Under Armour's Recent Financial Performance
Under Armour, Inc. UAA stock experienced a significant decline following the release of its latest financial results. Although the company met internal expectations for its first quarter of fiscal 2026, it fell short of Wall Street's expectations, leading to a troubling reaction in the stock market.
During this quarter, Under Armour reported a revenue drop of 4% year over year, totaling $1.13 billion. This figure did not meet the $1.154 billion consensus estimate projected by analysts. The company also reported a GAAP net loss of $3 million, equating to a loss of 1 cent per diluted share. For a glimmer of positivity, Under Armour did report adjusted net income of $9 million, or 2 cents per share, an increase from a loss of 1 cent per share at the same point last year.
Performance by Region
North American revenue fell by 5%, totaling $670 million. Additionally, international revenue slipped by 1% to $467 million. Within those international markets, the EMEA region fared better, seeing a growth of 10% to $249 million, while revenue from the Asia-Pacific and Latin America regions dropped by 10% and 15%, respectively.
Sales & Revenue Breakdown
Examining sales channels, the wholesale segment saw a decline of 5%, landing at $649 million, and direct-to-consumer revenue also fell by 3% to $463 million. The eCommerce sector was particularly hard hit, witnessing a 12% decline, which accounts for 31% of the direct-to-consumer operations. Interestingly, revenue from owned and operated stores increased slightly by 1%.
Category Performance Insights
When categorized, Under Armour's apparel revenue saw a slight slip of 1%, totaling $747 million. Footwear sales plummeted by 14% to $266 million, while accessories grew by 8%, achieving $100 million in revenue. The gross margin did improve by 70 basis points to 48.2%, helped by favorable product mix and pricing, although higher supply chain costs in addition to a less favorable channel mix posed challenges.
Operational Adjustments
Operating income reached $3 million. Adjusted operating income, excluding $13 million in restructuring charges and $8 million in expenses related to its restructuring plan, was reported at $24 million. Administrative expenses saw a significant drop of 37% to $530 million, with adjusted SG&A expense falling 6% to $522 million. However, inventory levels rose by 2% year over year to $1.1 billion.
Financial Strategies and Cash Flow
At the close of the quarter, Under Armour maintained a cash position of $911 million, buoyed by a recent issuance of senior notes worth $400 million. The company has no current borrowings against its $1.1 billion revolving credit facility. Operating cash flow for the quarter was reported at $49 million, with capital expenditures reaching $35 million.
Since the initiation of its ongoing restructuring plan, Under Armour has incurred $110 million of the expected $140 million to $160 million in total charges, with $65 million being cash-related and $45 million non-cash expenses.
Leadership Outlook
In light of the ongoing uncertainty, President and CEO Kevin Plank expressed confidence in the brand's resilience, noting, “Despite ongoing challenges, our brand is gaining strength, and we are executing our strategic plan with clarity and confidence.”
Future Guidance
Looking ahead to the second quarter of fiscal 2026, Under Armour anticipates revenues in the range of $1.055 billion to $1.066 billion, a stark contrast to the $1.374 billion estimate provided by analysts. Adjusted diluted earnings per share are projected to fall between 1 to 2 cents, far from the consensus expectation of 28 cents.
The forecast suggests a low double-digit revenue decline in North America, contrasted with a high single-digit growth forecast in EMEA and a low-teens decline in the Asia-Pacific region. Furthermore, gross margins are expected to shrink between 340 and 360 basis points, primarily due to tariff impacts and an adverse channel mix. Selling, general, and administrative expenses are also projected to increase in the low double digits due to heightened marketing investment.
Market Reaction
At the last check on trading day, UAA shares were seen trading lower by 20.5%, valued at $5.280 in premarket trading.
Frequently Asked Questions
What caused the decline in Under Armour's stock?
The stock decline was primarily due to disappointing revenue figures and lower-than-expected guidance.
How did Under Armour perform compared to Wall Street estimates?
Under Armour fell short of Wall Street estimates, with revenues and earnings below analyst expectations.
What are the future revenue projections for Under Armour?
For the upcoming quarter, Under Armour projects revenues between $1.055 billion and $1.066 billion, significantly lower than analyst estimates.
What strategies is Under Armour implementing to combat challenges?
Under Armour is executing a restructuring plan aimed at improving operational efficiency and cost management.
Who is the CEO of Under Armour?
The current President and CEO of Under Armour is Kevin Plank, who has expressed confidence in the company’s strategic direction despite market challenges.
