Under Armour, Inc. (UAA) Q3 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reflects mixed signals: while adjusted operating income exceeded expectations and inventory management improved, revenue declines in key segments and negative gross margin projections raise concerns. The Q&A reveals management's confidence in future stabilization and growth, particularly in EMEA and APAC, but uncertainty remains due to a lack of specific guidance and ongoing structural challenges. The market cap indicates a moderate reaction, leading to a neutral prediction.
Key Financial Performance
Revenue Declined 5% to $1.3 billion year-over-year. The decline was primarily due to a decrease in North America revenue by 10%, driven by a decrease in wholesale and direct-to-consumer business. EMEA revenue increased 6% on a reported basis, while APAC revenue decreased 5%. Latin America revenue increased 20%. The reasons for these changes include timing shifts of wholesale deliveries, regional performance variations, and a promotional environment in North America.
Gross Margin Declined 310 basis points year-over-year to 44.4%. The decline was driven by supply chain headwinds, including higher U.S. tariffs, pricing amid a promotional environment, and unfavorable channel and regional mix. These were partially offset by foreign currency impacts and a more favorable product mix.
SG&A Expenses Increased 4% to $665 million year-over-year. This increase was driven by a $99 million litigation reserve expense and $3 million in transformation costs. Excluding these, adjusted SG&A was down 7% to $563 million due to lower marketing spend and benefits from restructuring actions.
Operating Income Reported an operating loss of $150 million. Adjusted operating income was $26 million, exceeding expectations. The loss was influenced by litigation reserve expenses, transformation costs, and restructuring charges.
Inventory Decreased 2% year-over-year to just over $1 billion. This reflects efforts to streamline inventory and improve planning precision.
Footwear Revenue Decreased 12% year-over-year. The decline was attributed to structural issues, including redundant SKUs and low productivity styles, which are being addressed through a disciplined approach to product segmentation and pricing.
Apparel Revenue Decreased 3% year-over-year. The decline was due to softness in train, golf, and run categories, while sportswear remained flat.
Accessories Revenue Decreased 3% year-over-year. The decline was driven by decreases in golf, outdoor, and team sports, partially offset by growth in sportswear.
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Operating Highlights
Product Simplification: 25% of SKUs eliminated in fiscal '25, with further opportunities for efficiency in SKUs, styles, and raw materials.
Product Innovation: New products like the women's Vanish Elite collection, StealthForm Hat, and No Weigh Backpack introduced. Footwear innovations include Velociti Elite 3, Assert 11, HB-LO, Sola, and Arc 96.
Pricing Power: Higher ASPs driven by refreshed designs and modern colorways in Heat and ColdGear, as well as other product lines.
Regional Performance: North America revenue declined 10%, EMEA revenue increased 6%, APAC revenue decreased 5%, and Latin America revenue increased 20%.
Digital Engagement: Strong digital engagement through platforms like TikTok Shop and SMS tools.
Wholesale Partnerships: Improved collaboration with partners like Dick's Sporting Goods, with positive results from campaigns like ColdGear compression.
Operational Simplification: Streamlined operating system with reduced complexity, faster decision-making, and improved planning precision.
Leadership Changes: New leadership roles include Chief Merchandising Officer, President of the Americas, and Chief Marketing Officer to enhance speed and alignment.
Cost Management: SG&A expenses reduced by 7% (excluding litigation and transformation costs).
Turnaround Strategy: Focus on execution and stabilization post-structural changes. Emphasis on consistent operating model and disciplined go-to-market approach.
Brand Momentum: Improved brand health in the U.S., with higher awareness and engagement among younger athletes. Enhanced storytelling and influencer strategies.
Team Sports and Global Presence: Expanded partnerships in American Football, collegiate sports, and global football. Increased presence in events like the Winter Olympics and World Baseball Classic.
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Risk or Challenges
Footwear Sales Decline: Year-to-date sales are down about 14%, reflecting structural issues such as diluted volume, pressured margins, and increased inventory risk. Actions are being taken to address these issues, but the reset is still underway.
North America Revenue Decline: Revenue in North America declined 10%, primarily due to a decrease in wholesale and direct-to-consumer business. Traffic remains soft, and the promotional environment is challenging.
