Under Armour, Inc. (UAA) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
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.
Key Financial Performance
Revenue Declined 5% to $1.3 billion year-over-year. This includes a 1-point benefit from timing shifts that moved some shipments from Q3 into Q2. North America revenue decreased 8%, primarily due to a decline in full-price wholesale business and lower e-commerce sales. EMEA revenue increased 12% (7% on a currency-neutral basis), driven by full-price wholesale business and strong growth in DTC channel. APAC revenue declined 14%, mainly driven by wholesale business, while DTC decreased modestly. Latin America revenue increased 15% (14% on a currency-neutral basis) with strong growth across wholesale and DTC.
Gross Margin Declined 250 basis points year-over-year to 47.3%. This was mainly caused by 275 basis points of supply chain headwinds (higher U.S. tariffs) and 100 basis points of unfavorable channel and regional mix. Partly offset by 50 basis points of foreign currency tailwinds, 50 basis points of pricing benefits, and 25 basis points from favorable product mix.
SG&A Expenses Increased 12% to $582 million. Excluding $4 million of transformation expenses, adjusted SG&A expenses were $577 million, a 9% increase year-over-year. Last year's Q2 SG&A benefited from a $27 million insurance recovery, explaining about 5 points of the increase. The rest reflects higher marketing driven by timing shifts.
Operating Income Reported operating income was $17 million. Excluding transformation expenses and restructuring charges, adjusted operating income was $53 million, outperforming the outlook.
Net Income Reported diluted loss per share was $0.04, while adjusted diluted earnings per share was $0.04.
Inventory Decreased 6% year-over-year to $1 billion.
Cash Balance $396 million at the end of the period.
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Operating Highlights
Streamlined assortments: Cut 25% of SKUs, refocused materials library, and prioritized fabrics for innovation and style.
New product launches: Introduced Velociti Elite 3, SlipSpeed Echo, Nova extensions, and accessories like StealthForm hat and No Weigh backpack.
Upcoming innovations: Spring/Summer '26 to feature Velociti distance run shoe, Shadow and Magnetico football boots, and HeatGear Elite base layer with NEOLAST fiber technology.
Focus on top products: Elevating top 10 largest unit products with better quality and design, aiming for higher price points.
Global reach: Nearly 2,000 UA-branded stores worldwide, with a focus on training, running, and sportswear.
Regional performance: EMEA showing healthy growth, APAC rebuilding, and North America focusing on brand heat and storytelling.
Cultural relevance: Campaigns like 'We Are Football' increased awareness among 18-34-year-olds and boosted sales.
Leadership transition: Dave Bergman transitioning out as CFO, with Reza Taleghani joining in February 2026.
Restructuring plan: Generated $35 million in savings in fiscal 2025 and on track for $45 million in fiscal 2026.
E-commerce improvements: New content management system supports modern tools like TikTok and shoppable reels.
Brand storytelling: Focus on blending creativity with performance to enhance cultural edge and consumer connection.
Marketplace management: Disciplined approach in North America and APAC to stabilize and grow markets.
Long-term strategy: Aiming to reignite Under Armour's potential with sharper products, storytelling, and operational discipline.
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Risk or Challenges
Leadership Transition: The transition of CFO Dave Bergman, who has been with the company for over two decades, could pose risks related to continuity and strategic execution during the leadership change. The incoming CFO, Reza Taleghani, will need time to adapt and align with the company's strategic goals.
North America Revenue Decline: North America revenue decreased by 8%, primarily due to a decline in full-price wholesale business and lower e-commerce sales. This indicates challenges in the core market, which could impact overall financial performance.
APAC Revenue Decline: Revenue in the APAC region declined by 14%, driven by structural challenges and wholesale business issues. This region is undergoing a rebuild, but the current decline reflects ongoing difficulties.
Footwear Revenue Decline: Footwear revenue declined by 16%, reflecting challenges in consumer demand and the need to recalibrate the footwear portfolio. This could impact profitability and market share in this segment.
Gross Margin Decline: Gross margin declined by 250 basis points to 47.3%, mainly due to higher U.S. tariffs and unfavorable channel and regional mix. This could pressure profitability if not addressed.
Supply Chain Headwinds: The company faces 275 basis points of supply chain headwinds, primarily due to higher U.S. tariffs. This adds to cost pressures and could impact margins.
Promotional Market Environment: The North American market remains highly promotional, impacting e-commerce sales and pricing discipline. This could affect profitability and brand positioning.
Wholesale Business Challenges: The wholesale business in North America and APAC is facing challenges, with declines in full-price sales and structural issues. This could hinder revenue growth and market penetration.
Inventory Management: Inventory levels decreased by 6%, but tighter inventory management is required to address regional challenges and improve efficiency.
Restructuring Costs: The company incurred $36 million in restructuring charges and transformation expenses in Q2, with total charges expected to reach $160 million by fiscal 2026. These costs could strain financial resources in the short term.
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Guidance & Outlook
Revenue Expectations: Full year revenue is expected to decline 4% to 5% in fiscal '26, an improvement compared to fiscal '25's 9% decline. North America and APAC revenues are projected to decrease by high single-digit percentages, while EMEA is expected to grow by a high single-digit percentage.
