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Under Armour, Inc. (UAA - Free Report) reported second-quarter results for fiscal 2026, with the top line missing the Zacks Consensus Estimate while the bottom line exceeded the same.
UAA posted adjusted earnings per share at breakeven for the second quarter of fiscal 2027, beating the Zacks Consensus Estimate of a loss of one cent. Revenues declined 7% year over year to $1,242 million, missing the consensus estimate of $1,246 million.
The company benefited from expense discipline and supply-chain efficiencies despite softer consumer demand. Gross margin contracted 30 basis points, while inventory increased 4% year over year. Management highlighted continued traffic pressure, particularly in North America, and weaker wholesale sell-through.
Under Armour, Inc. Price, Consensus and EPS Surprise
North America revenues declined 7% year over year, reflecting continued traffic weakness in direct-to-consumer (DTC) operations and softer wholesale sell-through. Growth in select apparel franchises provided some support but failed to offset broader demand challenges.
EMEA revenues fell 9%, primarily due to weak retail traffic in the United Kingdom, partially offset by growth in France and Spain. Shipment timing also affected distributor performance. Asia-Pacific revenues decreased 9%, reflecting softness in China and licensing operations. Latin America revenues increased 3%, benefiting from favorable foreign exchange, although constant-currency revenues declined 4%.
Under Armour's Sales Channels Remain Challenged
Wholesale revenues decreased 6% year over year to $725 million, beating the Zacks Consensus Estimate of $693 million, reflecting softer full-price sell-through and weakness in portions of the distributor business. Performance in select accounts and markets provided some relief.
DTC revenues declined 8% to $494 million, missing the Zacks Consensus Estimate of $505 million. Owned-and-operated store revenues fell 7%, while e-commerce revenues decreased 12%. Traffic remained the primary challenge, particularly in North America, although improved conversion and targeted digital initiatives partially offset the weakness. Licensing revenues declined 4% to $28 million, due to softness in North America.
UAA's Product Categories Face Broad-Based Weakness
Apparel revenues declined 6% year over year to $880 million, slightly missing the Zacks Consensus Estimate of $884 million. HeatGear and core Vanish demonstrated strength, while fleece and women's bottoms remained challenged. Growth in outdoor and sportswear partially offset declines across most categories.
Footwear revenues decreased 11% to $234 million, reflecting weakness across most categories, missing the Zacks Consensus Estimate of $239 million. However, selected cleated products and running footwear recorded growth. Accessories revenues declined 7% to $105 million, beating the Zacks Consensus Estimate of $80 million. Management highlighted double-digit growth in American football cleats, supported by higher average selling prices and market share gains.
Under Armour's Margin Faces Pricing and Currency Woes
Gross margin contracted 30 basis points year over year to 47%. Unfavorable foreign currency movements reduced margin by 40 basis points, while channel and regional mix created a combined 35-basis-point headwind. Pricing contributed another 20-basis-point decline as higher discounting outweighed pricing benefits.
These pressures were partially offset by 55 basis points of supply-chain benefits and 10 basis points from favorable product mix. Adjusted selling, general and administrative (SG&A) expenses declined 3% to $559 million, reflecting lower marketing spending and continued expense discipline. Adjusted operating income reached $25 million, exceeding management's earlier outlook of $10-$20 million.
UAA's Inventory Levels Keep Liquidity in Focus
Under Armour ended the quarter with $1.1 billion in inventory, above planned sales requirements following an approximately $200 million reduction in its revenue outlook in August. Management is reducing future purchases and implementing targeted inventory-clearing initiatives to improve working capital.
The company held $285 million in cash and had $190 million outstanding under its $1.1 billion revolving credit facility. Restructuring costs incurred to date totaled $280 million against an expected $305 million. The fiscal 2025 restructuring plan is expected to be substantially completed by Dec. 31, 2026.
Under Armour Maintains Earnings Outlook, Cuts Margin View
For fiscal 2027, this Zacks Rank #3 (Hold) company continues to expect revenues to decline at a mid-single-digit rate. However, expected gross margin expansion was reduced to 170-220 basis points from 220-270 basis points, reflecting elevated freight costs, planned inventory markdowns and a stronger U.S. dollar.
