FY26, Under Armour expects revenue to decline by 4% to 5%, with North America experiencing similar declines.
Gross Margin Projections: The company anticipates gross margin expansion of 40 to 60 basis points compared to the previous year.
SG&A Management: Adjusted SG&A expenses are expected to leverage slightly compared to the prior year, driven by ongoing savings from restructuring.
Operating Income Forecast: Adjusted operating income is projected to reach $20 million to $30 million for Q1 FY26.
Earnings Per Share Outlook: Adjusted diluted earnings per share are expected to be between $0.01 to $0.03 for Q1 FY26.
Share Repurchase Program: Under Armour has a three-year $500 million share repurchase program, of which $90 million has been repurchased, retiring 12.8 million shares.
Share Repurchase in Q4 2025: In the fourth quarter, Under Armour repurchased $25 million worth of Class C stock, retiring 4.1 million shares.
The earnings call summary and Q&A reveal several challenges: declining revenue, gross margins, and operating income projections, along with tariff impacts. Despite some positive developments like product innovation and improved partnerships, the lack of concrete guidance for North American stabilization and unclear pricing strategies weigh heavily. The market cap suggests moderate sensitivity, but the overall negative outlook on financials, especially in key markets, points to a negative stock price reaction in the near term.
The earnings call reveals several concerning factors: anticipated revenue decline, significant gross margin pressure from tariffs, and challenges in North America. While there are positive indicators like improved brand perception and strategic initiatives, the overall financial outlook is weak, with expected declines in North America sales and Q2 being particularly tough. The market may react negatively to the revenue and margin pressures, despite optimistic guidance for the latter part of the year. With a market cap of approximately $2.9 billion, the stock is likely to experience a negative movement of -2% to -8%.
The earnings call presents a mixed outlook. While revenue and operating losses are concerning, improved gross margins, share repurchase, and positive adjustments to guidance offer some optimism. The Q&A reveals positive traction in the DTC business and a focus on premium offerings, but uncertainties about tariffs and e-commerce decline remain. Given the small-cap status, the stock might see some volatility but likely remain within a neutral range of -2% to 2%.
The earnings call presents a mixed picture. Revenue declined, but gross margin improved. The company is facing supply chain and macroeconomic challenges, especially in APAC, but is also focusing on brand strengthening. The Q&A reveals some uncertainties, particularly in eCommerce and regional strategies, but there's cautious optimism in North America. Share repurchase is a positive signal. Given the small-cap nature of the company, the mixed signals suggest a neutral stock price movement within the next two weeks.
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