Supply Chain Headwinds: Gross margin declined due to 180 basis points of supply chain headwinds, including 200 basis points from higher U.S. tariffs.
Inventory Management Challenges: Efforts to manage inventory and sharpen assortments are ongoing, particularly in the APAC region, where stabilization is expected over the next 12 months.
Promotional Environment: Pricing headwinds amid a more promotional environment in North America are impacting gross margins and revenue.
Litigation Reserve Expense: A $99 million litigation reserve expense related to an insurance carrier dispute impacted SG&A expenses.
Restructuring Costs: Restructuring charges and transformation-related expenses under the Fiscal 2025 Restructuring Plan are ongoing, with $224 million incurred so far, impacting financials.
E-commerce Revenue Decline: E-commerce revenue decreased 7%, contributing to the overall decline in direct-to-consumer revenue.
APAC Revenue Decline: Revenue in the APAC region decreased 5%, driven by declines in full-price wholesale business and slight decreases in direct-to-consumer revenue.
Footwear Structural Issues: Structural issues in the footwear category, such as redundant SKUs and low productivity styles, are being addressed but continue to challenge the business.
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Guidance & Outlook
Revenue Expectations: Full year revenue is expected to decline approximately 4%, with North America revenue declining approximately 8%, APAC revenue declining approximately 6%, and EMEA revenue growing approximately 9%. Fourth quarter revenue trends are expected to improve meaningfully as the company moves toward stabilization in fiscal '27.
Gross Margin Projections: Full year gross margin is expected to decline by approximately 190 basis points, driven by U.S. tariffs, unfavorable channel and regional mix, and pricing headwinds. These pressures are partially offset by foreign currency tailwinds and a more favorable product mix.
Adjusted Operating Income: Expected to be approximately $110 million at the high end of the $95 million to $110 million range provided earlier.
Adjusted Diluted Earnings Per Share: Expected to be $0.10 to $0.11, driven in part by favorable tax planning developments.
Footwear Business Outlook: The company is addressing structural issues in the footwear segment by exiting low productivity styles, reducing redundant SKUs, and focusing on fewer, higher-impact franchises. Stabilization of the footwear category is expected next year, with momentum rebuilding among consumers and wholesale partners.
Product and Pricing Strategy: The company is focusing on intentional product segmentation, innovation, and pricing discipline. New product launches, such as the HB-LO basketball-inspired silhouette and the Arc 96, are expected to drive consumer engagement and improve margins.
Regional Performance: North America is beginning to stabilize, with improvements in e-commerce conversion and wholesale partnerships. EMEA remains strong with disciplined execution and pricing integrity. APAC is expected to stabilize over the next 12 months, with more sustainable growth beyond.
Marketing and Brand Engagement: The company is enhancing storytelling and digital engagement, particularly on platforms like TikTok. Influencer strategies and community-led platforms are expected to generate authentic energy and momentum for the brand.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:Can you speak to what makes you confident about the December quarter being the lowest revenue decline for North America and the stabilization in FY '27?
A:Kevin Plank expressed confidence in the stabilization of North America due to leadership changes, structural improvements, and product consistency. He highlighted the success of HeatGear and ColdGear, new styles, and improved storytelling. He noted that wholesale order books are shaping up positively, and the company is focusing on intentionality and clarity in product offerings.
Q:Are the operational progress and wholesale engagement in North America transferable to Europe and APAC regions?
A:Kevin Plank stated that EMEA has been a strong performer with 9% growth, supported by strong leadership and partnerships with JD Sports and Sports Direct. However, the U.K. market is becoming more promotional. For APAC, new leadership is focusing on rebuilding the brand, and while the region is behind North America in turnaround efforts, the worst declines are believed to be over.
Q:How are you thinking about segmentation in the competitive footwear market?
A:Kevin Plank emphasized the importance of clear segmentation into good, better, and best categories. He noted that the company is focusing on premiumization and driving higher ASPs, particularly in footwear. He highlighted the Velociti franchise as an example of clear segmentation and the focus on global continuity and consistency.
Q:What are you doing to create an emotional connection with your products?
A:Kevin Plank emphasized the importance of making consumers feel something through authenticity, athlete credibility, and inspirational storytelling. He highlighted the women's flag football campaign as an example of creating emotional connections and inspiring young athletes. The company is focusing on price-to-value relationships and deliberate city attack strategies.