Gross Margin Projections: Full year gross margin is expected to decline by 190 to 210 basis points, mainly due to higher U.S. tariffs. These headwinds are expected to be partly offset by foreign currency gains, a more favorable product mix, and slight pricing benefits.
Adjusted Operating Income: Expected to be between $90 million to $105 million for fiscal '26.
Adjusted Diluted Earnings Per Share: Expected to range between $0.03 to $0.05 for fiscal '26.
Third Quarter Revenue Outlook: Revenue is expected to decline 6% to 7%, including a 1-point impact from shipment timing shifts. North America is anticipated to see a low double-digit decline, EMEA is projected to grow at a high single-digit rate, and APAC is expected to decline by a high single-digit rate.
Third Quarter Gross Margin: Expected to decline by 310 to 330 basis points due to a full quarter impact of new U.S. tariff costs.
Third Quarter Adjusted Operating Income: Expected to range from a $5 million profit to a $5 million loss, translating to approximately $0.02 to $0.03 of adjusted loss per share.
Future Growth and Market Recovery: Momentum is expected to improve toward a potential inflection point in fiscal '27, with stabilization in North American wholesale and growth in EMEA and APAC.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What makes you confident that North America will see stabilization before the end of fiscal '27?
A:Kevin Plank outlined five key points: 1) Structural improvements with the right team, operating model, and business plan; 2) Product innovation and monetization, including premium products like Velociti Elite 3 and $140 backpacks; 3) Improved storytelling and brand awareness campaigns, such as 'We Are Football,' which increased awareness by 20 points; 4) Stronger partnerships with wholesalers, moving from cautious to collaborative relationships; 5) Cultural renewal within the company, driven by a new headquarters and a brand-first approach.
Q:Can you tell us more about NEOLAST and what makes it special?
A:NEOLAST is a sustainable fiber developed in partnership with NC State, Celanese, and Under Armour over five years. It replaces Lycra, offering better stretch and sustainability. It will be incorporated into products like HeatGear Elite and compression gear, with a spring launch of a shirt featuring NEOLAST.
Q:What are you doing to increase your voice in track and field/running, given its larger addressable market compared to football?
A:Kevin Plank emphasized leveraging credibility from athletes like Sharon Lokedi and products like Velociti Elite 3. The strategy includes offering products at various price points ($250 to $75) and using partnerships with colleges and high schools to promote track-specific products. Marketing efforts will focus on storytelling to highlight the brand's performance and aspiration.
Q:Can you talk about the improvement in the U.S. business or North American business, specifically sell-through rates and velocity at full price?
A:Kevin Plank noted better sell-through rates and replenishment orders, indicating stronger retail performance. The company is beating plans and driving better gross margins with fewer returns. Retail partners are showing more confidence, and the company is focused on premiumizing the brand and stabilizing the business.
Q:Can you expand on how the sports marketing portfolio can work better in your storytelling approach?
A:Kevin Plank highlighted the dynamic nature of the sports marketing portfolio, including NIL athletes and high school partnerships. The focus is on balancing athletes, teams, and leagues to enhance storytelling. The current campaign includes diverse talent, such as Justin Jefferson and NIL athletes, to connect with various audiences.
Q:What changes are being made to address challenges in the footwear business?
A:Kevin Plank acknowledged the disappointing performance in footwear (-16%) and outlined a strategy to move from sub-$100 products to premium offerings. The focus is on creating aspiration and anchoring products like the $75 Assert 11 at full price. The company aims to leverage its performance apparel credibility to grow categories like running, cleated, and sportswear footwear.
Q:How should we think about pricing for spring/summer 2026 products and pricing elasticity?
A:David Bergman stated that pricing increases will be strategic and focused on better and best products. The company is also analyzing SKU profitability to make data-driven decisions. Tariff impacts are being mitigated through vendor cost sharing, production shifts, and selective price increases, with more visible effects expected in fiscal '27.
Q:What are the drivers and cadence for stabilization in the APAC business?
A:Kevin Plank mentioned a turnaround strategy led by Simon Pestridge, including a new head for China operations. The focus is on storytelling, reducing promotions, and improving retail execution. The company aims for stabilization in fiscal '27, with a new store launch in January and lessons learned from other regions being applied.
Q:What is the outlook for North America wholesale and order books?
A:Kevin Plank noted stable order books with fewer returns and cancellations. Improved sell-through rates and brand heat are driving confidence. The company is focused on premiumizing the brand and stabilizing the business, with better and best products leading the way.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the elasticity of demand for consumers and the exact pricing strategy for spring/summer 2026 products. Additionally, while they mentioned stabilization in APAC and North America, they did not provide concrete data or timelines for achieving these goals.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CFO
ColdGear
EMEA APAC
Football campaign
NEOLAST
New York
Vice President
Weigh
activation
athlete UA
base
belief
brand heat
commitment
discipline
edge
extension
film
finance
focus brand
football basketball
foundation
franchise
generation
integrity
investor website
issue
marketplace region
old
personality
precision
price point
priority
purchase
purpose
rebuild
run
sector
sportswear sport
style
trust
turnaround product
voice
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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