Under Armour — Fiscal 2027 Q2 Earnings Summary

Financial Performance:

• Total revenue decreased 7% year-over-year to $1.2 billion for the quarter; North America revenue declined 7% to $737 million, and international revenue decreased 7% to $509 million (down 9% in constant currency).
• Wholesale revenue fell 6% to $725 million, while direct-to-consumer (DTC) revenue dropped 8% to $494 million; DTC eCommerce revenue declined 12% and represented 27% of total DTC revenue.
• By category, apparel revenue decreased 6% to $880 million, footwear revenue declined 11% to $234 million, and accessories revenue decreased 7% to $105 million.
• Gross margin decreased 30 basis points to 47.0%, driven by unfavorable foreign currency, channel and regional mix, and pricing, partially offset by supply chain benefits and favorable product mix.
• Selling, general and administrative (SG&A) expenses decreased 4% to $557 million; adjusted SG&A (excluding transformation expenses and litigation reserve reversal) decreased 3% to $559 million.
• Operating income was $15 million; adjusted operating income (excluding transformation expenses, restructuring charges, and litigation reserve reversal) was $25 million.
• Net loss was $0.4 million; adjusted net loss was $2 million.
• Diluted loss per share and adjusted diluted loss per share were $0.00.
• Inventory increased 4% to $1.1 billion.
• Cash and cash equivalents totaled $285 million at quarter-end; $190 million was outstanding under the $1.1 billion revolving credit facility.
• For the six months ended September 30, 2026, net revenues were $2.34 billion (down 5.2%); net income was $120,000 compared to a net loss of $21.4 million in the prior year period.

Guidance and Future Outlook:

• Fiscal 2027 revenue is expected to decline at a mid-single-digit percentage rate.
• Gross margin is now expected to increase 170 to 220 basis points versus the prior year, down from a previous expectation of 220 to 270 basis points, due to higher fuel and freight costs, planned inventory management actions, and foreign exchange headwinds.
• Approximately 150 basis points of the expected gross margin improvement is attributed to the recovery of IEEPA-related tariff costs expensed in fiscal 2026.
• SG&A expense is expected to decrease at a high-single-digit rate; adjusted SG&A is expected to decrease at a low-single-digit rate.
• Operating income is now expected to range from $99 million to $119 million, up from a prior expectation of $96 million to $116 million.
• Adjusted operating income is expected to be in the $140 million to $160 million range.
• The outlook includes an approximate $70 million benefit from prior-year IEEPA tariff refunds, partially offset by $45 million in headwinds related to the ongoing conflict in the Middle East.
• Diluted earnings per share is now expected to range from a loss of $0.02 to earnings of $0.02, compared to a prior expectation of a loss of $0.01 to earnings of $0.05.
• Adjusted diluted earnings per share is expected to be $0.08 to $0.12.

Business Segments and Product Lines:

• International performance varied by region: EMEA revenue decreased 9% (down 8% constant currency), Asia-Pacific decreased 9% (down 12% constant currency), and Latin America increased 3% (down 4% constant currency).
• Within DTC, owned-and-operated store revenue declined 7%.
• The Fiscal 2025 Restructuring Plan recorded $11 million in restructuring charges and $2 million in transformation-related SG&A expenses in the second quarter.
• Total costs incurred to date under the Fiscal 2025 Restructuring Plan are $280 million ($121 million cash, $159 million non-cash), with total program costs anticipated at approximately $305 million.
• The restructuring plan is expected to be substantially complete by December 31, 2026.
• Total company-owned and operated doors decreased to 438 at September 30, 2026, from 447 at September 30, 2025; North America doors remained flat at 196, while international doors decreased to 242 from 251.

Market and Competitive Landscape:

• The company cited increased supply chain headwinds related to the ongoing conflict in the Middle East and unfavorable foreign exchange impacts as factors affecting performance and outlook.
• Higher fuel and freight costs are impacting gross margin expectations.
• The company is prioritizing pricing actions, lower discounting, and a more favorable channel and product mix to drive gross margin expansion.

Risks and Challenges:

• The press release notes risks related to global economic conditions, inflation, trade policies, and potential tariffs.
• Ongoing military conflicts, such as the situation in the Middle East, present supply chain and cost headwinds.
• Foreign currency exchange rate fluctuations continue to impact revenue and margin reporting.
• Inventory management actions are being implemented, which may impact gross margin in the near term.

Management Commentary and Tone:

• Kevin Plank, President and CEO, stated the company "delivered against our revenue expectation and exceeded our operating income outlook."
• Management emphasized driving greater efficiency, sharpening product offerings, and amplifying global marketing to strengthen the brand and improve financial performance.
• The tone reflects a focus on disciplined cost management and aligning operating expenses with the current demand environment.

Other Key Points:

• The company recorded $11 million in restructuring charges for the quarter.
• A reversal of certain previously accrued litigation reserve expense impacted adjusted SG&A and operating income metrics.
• The company expects to realize refunds from prior-year IEEPA tariff expenses, contributing approximately $70 million to the full-year operating income outlook.
• The Fiscal 2025 Restructuring Plan is on track for substantial completion by year-end 2026.