Adjusted operating income guidance remains $140-$160 million, including approximately $70 million in tariff-related refund benefits. Adjusted earnings are expected to range from eight cents to 12 cents per share. The outlook incorporates approximately $45 million of headwinds related to the ongoing Middle East conflict.
For the third quarter, revenues are expected to decline approximately 8-9%. Gross margin is projected to expand 30-50 basis points, while adjusted operating results are expected to range from a $5 million loss to a $5 million profit. Adjusted loss per share is forecast at one-three cents. Management anticipates stronger fourth-quarter profitability, supported by pricing, favorable mix and expense discipline.
UAA’s shares have declined 10.1% in the past three months against the industry’s 1.1% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
Vince Holding Corp. (VNCE - Free Report) provides luxury apparel and accessories in the United States and internationally. It operates through Vince Wholesale and Vince Direct-to-Consumer segments. At present, the company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VNCE’s current fiscal-year sales and earnings implies growth of 15.5% and 175%, respectively, from the year-ago reported figures. VNCE has delivered a trailing four-quarter earnings surprise of 561.4%, on average.
The Crocs, Inc. (CROX - Free Report) designs, develops, manufactures, markets, distributes and sells casual lifestyle footwear and accessories for men, women and kids. At present, CROX carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for CROX’s current fiscal-year sales and earnings implies growth of 3.4% and 16.9%, respectively, from the year-ago figures. CROX delivered a trailing four-quarter earnings surprise of 10.9%, on average.
Kontoor Brands, Inc. (KTB - Free Report) , a lifestyle apparel company, designs, manufactures, procures, sells and licenses apparel, footwear and accessories, primarily under the Wrangler, Lee, and Helly Hansen brands. At present, KTB carries a Zacks Rank of 2.
The Zacks Consensus Estimate for KTB’s current fiscal-year sales and earnings implies a decline of 14.3% and 4.8%, respectively, from the year-ago figures. KTB delivered a trailing four-quarter earnings surprise of 22.7%, on average.
View the Zacks #1 Rank List
Image: Bigstock
Under Armour's Q2 Earnings Beat Estimates on Cost Discipline
Key Takeaways
Under Armour, Inc. (UAA - Free Report) reported second-quarter results for fiscal 2026, with the top line missing the Zacks Consensus Estimate while the bottom line exceeded the same.
UAA posted adjusted earnings per share at breakeven for the second quarter of fiscal 2027, beating the Zacks Consensus Estimate of a loss of one cent. Revenues declined 7% year over year to $1,242 million, missing the consensus estimate of $1,246 million.
The company benefited from expense discipline and supply-chain efficiencies despite softer consumer demand. Gross margin contracted 30 basis points, while inventory increased 4% year over year. Management highlighted continued traffic pressure, particularly in North America, and weaker wholesale sell-through.
Under Armour, Inc. Price, Consensus and EPS Surprise
Under Armour, Inc. price-consensus-eps-surprise-chart | Under Armour, Inc. Quote
UAA's Regional Results Reflect Demand Pressure
North America revenues declined 7% year over year, reflecting continued traffic weakness in direct-to-consumer (DTC) operations and softer wholesale sell-through. Growth in select apparel franchises provided some support but failed to offset broader demand challenges.
EMEA revenues fell 9%, primarily due to weak retail traffic in the United Kingdom, partially offset by growth in France and Spain. Shipment timing also affected distributor performance. Asia-Pacific revenues decreased 9%, reflecting softness in China and licensing operations. Latin America revenues increased 3%, benefiting from favorable foreign exchange, although constant-currency revenues declined 4%.
Under Armour's Sales Channels Remain Challenged
Wholesale revenues decreased 6% year over year to $725 million, beating the Zacks Consensus Estimate of $693 million, reflecting softer full-price sell-through and weakness in portions of the distributor business. Performance in select accounts and markets provided some relief.
DTC revenues declined 8% to $494 million, missing the Zacks Consensus Estimate of $505 million. Owned-and-operated store revenues fell 7%, while e-commerce revenues decreased 12%. Traffic remained the primary challenge, particularly in North America, although improved conversion and targeted digital initiatives partially offset the weakness. Licensing revenues declined 4% to $28 million, due to softness in North America.
