Under Armour (UA -17.30%), the athletic apparel and footwear maker recognized for its performance sportswear and innovation, released its first quarter fiscal 2026 earnings on August 8, 2025. The results pointed to continued operational progress, including improved gross margin and a jump in adjusted operating income (non-GAAP).
However, GAAP revenue fell to $1,134 million, 4.2% lower than the prior year and 2.0% below analyst expectations of $1,155 million.
Adjusted earnings per share (EPS) came in at $0.02, short of Wall Street’s $0.03 estimate. Overall, the quarter reflected improvement in expense management and margins, but persistent sales declines and an uncertain outlook weigh on the company's path forward.
| Metric | Q1 FY26(three months ended June 30, 2025) | Q1 Estimate | Q1 FY25(three months ended June 30, 2024) | Y/Y Change |
|---|---|---|---|---|
| EPS (Adjusted, Non-GAAP) | $0.02 | $0.03 | $0.01 | 100.0 % |
| Revenue (GAAP) | $1,134 million | $1,155 million | $1,184 million | (4.2%) |
| Operating Income (Adjusted, Non-GAAP) | $24 million | $8 million | 200.0 % | |
| Gross Margin (GAAP) | 48.2 % | 47.5 % | 0.7 pp | |
| Inventory | $1,142 million | N/A | N/A |
Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q4 2025 earnings report.
About Under Armour’s Business and Key Focus Areas
Under Armour operates at the intersection of performance sportswear, footwear, and accessories. Its signature innovations—like moisture-wicking HeatGear apparel and lightweight footwear—aim to help athletes perform better. Its business spans wholesale partners, direct-to-consumer (DTC) digital channels, and company-owned stores, serving athletes and fitness enthusiasts globally.
Key focuses for the business include brand strength, premiumization, and digital engagement. The company works to maintain its reputation by associating with top athletes and delivering high-performance products. Its strategy also hinges on expanding DTC and e-commerce, managing inventory efficiently, and sustaining innovation in core categories like running, training, and team sportswear. Under Armour’s ability to balance brand perception, digital engagement, and supply chain excellence is central to its future prospects.
Quarter in Review: Revenue Trends, Margins, and Strategic Actions
The quarter saw GAAP revenue dip 4.2%, driven by a 5.5% decline in North America, its largest market, to $670 million.
International revenue declined 1% to $467 million, with EMEA up 9.6% to $248.6 million, while Asia-Pacific fell 10.1% and Latin America dropped 15.3%.
Wholesale sales fell 4.6% (GAAP) and direct-to-consumer sales contracted 3.5% (GAAP). Within DTC, e-commerce revenue was notably weak, shrinking 12% and comprising 31% of the channel's sales. However, physical store sales grew 1% (GAAP).
Among product categories (GAAP), apparel held steadier (down 1.5%), but footwear revenue dropped 14.3%, signaling continued competition and demand challenges. Accessories, however, climbed 8.1% (GAAP). Channel challenges were tied to strategic choices: Under Armour deliberately pulled back on promotional activity, looking to boost long-term margin and brand positioning. The effort to shift toward full-price sales in DTC contributed to the recent DTC and e-commerce declines.
Gross margin (GAAP) increased by 0.7 percentage points versus the prior year, reaching 48.2%—its strongest result of the quarter. This margin improvement (GAAP) stemmed from favorable foreign currency swings, price gains, and a stronger product mix. Offsetting these wins were higher supply chain costs and a shift toward lower-margin sales channels. Adjusted operating income—a non-GAAP measure of core profit excluding one-time restructuring and transformation expenses—jumped to $24 million, up from $8 million in the prior year. GAAP net income remained negative at -$2.6 million, but this improved greatly versus last year’s -$305 million loss. Selling, general and administrative expense also dropped 6% on an adjusted (non-GAAP) basis to $522 million, helping boost profitability despite revenue pressure.
Inventory increased 2 percent to $1.1 billion.
While slightly elevated given declining sales, management described inventory as healthy and actively managed. One-time restructuring costs tied to the company’s transformation plan totaled $110 million so far, including $71 million in charges and $39 million in related expenses. These actions, intended to streamline the business and cut costs, are expected to save $75 million annually by the end of FY2026.
UA does not currently pay a dividend.
Business Drivers: Brand, Digital, and Supply Chain Moves
Brand discipline remained a central theme during the quarter. Under Armour continued to emphasize product storytelling and alignment with athletes—high-profile partnerships and planned launches like the UA Halo sportswear and expanded accessories lines are designed to drive “premiumization,” or shifting the brand and customer base toward higher-priced goods. Its marketing investment stayed steady, but leaders focused on impact over volume, telling more compelling product and athlete stories rather than boosting generic promotions and discounts.
On the digital and retail front, Under Armour pressed ahead with its DTC strategy. Total DTC sales accounted for about 40% of revenue in FY2025, but leadership noted the deliberate e-commerce pullback—shifting away from discounting, even at the cost of lower web sales volumes. At the same time, company-owned retail stores stabilized, with sales increasing 1% (GAAP) as store formats and experiences received upgrades. This was in contrast to factory outlet rationalization, which led to fewer store-wide sales and more curated, full-price assortments.
Supply chain and inventory management remained top priorities. With about 30% of production volume sourced from Vietnam, 20% from Jordan, and 15% from Indonesia, the company flagged ongoing supply chain and tariff risks. The company continued to diversify sourcing where possible and leaned on its Factory House outlets to clear excess inventory. Management detailed active control over purchase orders and close monitoring of demand shifts, aiming to limit old or obsolete stock.
Product innovation is a persistent driver. New offerings like the UA Halo (a premium sportswear family blending performance and style), footwear lines such as the Velociti running shoe, and breakthroughs in material science are positioned as growth vectors. However, the sharp year-over-year decline in footwear revenue (GAAP) raises concerns about competitive intensity, especially as key rivals invest heavily in technology, digital, and athlete partnerships. The success of new product launches in the coming quarters will be closely watched as a measure of brand and commercial traction.
Looking Ahead: Guidance and Key Areas to Watch
For Q2 FY2026, management forecasts revenue (GAAP) will decline 6–7%, with weakness led by North America and Asia-Pacific, though EMEA is expected to grow at a high single-digit rate. Gross margin (GAAP) is projected to drop by 3.4–3.6 percentage points, primarily due to expected tariff impacts and channel mix shifts. Adjusted operating income is guided for $30–$40 million, and adjusted diluted EPS in the range of $0.01–$0.02. There is no full-year guidance, with leadership noting the “significant uncertainty” surrounding tariffs, cost inflation, and the pace of consumer demand.
Investors should closely monitor inventory trends, as a rising balance could put pressure on margins if demand continues to soften, especially in footwear and Asia-Pacific. Management’s transparency on the transformation plan and restructuring actions is clear, but the impact of premiumization, supply chain actions, and new product launches will take time to play out. UA does not currently pay a dividend.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
