Under Armour’s Earnings Call: Progress Amid Challenges

Under Armour Inc – Class C ((UA)) has held its Q1 earnings call. Read on for the main highlights of the call.

Under Armour’s Recent Earnings Call: A Mixed Bag of Progress and Challenges

Under Armour’s recent earnings call painted a picture of a company in transition, grappling with both internal strategic shifts and external macroeconomic challenges. While there were notable achievements such as regional growth in EMEA and improvements in gross margin, these were tempered by declines in revenue in key markets, significant hurdles in the footwear segment, and the adverse effects of new tariffs on profitability.

EMEA Outperformance

The earnings call highlighted Under Armour’s success in the EMEA region, where revenue increased by 10%, or 6% after adjusting for foreign currency fluctuations. This growth was consistent across all channels, showcasing the region’s robust performance during the quarter.

Gross Margin Improvement

Under Armour reported a 70 basis point increase in gross margin year-over-year, reaching 48.2%. This improvement was attributed to favorable foreign currency impacts, strategic pricing benefits, and a favorable product mix.

Licensing Revenue Growth

Licensing revenues saw a 12% increase, with growth in both North American and international licensees. This reflects the company’s successful expansion and partnerships in the licensing domain.

SG&A Expense Reduction

The company achieved a significant reduction in SG&A expenses, which decreased by 37% to $530 million. This was driven by lower marketing costs and savings across various areas, stemming from a restructuring plan and ongoing cost management efforts.

Revenue Decline

Despite some areas of growth, Under Armour faced a 4% decline in first-quarter revenue, totaling $1.1 billion. The North American market saw a 5% decline, while APAC revenue decreased by 10%, highlighting challenges in these key regions.

Footwear Revenue Challenges

Footwear revenue experienced a significant drop of 14% in the quarter, with declines across all categories. This reflects a challenging consumer demand environment that the company is currently navigating.

Tariff Impact

The announcement of incremental tariffs is expected to result in approximately $100 million in additional costs, impacting profitability. This is projected to be about half of what it was last year, indicating ongoing challenges from tariff-related expenses.

North America Demand Weakness

The North American market is expected to face continued challenges, with higher costs due to tariffs and softer demand. A low double-digit revenue decline is anticipated in the second quarter, underscoring the region’s current difficulties.

Forward-Looking Guidance

CEO Kevin Plank outlined a strategic transformation aimed at enhancing brand health and long-term shareholder value. The company plans to simplify operations by reducing SKUs by 25% and cutting materials by 30% for the 2025 product lineup, with further reductions in 2026. A new category management operating model is being adopted to improve product execution and pricing. Despite challenges from additional tariff costs and softer demand, Under Armour is committed to strengthening its brand across North America, APAC, and EMEA regions. The company is also focusing on enhancing digital engagement and improving the DTC experience, leveraging AI for more efficient operations. Adjusted operating income for fiscal 2026 is expected to be about half of the previous year’s, but the company remains optimistic about future growth driven by strategic investments and improved brand positioning.

In conclusion, Under Armour’s earnings call reflects a company in the midst of transformation, balancing positive strides in certain areas with significant challenges in others. While there are hurdles to overcome, particularly in the North American market and the footwear segment, the company’s strategic initiatives and focus on brand strengthening offer a path forward. Investors and stakeholders will be keenly watching how these strategies unfold in the coming quarters.