Under Armour, Inc. (NYSE: UAA, UA)
Q1 Fiscal 2026 Financial Analysis | August 8, 2025
Executive Summary
Under Armour reported Q1 fiscal 2026 results that met or exceeded expectations amid ongoing transformation efforts. Revenue declined 4% to $1.1 billion (down 4% currency-neutral), but the company demonstrated improved operational discipline with gross margin expanding 70 basis points to 48.2%. Under CEO Kevin Plank’s leadership, the company is executing a bold transformation focused on sports credibility, innovation, and style while building operational efficiency. The quarter included net loss improvement from $305 million to $3 million year-over-year, with adjusted net income of $9 million.
Q1 Fiscal 2026 Highlights
Financial Performance
Under Armour’s Q1 fiscal 2026 financial performance demonstrated meaningful progress in the company’s transformation journey. Revenue declined 4% to $1.1 billion, reflecting strategic repositioning efforts and challenging market conditions. However, this decline was offset by significant improvements in operational efficiency and profitability metrics.
The most notable achievement was the 70 basis point expansion in gross margin to 48.2%, driven by favorable foreign exchange, strategic pricing actions, and improved product mix. This improvement was partially offset by unfavorable channel mix and higher supply chain costs, demonstrating the company’s focus on premium positioning and operational discipline.
Operating income dramatically improved to $3 million from a loss of $300 million in the prior year. This improvement was primarily driven by the absence of the significant legal reserve expense that impacted Q1 fiscal 2025 (\$274 million). Excluding transformation expenses and restructuring charges, adjusted operating income was \$24 million, compared to \$8 million in the prior year.
Net loss improved substantially to \$3 million from \$305 million in the prior year period. On an adjusted basis, net income was \$9 million compared to \$4 million in Q1 fiscal 2025, translating to adjusted diluted earnings per share of \$0.02 versus \$0.01 in the prior year.
The company maintained strong liquidity with \$911 million in cash and cash equivalents, bolstered by \$400 million in senior notes raised during the quarter. Under Armour plans to use these proceeds, along with borrowings and cash on hand, to retire its \$600 million in senior notes due June 2026, optimizing its debt structure.
Geographic & Channel Performance
| Geographic Segment | Revenue ($M) | YoY Change | Currency-Neutral Change | Operating Income ($M) |
|---|---|---|---|---|
| North America | $670 | -5% | -5% | $121 |
| EMEA | $249 | +10% | +6% | $40 |
| Asia-Pacific | $163 | -10% | -10% | $15 |
| Latin America | $55 | -15% | -8% | $7 |
North America revenue decreased 5% to \$670 million, reflecting ongoing market challenges and strategic shifts toward premium positioning. Despite the revenue decline, the region maintained strong operating margins at 18.1%, down from 20.9% in the prior year but demonstrating resilient profitability in a challenging environment.
EMEA was the standout performer with revenue increasing 10% to \$249 million (6% currency-neutral), driven by successful brand positioning and market expansion efforts. Operating margin improved significantly to 15.9% from 9.0% in the prior year, highlighting effective operational execution in the region.
Asia-Pacific faced headwinds with revenue declining 10% to \$163 million, though operating margin improved to 9.0% from 5.5% in the prior year. The region continues to present both challenges and opportunities as Under Armour refines its positioning in competitive Asian markets.
Latin America revenue declined 15% to \$55 million (8% currency-neutral), primarily due to foreign exchange impacts and regional economic pressures. However, operating margin remained healthy at 12.1%, though down from 23.6% in the prior year.
From a channel perspective, wholesale revenue decreased 5% to \$649 million, while direct-to-consumer revenue fell 3% to \$463 million. Within DTC, owned and operated stores showed resilience with 1% growth, while eCommerce revenue declined 12%, accounting for 31% of total DTC business. This shift reflects the company’s strategic focus on premium retail experiences and operational efficiency.
Product Category Performance
| Product Category | Revenue ($M) | YoY Change | % of Total Sales |
|---|---|---|---|
| Apparel | $747 | -1% | 67% |
| Footwear | $266 | -14% | 24% |
| Accessories | $100 | +8% | 9% |
Apparel remained the core category with revenue of \$747 million, declining only 1% year-over-year. This resilient performance demonstrates the strength of Under Armour’s athletic apparel franchise and the company’s strategic focus on innovation and premium positioning in performance wear.
Footwear faced significant challenges with revenue declining 14% to \$266 million, reflecting strategic repositioning efforts and intensified competition in the athletic footwear market. The company is focusing on enhancing its footwear innovation pipeline and strengthening key athletic partnerships to drive future growth in this critical category.
