Under Armour, Inc. (NYSE: UAA, UA)

Under Armour's fourth quarter fiscal 2025 results reflected the ongoing challenges of the company's strategic reset, with revenue declining 11% year-over-year to $1.2 billion. On a currency-neutral basis, revenue decreased 10%. The revenue decline was consistent across most regions and product categories, indicating broad challenges in the company's marketplace positioning.

Despite revenue headwinds, gross margin represented a significant positive, expanding 170 basis points to 46.7% compared to the prior year period. This improvement was primarily driven by supply chain benefits, including lower product and freight costs, reduced direct-to-consumer discounting, and positive impacts from product mix and foreign exchange. These benefits were partially offset by unfavorable channel and regional mix factors.

Selling, general, and administrative expenses increased 1% to $607 million in Q4. Adjusted SG&A expenses, which exclude approximately $16 million in transformation expenses related to the company's Fiscal 2025 Restructuring Program and roughly $5 million in litigation settlement expenses, increased 7% to $586 million.

The company reported an operating loss of $72 million for Q4, compared to an operating loss of $4 million in the prior year period. Excluding restructuring charges, transformation expenses, and litigation settlement expenses, the adjusted operating loss was $36 million.

Net loss for the quarter was $67 million, or $0.16 per diluted share, compared to net income of $7 million, or $0.02 per diluted share, in the prior year period. On an adjusted basis, net loss was $35 million, or $0.08 per diluted share.

For the full fiscal year 2025, Under Armour reported revenue of $5.2 billion, a 9% decrease from the prior year. Gross margin for the full year increased 180 basis points to 47.9%, reflecting similar dynamics to the quarterly improvement. The company reported a full-year operating loss of $185 million and net loss of $201 million. On an adjusted basis, full-year operating income was $198 million and adjusted net income was $135 million, translating to adjusted earnings per share of $0.31.

North America, Under Armour's largest market, experienced an 11% revenue decline to $689 million in Q4 FY2025. The decline reflected broader challenging market conditions and the company's strategic shift toward tightening distribution. For the full fiscal year, North American revenue decreased 11% to $3.1 billion. The region maintained a positive operating income of $100 million in Q4, though the operating margin contracted to 14.5% from 18.1% in the prior year period.

EMEA (Europe, Middle East & Africa) proved the most resilient region with a modest 2% revenue decline to $279 million (flat on a currency-neutral basis) in Q4. For the full fiscal year, EMEA revenue was flat at $1.1 billion. Operating income in the region for Q4 was $33 million, representing an operating margin of 11.9%, down from 20.6% in the prior year period, demonstrating significant margin pressure despite relatively stable revenue.

Asia-Pacific faced the most substantial challenges with a 27% revenue decline to $165 million (26% currency-neutral) in Q4. The significant decrease was driven primarily by continued softness in the Chinese market and broader regional retail challenges. For the full fiscal year, Asia-Pacific revenue declined 13% to $755 million. Operating income for Q4 was $15 million, with operating margin falling to 9.1% from 14.8% in the prior year period.

Latin America experienced a 10% revenue decline to $45 million in Q4, though on a currency-neutral basis, the region actually grew 3%, highlighting the significant impact of foreign exchange fluctuations. For the full fiscal year, Latin America revenue decreased 6% to $215 million, but was flat on a currency-neutral basis. Operating income in the region for Q4 was $6 million, with operating margin improving to 13.3% from 11.2% in the prior year period.

From a product category perspective, apparel revenue, which accounts for the majority of Under Armour's business, decreased 11% to $780 million in Q4. Footwear saw the most significant decline of 17% to $282 million, reflecting intense competitive pressures in the athletic footwear market. Accessories was the only product category to show growth, increasing 2% to $92 million in Q4.

