Under Armour beats profit outlook despite 7 percent sales decline

Under Armour exceeded its operating income outlook in the second quarter of fiscal 2027, even as revenue fell 7 percent to 1.2 billion dollars, the company said in its results release on Friday.

The Baltimore-based sportswear company reported operating income of 15 million dollars for the quarter ended September 30, 2026, down from 17 million dollars a year earlier. Adjusted operating income was 25 million dollars, compared with 53.4 million dollars in the prior-year period. Net loss narrowed to 0.4 million dollars from 18.8 million dollars. Adjusted net loss was 2 million dollars, compared with adjusted net income of 15.3 million dollars a year ago.

"We delivered against our revenue expectation and exceeded our operating income outlook," said Kevin Plank, Under Armour president and CEO. "As we progress in this transformation, we are driving greater efficiency across our business, sharpening our product offering, and amplifying global marketing to strengthen our brand and improve financial performance."

Sales decline across most regions and channels

North America revenue fell 7 percent to 737 million dollars. International revenue decreased 7 percent to 509 million dollars, or 9 percent in constant currency. EMEA revenue fell 9 percent, Asia-Pacific fell 9 percent, and Latin America rose 3 percent.

Wholesale revenue fell 6 percent to 725 million dollars. Direct-to-consumer revenue fell 8 percent to 494 million dollars. Within DTC, owned-and-operated store revenue fell 7 percent and eCommerce revenue fell 12 percent.

By category, apparel revenue fell 6 percent to 880 million dollars, footwear fell 11 percent to 234 million dollars, and accessories fell 7 percent to 105 million dollars.

Gross margin fell 30 basis points to 47.0 percent. The company attributed the decline primarily to unfavourable foreign currency, channel and regional mix, and pricing. Selling, general and administrative expenses fell 4 percent to 557 million dollars on lower marketing spend and cost management. Inventory rose 4 percent to 1.1 billion dollars.

Operating income outlook raised, gross margin outlook cut

Under Armour raised its fiscal 2027 operating income outlook to between 99 million and 119 million dollars, up from a prior range of 96 million to 116 million dollars. Adjusted operating income is still expected at 140 million to 160 million dollars. That figure includes an approximately 70 million dollar benefit from refunds of prior-year IEEPA tariff expenses, partially offset by roughly 45 million dollars in headwinds tied to the conflict in the Middle East. The company had previously put that headwind at 35 million dollars.

The company now expects gross margin to rise 170 to 220 basis points, down from a prior expectation of 220 to 270 basis points. It cited higher fuel and freight costs, planned inventory management actions and foreign exchange headwinds. Revenue is still expected to decline at a mid-single-digit rate. Adjusted diluted earnings per share are still expected at 0.08 to 0.12 dollars.

For the third quarter, Under Armour expects an operating loss of 20 million to 30 million dollars. On an adjusted basis, it expects a range of a 5 million dollar loss to 5 million dollars in operating income.

Restructuring nears completion

The company recorded 13 million dollars in charges under its Fiscal 2025 Restructuring Plan during the quarter. That brings total costs to date to 280 million dollars, out of an expected 305 million dollars. Under Armour expects the plan to be substantially complete by December 31, 2026.

Under Armour operated 438 owned stores at the end of the quarter, down from 447 a year earlier.

This article was written with the assistance of AI.