What happened

Shares of Under Armour Inc. (NYSE:UA)(NYSE:UAA) dropped 11.2% in July, according to data from S&P Global Market Intelligence, following the athletic apparel and footwear specialist's second-quarter 2018 results.

Curiously, Under Armour climbed around 4% on July 26, following the release of its quarterly report that morning. But then Under Armour declined more than 6% the following day as investors absorbed the news, and it only continued to drift lower from there.

Interior of Under Armour brand house store in Chicago

Image source: Under Armour.

So what

To be clear, Under Armour's actual second quarter was solid. Revenue climbed 8% year over year to $1.2 billion, beating expectations thanks to a modest return to growth from its core North American segment, where sales rose 1.6%, to $843 million. That translated to an adjusted net loss of $34 million, or $0.08 per share (and that was after excluding $62 million in restructuring costs), which was essentially in line with consensus estimates.

CEO Kevin Plank said, "The ongoing improvements in our structure, systems, and go-to-market process across our global business better position us to drive a more consistent, predictable path to deliver for our consumers, customers, and shareholders over the long term." 

Under Armour also told investors that it identified roughly $80 million of additional restructuring initiatives during the quarter. As such, its 2018 restructuring plan is now expected to result in pre-tax charges of $190 million to $210 million (up from the previously communicated range of $110 million to $130 million).

Now what

Looking ahead to the full year, Under Armour also revised its 2018 guidance for revenue to increase roughly 3% to 4% from 2017, marking a more specific prediction, as compared to its previous outlook for low single-digit growth. But Under Armour also called for full-year gross margin to be flat to down slightly from 45% last year -- a reduction from its prior outlook for the metric to climb 50 basis points to 45.5%. Excluding the impact of the restructuring, however, it also reiterated its outlook for 2018 adjusted earnings per share in the range of $0.14 to $0.19.

In the end, there's no denying that Under Armour's turnaround is making progress, and its long-term story appears to remain firmly intact. But given the significant increase in restructuring costs to actually execute that turnaround relative to its original expectations, it's no surprise that the stock gave back its initial post-earnings gains last month.