Under Armour, Inc. (UAA) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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%.
Key Financial Performance
Revenue First quarter revenue declined 4% to $1.1 billion year-over-year. North America revenue declined 5% due to a decrease in full price wholesale business and lower e-commerce sales. EMEA revenue increased 10% (6% after adjusting for foreign currency), driven by growth across all channels, especially full price wholesale. APAC revenue decreased 10% due to weak consumer confidence and a competitive market. Latin America revenue declined 15% (8% on a currency-neutral basis) due to foreign currency headwinds and decreases in full-price wholesale and DTC.
Gross Margin Gross margin increased by 70 basis points year-over-year to 48.2%. This was driven by 55 basis points of favorable foreign currency impacts, 30 basis points of pricing benefits, and 30 basis points of favorable product mix. These were partially offset by 45 basis points of unfavorable channel mix and supply chain headwinds.
SG&A Expenses SG&A expenses decreased 37% to $530 million year-over-year, primarily due to a considerable litigation reserve expense in the prior year. Adjusted SG&A expenses (excluding transformation expenses) were $522 million, reflecting a 6% decline year-over-year. The decrease was driven by lower marketing expenses and savings from restructuring and cost management efforts.
Operating Income Reported operating income was $3 million for the quarter. Adjusted operating income (excluding transformation expenses and restructuring charges) was $24 million.
Diluted Earnings Per Share (EPS) Reported diluted loss per share was $0.01. Adjusted diluted earnings per share was $0.02 for the quarter.
Inventory Inventory at the end of Q1 was $1.1 billion, a 2% increase year-over-year.
Cash Balance Cash balance was $911 million, with no utilization of the revolving credit facility during the quarter. The increase in cash was mainly driven by the issuance of $400 million in senior notes due in 2030.
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Operating Highlights
HeatGear OG compression mock, Velociti Elite 3 running shoe, Magnetico football boot, Halo collection, StealthForm Hat, No Weigh backpack: Under Armour is launching these pinnacle products to redefine its brand identity and reshape operations. These products are designed to blend sports authenticity, cultural style, and innovation, with higher ASPs gaining traction.
Top 10 volume drivers redesign: Systematic redesign of top 10 volume items across apparel, footwear, and accessories to improve performance, design, and ASPs. This strategy aims to elevate the brand and mitigate tariff impacts.
Women's product focus: Structural changes to integrate a women-centered approach into category management, aiming to grow the women's business share of total revenue.
Footwear reset: Streamlined portfolio under new leadership, focusing on Velociti and Halo franchises, with deliberate decisions to sunset underperforming lines like Infinite.
EMEA growth: EMEA is the strongest performing region, achieving profitable growth through sharper execution, local relevance, and financial discipline. Focused on football, sportswear, training, and running in key cities and countries.
APAC stabilization: APAC is emerging from a reset year with a focus on reigniting relevance through local storytelling, disciplined pricing, and premium partnerships. Fiscal '26 is about stabilizing and building momentum.
North America reset: Phased plan to rebuild brand loyalty, improve revenue quality, and stabilize growth. Focus on team sports, creators, and cultural collaborations to regain cultural relevance.
SKU reduction: On track to reduce SKUs by 25%, with a 30% reduction in materials for 2025 products, aiming for cost efficiency and sustainable innovation.
AI integration: Over 80 automations implemented to streamline workflows, reduce time to market, and improve execution in areas like predictive pricing and inventory management.
Category-led teams: Shift from siloed functions to collaborative category-led teams driven by real-time data and shared KPIs for smarter decision-making.
Brand transformation: Under Armour is undergoing a bold reinvention to become a sharper, more focused brand, blending sports, style, and innovation with financial discipline.
Focus on team sports: Shifting from a gym-first approach to team sports, emphasizing football, basketball, baseball, and volleyball to bring new energy and relevance.
Influencer-led network: Expanding athlete roster to include high school stars, college athletes, and creators, moving beyond a professional athlete-only model.