UAA's Product Categories Face Broad-Based Weakness
Apparel revenues declined 6% year over year to $880 million, slightly missing the Zacks Consensus Estimate of $884 million. HeatGear and core Vanish demonstrated strength, while fleece and women's bottoms remained challenged. Growth in outdoor and sportswear partially offset declines across most categories.
Footwear revenues decreased 11% to $234 million, reflecting weakness across most categories, missing the Zacks Consensus Estimate of $239 million. However, selected cleated products and running footwear recorded growth. Accessories revenues declined 7% to $105 million, beating the Zacks Consensus Estimate of $80 million. Management highlighted double-digit growth in American football cleats, supported by higher average selling prices and market share gains.
Under Armour's Margin Faces Pricing and Currency Woes
Gross margin contracted 30 basis points year over year to 47%. Unfavorable foreign currency movements reduced margin by 40 basis points, while channel and regional mix created a combined 35-basis-point headwind. Pricing contributed another 20-basis-point decline as higher discounting outweighed pricing benefits.
These pressures were partially offset by 55 basis points of supply-chain benefits and 10 basis points from favorable product mix. Adjusted selling, general and administrative (SG&A) expenses declined 3% to $559 million, reflecting lower marketing spending and continued expense discipline. Adjusted operating income reached $25 million, exceeding management's earlier outlook of $10-$20 million.
UAA's Inventory Levels Keep Liquidity in Focus
Under Armour ended the quarter with $1.1 billion in inventory, above planned sales requirements following an approximately $200 million reduction in its revenue outlook in August. Management is reducing future purchases and implementing targeted inventory-clearing initiatives to improve working capital.
The company held $285 million in cash and had $190 million outstanding under its $1.1 billion revolving credit facility. Restructuring costs incurred to date totaled $280 million against an expected $305 million. The fiscal 2025 restructuring plan is expected to be substantially completed by Dec. 31, 2026.
Under Armour Maintains Earnings Outlook, Cuts Margin View
For fiscal 2027, this Zacks Rank #3 (Hold) company continues to expect revenues to decline at a mid-single-digit rate. However, expected gross margin expansion was reduced to 170-220 basis points from 220-270 basis points, reflecting elevated freight costs, planned inventory markdowns and a stronger U.S. dollar.
Adjusted operating income guidance remains $140-$160 million, including approximately $70 million in tariff-related refund benefits. Adjusted earnings are expected to range from eight cents to 12 cents per share. The outlook incorporates approximately $45 million of headwinds related to the ongoing Middle East conflict.
For the third quarter, revenues are expected to decline approximately 8-9%. Gross margin is projected to expand 30-50 basis points, while adjusted operating results are expected to range from a $5 million loss to a $5 million profit. Adjusted loss per share is forecast at one-three cents. Management anticipates stronger fourth-quarter profitability, supported by pricing, favorable mix and expense discipline.
UAA’s shares have declined 10.1% in the past three months against the industry’s 1.1% growth.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks have been discussed below:
Vince Holding Corp. (VNCE - Free Report) provides luxury apparel and accessories in the United States and internationally. It operates through Vince Wholesale and Vince Direct-to-Consumer segments. At present, the company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for VNCE’s current fiscal-year sales and earnings implies growth of 15.5% and 175%, respectively, from the year-ago reported figures. VNCE has delivered a trailing four-quarter earnings surprise of 561.4%, on average.
The Crocs, Inc. (CROX - Free Report) designs, develops, manufactures, markets, distributes and sells casual lifestyle footwear and accessories for men, women and kids. At present, CROX carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for CROX’s current fiscal-year sales and earnings implies growth of 3.4% and 16.9%, respectively, from the year-ago figures. CROX delivered a trailing four-quarter earnings surprise of 10.9%, on average.
Kontoor Brands, Inc. (KTB - Free Report) , a lifestyle apparel company, designs, manufactures, procures, sells and licenses apparel, footwear and accessories, primarily under the Wrangler, Lee, and Helly Hansen brands. At present, KTB carries a Zacks Rank of 2.
The Zacks Consensus Estimate for KTB’s current fiscal-year sales and earnings implies a decline of 14.3% and 4.8%, respectively, from the year-ago figures. KTB delivered a trailing four-quarter earnings surprise of 22.7%, on average.