Accessories showed strong growth with revenue increasing 8% to \$100 million, highlighting successful expansion in complementary product categories. This growth demonstrates the brand’s ability to leverage its athletic credibility across diverse product offerings and capture additional share of the athletic consumer’s wallet.
The product mix shift toward apparel (67% of sales) reflects Under Armour’s core competency while the company works to revitalize its footwear business through enhanced innovation and strategic partnerships. The strong accessories performance indicates potential for continued diversification and growth in higher-margin categories.
Fiscal 2025 Restructuring Plan & Transformation
Under Armour continued executing its comprehensive restructuring plan aimed at improving financial and operational efficiency. The plan, announced in May 2024, represents a critical component of the company’s transformation under CEO Kevin Plank’s leadership:
Restructuring Plan Progress
- Total Estimated Cost: $140-160 million, with up to $90 million expected to be cash-related and $70 million projected as non-cash charges
- Progress Through Q1: Recorded $71 million in restructuring and impairment charges, plus $39 million in transformational expenses
- Cash Impact: Of the total $110 million incurred, $65 million is cash-related and $45 million is non-cash related
- Timeline: Remaining charges expected to be recognized by the end of fiscal 2026
Transformation Strategy Focus Areas
CEO Kevin Plank emphasized the company’s strategic priorities during the transformation:
- Strengthening brand positioning with premium products and increased average selling prices
- Driving innovation and enhancing sports credibility through strategic partnerships
- Optimizing top-volume programs to create more compelling value propositions
- Building operational discipline while maintaining brand authenticity and performance focus
The restructuring efforts are yielding tangible results, as evidenced by improved gross margins and operational efficiency. Management expressed confidence in the company’s strategic direction, emphasizing that “this is about building a fearless, thoughtful, and stronger Under Armour.”
Q2 Fiscal 2026 Outlook
Under Armour provided guidance for Q2 fiscal 2026, acknowledging ongoing uncertainty around trade policies and macroeconomic conditions while maintaining strategic focus:
- Revenue expected to decline 6-7% year-over-year, including anticipated low-double-digit decline in North America offset by high-single-digit growth in EMEA and low-teens decline in Asia-Pacific
- Gross margin expected to decline 340-360 basis points, primarily due to supply chain headwinds and anticipated tariff impacts, along with unfavorable channel mix
- SG&A expenses expected to increase at low double-digit rate, with adjusted SG&A growing at high-single-digit rate driven by higher marketing investments
- Operating income expected to range from $10 million loss to breakeven, with adjusted operating income between $30-40 million
- Diluted loss per share expected between $0.07-$0.08, with adjusted diluted EPS of $0.01-$0.02
The outlook reflects management’s cautious approach given potential tariff impacts and broader economic uncertainties, while maintaining investment in strategic initiatives to drive long-term brand strength and market positioning.
Risks & Opportunities
Opportunities
Risks
Conclusion
Strengths
- Significant improvement in profitability metrics (net loss reduced from $305M to $3M)
- Strong gross margin expansion (+70 bps) demonstrating operational discipline
- EMEA region showing strong growth momentum (+10% revenue)
- Robust cash position ($911M) providing strategic flexibility
- Successful execution of transformation plan under experienced leadership
Areas of Focus
- Stabilizing North American revenue performance and market share
- Revitalizing footwear category through innovation and partnerships
- Managing supply chain costs and tariff impacts on margins
- Strengthening digital and eCommerce capabilities
- Continuing restructuring execution while investing in growth
Summary
Under Armour delivered Q1 fiscal 2026 results that demonstrated meaningful progress in its strategic transformation journey. While revenue declined 4% to $1.1 billion, the company achieved significant operational improvements with gross margin expansion of 70 basis points to 48.2% and a dramatic improvement in net loss from $305 million to just $3 million year-over-year.
The quarterly performance reflects CEO Kevin Plank’s strategic vision to build “a fearless, thoughtful, and stronger Under Armour” through operational discipline, premium positioning, and enhanced sports credibility. The strong improvement in profitability metrics, combined with EMEA’s 10% revenue growth, indicates that transformation efforts are gaining traction despite ongoing market challenges.
Looking ahead, Under Armour faces headwinds from tariff impacts and supply chain pressures in Q2, but the company’s strong cash position of $911 million and continued execution of its restructuring plan provide a solid foundation for long-term success. The strategic focus on premium products, innovation, and operational efficiency positions the brand well to navigate current uncertainties while building sustainable competitive advantages.
While challenges remain, particularly in footwear and North American markets, Under Armour’s transformation is showing tangible results in margin improvement and operational discipline, suggesting the company is on the right path toward sustainable growth and enhanced shareholder value.