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Risk or Challenges
Tariff Costs: The company is facing approximately $100 million in additional tariff-related costs, which is expected to negatively impact gross margins by about 200 basis points. This is a significant financial headwind for fiscal 2026.
Soft Consumer Demand: There is softer-than-expected demand in fiscal 2026, particularly in North America and APAC, which is affecting revenue and profitability.
Footwear Business Challenges: The footwear category has been underperforming, with a 14% decline in revenue for the quarter. This is attributed to deliberate portfolio streamlining, softer demand, and missed opportunities in innovation and storytelling.
APAC Market Weakness: The Asia Pacific region is experiencing a 10% revenue decline due to weak consumer confidence and a highly competitive and promotional market.
North America Revenue Decline: Revenue in North America declined 5%, driven by lower full-price wholesale business and e-commerce sales, as well as higher costs due to tariffs.
Inventory Management: Inventory increased by 2% year-over-year, which could indicate potential inefficiencies or challenges in aligning supply with demand.
Operational Restructuring Costs: The company has incurred $110 million in restructuring charges and transformation expenses to date, with additional costs expected in fiscal 2026.
E-commerce Weakness: E-commerce sales declined 12% due to competitive conditions in APAC and North America, highlighting challenges in digital engagement and online sales.
Women's Business Stagnation: The women's business, despite being over $1 billion, has not increased its share of the total business, indicating a lack of growth in this segment.
Footwear Transition Costs: The decision to sunset the Infinite franchise and focus on new lines like Velociti and Halo has come at a cost, contributing to near-term declines in the footwear category.
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Guidance & Outlook
Revenue Projections: Revenue is expected to decline modestly in fiscal 2026 due to a focus on strengthening the brand and increasing higher-quality sales. Q2 revenue is projected to decline 6% to 7% year-over-year, with North America seeing a low double-digit decline and APAC down at a low teen rate. EMEA is expected to deliver high single-digit revenue growth.
Gross Margin Outlook: Gross margin is expected to decline by 340 to 360 basis points in Q2 compared to last year, driven by higher product costs (including new tariff costs) and channel mix. Favorable changes in foreign currency and pricing benefits will partially offset these decreases.
Operating Income and EPS: Adjusted operating income for fiscal 2026 is projected to be roughly half of fiscal 2025 levels due to new tariff costs and related demand impacts. Adjusted diluted earnings per share for Q2 is expected to range from $0.01 to $0.02.
Tariff Impact: Approximately $100 million in additional tariff-related costs are expected in fiscal 2026, with mitigation strategies such as cost-sharing, alternative sourcing, and selective pricing adjustments being pursued. Most gross margin offsets are anticipated in fiscal 2027 and beyond.
Regional Performance: North America is expected to face challenges from higher costs and softer demand, while EMEA is projected to achieve profitable growth through sharper execution and local relevance. APAC is focused on stabilizing and building momentum for sustained growth.
Strategic Initiatives for Growth: The company is focusing on premiumizing its brand, launching high-ASP products, and redesigning top volume drivers to improve performance and pricing. Efforts include expanding into team sports, enhancing women's product offerings, and leveraging AI for operational efficiency.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:How are tariffs impacting demand from wholesale channel partners and what are the green shoots of improving brand health in North America?
A:Kevin Plank explained that the tariff environment is challenging for the industry, but Under Armour is addressing it through a two-lever strategy: creating unique, high-quality products and improving pricing power. He highlighted examples like the StealthForm cap and No Weigh backpack. Regarding brand health, he mentioned positive trends in base layer compression sales, improved NPS scores (e.g., e-commerce site score rising from 53% to 70%), and increased brand perception among 18-34-year-olds. Retailer confidence is also improving, with positive comps in men's and women's apparel.
Q:What is the impact of SKU cleanup and pullback on promotion and pricing on the 2Q revenue guide?
A:David Bergman stated that Q2 will be the toughest quarter due to challenges in North America, including low double-digit declines, traffic challenges, and the trailing spring/summer '25 order book. While progress was made on promotions and discounting last year, the tariff environment makes further progress difficult. The company is maintaining discipline to avoid setbacks, which pressures revenue.
