8-K: Under Armour Q1 FY26: Revenue Declines Amid Restructuring

Under Armour reported a 4% revenue decline in its first quarter of fiscal 2026, meeting or exceeding expectations while continuing its transformation efforts.

Summary

• Revenue declined 4% to $1.1 billion (down 4% currency neutral) for the first quarter of fiscal 2026.
• North American revenue decreased 5% to $670 million.
• International revenue declined 1% to $467 million (down 2% currency neutral), with EMEA increasing 10% (up 6% currency neutral), Asia-Pacific decreasing 10% (down 10% currency neutral), and Latin America declining 15% (down 8% currency neutral).
• Wholesale revenue decreased 5% to $649 million, and direct-to-consumer revenue fell 3% to $463 million.
• Apparel revenue decreased 1% to $747 million, footwear revenue declined 14% to $266 million, and accessories revenue increased 8% to $100 million.
• Gross margin increased 70 basis points to 48.2%, primarily due to favorable foreign exchange, pricing, and product mix.
• Selling, general, and administrative expenses decreased 37% to $530 million (adjusted SG&A decreased 6% to $522 million).
• Operating income was $3 million (adjusted operating income was $24 million).
• Net loss was $3 million (adjusted net income was $9 million).
• Diluted loss per share was $0.01 (adjusted diluted earnings per share was $0.02).
• Inventory increased 2% to $1.1 billion.
• Cash and cash equivalents totaled $911 million, including $400 million in senior notes raised during the quarter.
• The Fiscal 2025 Restructuring Plan is estimated to cost between $140 million and $160 million, with $110 million incurred so far ($65 million cash-related, $45 million non-cash-related). Remaining charges are anticipated by the end of fiscal 2026.

Sentiment

Score: 5

Explanation: While the company reported a GAAP net loss and revenue decline, the results 'met or exceeded expectations,' adjusted metrics showed improvement, and management expressed confidence in their transformation plan. However, the future outlook for Q2 indicates continued revenue decline and gross margin pressure, suggesting ongoing challenges. The capital raise for debt refinancing is a positive for liquidity management, balancing the negative top-line trends.

Positives

• Gross margin increased 70 basis points to 48.2%, driven by favorable foreign exchange, pricing, and product mix.
• Selling, general, and administrative expenses decreased significantly by 37% due to a large legal reserve expense in the prior year, with adjusted SG&A also down 6%.
• Operating income turned positive at $3 million (GAAP) and $24 million (adjusted), a substantial improvement from a $299.7 million loss in the prior year.
• Net loss significantly reduced to $3 million (GAAP), with adjusted net income at $9 million, compared to a $305.4 million loss in the prior year.
• Adjusted diluted earnings per share was positive at $0.02.
• Cash and cash equivalents increased to $911 million, bolstered by a $400 million senior notes raise.
• No outstanding borrowings were reported under the company's $1.1 billion revolving credit facility.
• EMEA revenue showed strong growth, increasing 10% (6% currency neutral).
• Accessories revenue increased 8% to $100 million.
• Revenue from owned and operated stores increased 1%, indicating strength in direct retail channels.
• Licensing revenues increased 12.4%.

Negatives

• Overall revenue declined 4% to $1.1 billion, indicating a challenging top-line environment.
• North American revenue, the largest segment, decreased 5% to $670 million.
• Asia-Pacific revenue declined 10% and Latin America revenue declined 15%, showing weakness in key international markets.
• Wholesale revenue decreased 5% and direct-to-consumer revenue fell 3%, indicating broad-based sales challenges.
• eCommerce revenue declined 12%, accounting for a smaller portion of the direct-to-consumer business.
• Footwear revenue saw a significant decline of 14% to $266 million.
• Inventory increased 2% to $1.1 billion, which could signal potential future markdown risks if not managed effectively.
• The company reported a GAAP net loss of $3 million and a diluted loss per share of $0.01.
• Restructuring charges of $13 million were incurred during the quarter as part of the ongoing Fiscal 2025 Restructuring Plan.
• The outlook for Q2 Fiscal 2026 projects a further revenue decline of 6-7% and a significant gross margin decline of 340-360 basis points, primarily due to supply chain headwinds and tariffs.

Risks

• Ongoing uncertainty around trade policies and the broader macroeconomic environment, including potential demand and cost impacts from tariffs.
• Fluctuations in foreign currency exchange rates impacting financial results.
• Supply chain headwinds, mainly resulting from anticipated impacts of tariffs, affecting gross margin.
• Increased competition that may lead to loss of market share, lower product prices, or increased marketing efforts.
• Fluctuations in the costs of raw materials, commodities, and labor within the supply chain.
• Challenges in successfully executing long-term strategies and driving operational efficiency.
• Changes in the financial health of customers impacting sales and receivables.
• Ability to effectively develop and launch new, innovative, and updated products to meet consumer demand.
• Ability to accurately forecast consumer preferences and demand for products and effectively manage inventory levels.
• Risks associated with successfully executing restructuring plans and achieving expected benefits.
• Potential loss of key customers, suppliers, or manufacturers.
• Challenges in expanding business globally and driving brand awareness and consumer acceptance in other countries.
• Difficulties in managing the increasingly complex operations of a global business.
• Ability to effectively market and maintain a positive brand image.
• Risks related to successfully managing or achieving expected outcomes from significant transactions and investments.
• Challenges in attracting key talent and retaining senior management and other key employees.
• Ability to effectively meet regulatory requirements and stakeholder expectations regarding sustainability and social matters.
• Availability, integration, and effective operation of information systems and other technology, as well as potential interruptions.
• Disruptions, delays, or deficiencies in the design, implementation, or application of global operating and financial reporting information technology systems.
• Ability to access capital and financing required to manage the business on acceptable terms.
• Ability to accurately anticipate and respond to seasonal or quarterly fluctuations in operating results.
• Risks related to data security or privacy breaches.
• Impact of global or regional public health emergencies on the industry, business, financial condition, and results of operations, including impacts on the global supply chain.
• Potential exposure to and the financial impact of litigation and other proceedings.