In terms of distribution channels, wholesale revenue declined 10% to $768 million in Q4, while direct-to-consumer revenue fell 15% to $386 million. Within the direct-to-consumer channel, eCommerce revenue dropped 27%, representing 37% of the total direct-to-consumer business. This significant decline in eCommerce was largely due to the company's strategic decision to reduce promotional activities to improve profitability and brand positioning.

In May 2024, Under Armour announced a comprehensive restructuring plan designed to improve the company's financial and operational efficiencies. One year into this strategic reset, Under Armour is showing progress in several key areas while continuing to navigate a challenging market environment:

Fiscal 2025 Restructuring Plan

• Scale & Scope: $140-160 million total anticipated restructuring charges, with up to $90 million expected to be cash-related and up to $70 million projected as non-cash charges
• Current Progress: Through the end of Q4 FY2025, the company has recognized $58 million in restructuring and impairment charges and $31 million in other related transformational expenses
• Implementation Status: Of the total $89 million incurred thus far, $55 million is cash-related and $34 million is non-cash related
• Timeline: Remaining charges outlined in the restructuring plan expected to be realized during fiscal 2026

Strategic Reset Priorities

CEO Kevin Plank highlighted several strategic priorities that form the foundation of Under Armour's transformation efforts:

• Product Elevation: Focus on improving product quality and innovation to drive consumer engagement and premium positioning
• Brand Storytelling: Enhanced marketing approach to rebuild brand relevance and emotional connection with consumers
• Distribution Optimization: Tightening distribution networks to ensure brand presentation aligns with premium positioning goals
• Operating Model Refinement: Moving to a category-led operating model to improve agility and market responsiveness
• Cost Structure Improvements: Ongoing efforts to create a more efficient cost structure and improve margins

The company continued its share repurchase program during Q4, buying back $25 million of its Class C common stock and retiring 4.1 million shares. As of March 31, 2025, a total of 12.8 million shares had been repurchased for $90 million as part of the three-year, $500 million program approved by the Board of Directors in May 2024.

Under Armour's strategic reset appears to be yielding positive results in certain areas, particularly gross margin improvement and inventory management, while revenue growth remains challenged. Management has emphasized that fiscal 2025 results were better than expectations set a year ago, suggesting the transformation efforts are gaining traction despite the revenue declines.

Given the uncertainty surrounding evolving trade policies and the macroeconomic environment, including potential demand-related and cost impacts from tariffs, Under Armour has provided guidance only for the first quarter of fiscal 2026 rather than offering a full-year outlook:

• Revenue expected to decrease 4-5% compared to Q1 FY2025
  • North America: Anticipated 4-5% decline
  • EMEA: High single-digit percentage growth
  • Asia-Pacific: Mid-teen percentage rate decline
• Gross margin expected to increase 40-60 basis points year-over-year, driven by:
  • More favorable product mix
  • Lower product and freight costs
  • Positive foreign exchange impacts
  • Partially offset by less favorable channel and regional mix
  • Partially offset by anticipated impacts from tariffs
• SG&A expenses expected to decrease approximately 40% compared to Q1 FY2025 (which included a $274 million litigation settlement expense)
• Adjusted SG&A expenses (excluding litigation settlement and restructuring costs) expected to leverage slightly year-over-year
• Operating income anticipated to be $5-15 million
• Adjusted operating income (excluding restructuring charges) expected to be $20-30 million
• Diluted loss per share expected to be $0.00-$0.02
• Adjusted diluted earnings per share anticipated to be $0.01-$0.03

CEO Kevin Plank expressed confidence in the company's ability to navigate ongoing volatility, highlighting the move to a category-led operating model as a key enabler of improved execution, alignment, and focus. Management emphasized that the agility built over the past year positions Under Armour to address market challenges with resilience, while acknowledging the complex macroeconomic backdrop.

The Q1 FY2026 outlook suggests a slightly improved trajectory compared to Q4 FY2025 results, with moderating revenue declines and continued gross margin expansion. The projected return to profitability on an adjusted basis indicates that cost management initiatives and operational improvements are beginning to deliver results despite ongoing topline challenges.