Q:Are you applying the local high school team strategy in flagship stores to other stores, including outlet stores?
A:Kevin Plank mentioned the significant presence in team sports and the opportunity to grow further. He emphasized the importance of authenticity on the field and the need to provide products for off-field use. However, he did not directly address applying the high school team strategy to other stores.
Q:Can you break down APAC by country and discuss the management realignment?
A:David Bergman stated that APAC is critical, with new leadership focusing on rebuilding the brand and driving full-price sales. He noted that the worst declines are likely behind. Regarding management realignment, Kevin Plank explained that Yassine is transitioning to an external role while maintaining a positive relationship with Under Armour. The company is focusing on simplification and consistency in product offerings.
Q:What improvements should we expect in the cost structure from complexity reduction and SKU rationalization?
A:Kevin Plank and David Bergman explained that reducing the number of fabrics and SKUs will lead to better margins and pricing on raw materials. These changes are expected to benefit the business in the back half of fiscal '27 and beyond. They also mentioned offsetting tariff costs and driving higher ASPs.
Q:Can you elaborate on the channel and product category puts and takes in North America for fiscal '27?
A:David Bergman stated that details on fiscal '27 will be provided in the early May call. He mentioned positive wholesale discussions and momentum in product and brand relationships. Kevin Plank emphasized the importance of winning with HeatGear and ColdGear and ensuring clear segmentation and appropriate distribution.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on fiscal '27 channel and product category expectations, stating that more information will be shared in the early May call. Additionally, while discussing the application of the high school team strategy to other stores, Kevin Plank did not provide a direct answer.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Baseball
Click Clack
ColdGear
Inventory
National
Olympics
Run
Spring
Summer
TikTok
Velociti
World
accessory
athlete engagement
credibility
discipline
engine
era
evolution
foundation
franchise price
indicator
infrastructure
investor website
launch
message
momentum brand
phase
price point
principle
product storytelling
proof point
relevance
reset
response
scale
segmentation
signal
silhouette
stage
structure
style
turnaround
value creation
woman
UA Transcript
Under Armour, Inc. (UAA) Q3 2026 Earnings Call Transcript
Unknown2-6
The earnings call reflects mixed signals: while adjusted operating income exceeded expectations and inventory management improved, revenue declines in key segments and negative gross margin projections raise concerns. The Q&A reveals management's confidence in future stabilization and growth, particularly in EMEA and APAC, but uncertainty remains due to a lack of specific guidance and ongoing structural challenges. The market cap indicates a moderate reaction, leading to a neutral prediction.
Under Armour, Inc. (UAA) Q2 2026 Earnings Call Transcript
Unknown11-6
The earnings call summary and Q&A reveal several challenges: declining revenue, gross margins, and operating income projections, along with tariff impacts. Despite some positive developments like product innovation and improved partnerships, the lack of concrete guidance for North American stabilization and unclear pricing strategies weigh heavily. The market cap suggests moderate sensitivity, but the overall negative outlook on financials, especially in key markets, points to a negative stock price reaction in the near term.
Under Armour, Inc. (UAA) Q1 2026 Earnings Call Transcript
Unknown8-8
The earnings call reveals several concerning factors: anticipated revenue decline, significant gross margin pressure from tariffs, and challenges in North America. While there are positive indicators like improved brand perception and strategic initiatives, the overall financial outlook is weak, with expected declines in North America sales and Q2 being particularly tough. The market may react negatively to the revenue and margin pressures, despite optimistic guidance for the latter part of the year. With a market cap of approximately $2.9 billion, the stock is likely to experience a negative movement of -2% to -8%.
Under Armour, Inc. (NYSE:UA) Q4 2025 Earnings Call Transcript
Unknown5-14
The earnings call presents a mixed outlook. While revenue and operating losses are concerning, improved gross margins, share repurchase, and positive adjustments to guidance offer some optimism. The Q&A reveals positive traction in the DTC business and a focus on premium offerings, but uncertainties about tariffs and e-commerce decline remain. Given the small-cap status, the stock might see some volatility but likely remain within a neutral range of -2% to 2%.
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