Q:What is the direction of marketing investment to engage the 16-24-year-old demographic?
A:Kevin Plank noted that brand perception among 18-34-year-olds is improving, with mid-single-digit growth. He highlighted new product launches like Apparition Tech and Sola, which are gaining traction. Partnerships with influencers and athletes, such as Gunna, are also helping to engage this demographic.
Q:What are the key course corrections made during the repositioning of the brand?
A:Kevin Plank emphasized focusing on selling fewer products at higher full retail prices and reducing SKUs and materials. He highlighted the importance of core products and strategic transformations, stating that the company is in month 16 of an 18-month go-to-market process. The operational structure is now in place, and execution is the priority.
Q:What is the outlook for North America sales in the second quarter and beyond?
A:David Bergman explained that North America sales are expected to decline in Q2 due to a challenging spring/summer '25 order book, traffic declines, and a promotional e-commerce environment. Footwear is facing more headwinds than apparel. However, improvements are expected in the back half of the year, driven by new product launches and prioritized marketing.
Q:What actions are being taken to address challenges in the DTC channel in North America?
A:David Bergman stated that e-commerce is facing pressure due to a promotional environment, but the company is holding the line on promotions to maintain last year's progress. Factory House traffic is down, but better assortments and the addition of full-price products are helping to improve conversion rates.
Q:What is the impact of tariffs on gross margins and the overall business?
A:David Bergman noted that tariffs are the biggest driver of gross margin pressure, accounting for approximately 200 basis points of the 300 basis point decline in Q2. Other factors include product costing and inventory returns. The company is also seeing some benefits from FX and pricing changes, but tariffs remain a significant challenge.
Q:What is the company's strategy for pricing and how are wholesale partners responding?
A:David Bergman explained that targeted price increases are being implemented, particularly for new product launches and relaunches. Broader price increases are expected in fiscal '27, and wholesale partners are generally accepting these changes.
Q:What is the company's confidence in executing the North America transformation amidst the current macro backdrop?
A:Kevin Plank expressed confidence in the transformation, citing positive momentum in core products like base layer compression and new sportswear offerings. He highlighted improved NPS scores and brand perception as indicators of progress. The company is focused on execution and maintaining its strategy despite macro challenges.
Q:What is the outlook for the order book and product launches?
A:Kevin Plank and David Bergman noted that the order book for spring/summer '26 shows promise, with positive feedback on new products. Retailers are testing new offerings like the Sola collection and Halo, and the company is prepared to meet demand while maintaining some scarcity to drive interest.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the holiday or spring '26 order book, citing the early stage of the process. They also did not offer a detailed breakdown of how pricing changes would impact revenue or provide a clear timeline for when the North America transformation would fully materialize.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
ASPs
America APAC
Brand health
Curry
Factory House
Foundation
Halo
Inc Research
Research Division
Weigh
athlete creator
authenticity
baseball
brand decision
brand loyalty
credibility
decision brand
discipline
foundation
franchise
item
model
momentum football
number
partnership
path stability
pinnacle
play
price point
product HeatGear
relevance
room
selling price
shareholder value
signal
storytelling
style
tariff
transformation
trust
veteran
UA Transcript
Under Armour, Inc. (UAA) Q3 2026 Earnings Call Transcript
Unknown2-6
The earnings call reflects mixed signals: while adjusted operating income exceeded expectations and inventory management improved, revenue declines in key segments and negative gross margin projections raise concerns. The Q&A reveals management's confidence in future stabilization and growth, particularly in EMEA and APAC, but uncertainty remains due to a lack of specific guidance and ongoing structural challenges. The market cap indicates a moderate reaction, leading to a neutral prediction.
Under Armour, Inc. (UAA) Q2 2026 Earnings Call Transcript
Unknown11-6
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.
Under Armour, Inc. (UAA) Q1 2026 Earnings Call Transcript
Unknown8-8
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%.
Under Armour, Inc. (NYSE:UA) Q4 2025 Earnings Call Transcript
Unknown5-14
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%.
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