Future Outlook

For the second quarter of fiscal 2026, revenue is expected to decline 6% to 7%. This includes an anticipated low-double-digit percent decrease in North America, high-single-digit percent growth in EMEA, and a low-teens percent decline in the Asia-Pacific region. Gross margin is expected to decline 340 to 360 basis points, primarily due to supply chain headwinds from anticipated tariffs and an unfavorable channel mix, partially offset by favorable foreign exchange and pricing benefits. Selling, general, and administrative expenses are expected to increase at a low double-digit percentage rate (high-single-digit adjusted), driven by higher marketing investments. Operating income is expected to range from a $10 million loss to breakeven (adjusted operating income between $30 million and $40 million). Diluted loss per share is expected to range from $0.07 to $0.08 (adjusted diluted earnings per share between $0.01 and $0.02).

Management Comments

• "We are pleased our quarterly results met or exceeded our expectations as we drive a bold transformation sharpening Under Armour into a brand where sports credibility, innovation and style meet operational discipline."
• "Despite ongoing uncertainty, our brand is gaining strength and were executing our strategic plan with clarity and confidence."
• "Moving ahead, we're focused on strengthening our brand positioning with premium products and increasing our average selling prices through innovative offerings, optimizing our top-volume programs, and creating a more compelling full price-to-value proposition."
• "Regardless of the backdrop, this is about building a fearless, thoughtful, and stronger Under Armour."

Industry Context

The filing highlights a challenging macroeconomic environment and ongoing uncertainty around trade policies, including potential impacts from tariffs, which are affecting demand and costs across the industry. Under Armour's strategic focus on "sharpening" the brand, emphasizing "operational discipline," and shifting towards "premium products" suggests a deliberate move to navigate these headwinds. This strategy aligns with a broader industry trend where established athletic wear brands are prioritizing profitability and brand equity over aggressive top-line growth, often by optimizing distribution channels and product offerings in response to market saturation and intense competition from both traditional rivals and emerging direct-to-consumer brands.

Legal Proceedings

• Prior year's selling, general, and administrative expenses included a significant legal reserve expense, indicating past legal matters.
• Forward-looking statements acknowledge potential exposure to and financial impact of litigation and other proceedings as a general risk.

Stakeholder Impact

• Shareholders: Experienced a GAAP diluted loss per share of $0.01, but adjusted diluted EPS was positive at $0.02. The ongoing restructuring and projected revenue declines in the near term could impact share value, but management's focus on long-term brand strengthening and debt refinancing aims to stabilize and improve future returns.
• Employees: The Fiscal 2025 Restructuring Plan, aimed at improving efficiencies, may imply potential workforce adjustments, though not explicitly detailed as layoffs in this filing.
• Customers: The strategic shift towards 'premium products' and 'increasing average selling prices' may affect customer segments sensitive to price, while potentially enhancing brand perception for others.
• Suppliers/Manufacturers: Anticipated impacts from tariffs and supply chain headwinds could influence relationships and costs with suppliers and manufacturers.
• Creditors: The successful raising of $400 million in senior notes to refinance existing debt demonstrates proactive financial management and strengthens the company's liquidity position for creditors.

Next Steps

• Hold a conference call on August 8, 2025, at 8:30 a.m. ET to discuss financial results.
• Anticipate recognizing the remaining charges detailed in the Fiscal 2025 Restructuring Plan by the end of fiscal 2026.
• Focus on strengthening brand positioning with premium products and increasing average selling prices through innovative offerings.
• Optimize top-volume programs and create a more compelling full price-to-value proposition.
• Utilize proceeds from senior notes and other funds to redeem, repurchase, or retire $600 million in senior notes due June 2026.

Key Dates

Recommendation

Under Armour's Q1 FY26 results present a mixed picture with continued revenue decline, particularly in key markets, and a GAAP net loss. However, the company's adjusted metrics show profitability, and gross margin improved. Management's commentary indicates that results met or exceeded expectations, and they are actively pursuing a restructuring plan aimed at long-term operational discipline and brand strengthening. The proactive refinancing of debt is a positive for financial stability. The Q2 outlook, however, projects further revenue decline and gross margin pressure, indicating ongoing headwinds. Given the mixed results, the ongoing transformation, and the challenging near-term outlook, a 'Hold' recommendation is appropriate for investors to observe the execution of the restructuring plan and the impact of strategic shifts before making a more definitive move.

Keywords

Under Armour, UAA, UA, athletic apparel, footwear, accessories, Q1 2026 results, financial report, earnings, restructuring, retail, direct-to-consumer, wholesale, sports performance, financial results