Under Armour's Valuation Doesn't Reflect Near-Term Turnaround Potential

Under Armour's valuation is too high and the company's near-term turnaround potential is uncertain. The sell rating is based on the thesis that the valuation does not accurately reflect the company's current performance.

Baltimore, MD — September 12, 2025 — Two of Baltimore's largest employers, Under Armour and T. Rowe Price, are calling workers back to the office more frequently, joining a growing number of international companies that have expanded their in-office requirements Under Armour, T. Rowe expand return-to-office requirements^[1].

However, Under Armour (NYSE: UAA) faces significant challenges that could hinder its near-term turnaround potential. The company's valuation remains too high, according to a recent analysis, which suggests that the current market price does not accurately reflect its current performance Under Armour: No Faith In Near-Term Turnaround Potential^[2].

The latest financial reports indicate that Under Armour's revenue has been declining, with the company reporting a 6% to 7% year-over-year (y/y) revenue decline in the second quarter of 2026. Additionally, the company's gross margin has contracted by 340 to 360 basis points (bps), leading to a more than 50% year-over-year decline in adjusted earnings before interest and taxes (EBIT) Under Armour: No Faith In Near-Term Turnaround Potential^[2].

The recent developments have removed any lingering optimism about the company's turnaround potential. The turnaround has increasingly turned unlikely, with management revising guidance downwards, which is much worse than previously thought. The company is guiding for adjusted EBIT to be roughly half of FY25 levels, equating to approximately $100 million Under Armour: No Faith In Near-Term Turnaround Potential^[2].

One of the most damaging factors is the new tariff headwind, which management quantified as a ~$100 million drag to cost of goods sold in FY26. This alone translates to ~200 bps of gross margin pressure for the year. Mitigation efforts like supplier cost-sharing and selective price increases are not expected to deliver meaningful offsets until FY27 or later, leaving Under Armour highly exposed for the next twelve months Under Armour: No Faith In Near-Term Turnaround Potential^[2].

Moreover, the company's repositioning towards a full-price strategy has not been successful. Direct-to-consumer sales have weakened without promotions, and falling retail traffic and competition from the e-commerce environment are further hurting the company's performance Under Armour: No Faith In Near-Term Turnaround Potential^[2].

Under Armour's North America market, which is its largest and most important market, saw a 5.5% y/y revenue decline in the first quarter of 2026 and is expected to see a low-double-digit decline in the second quarter of 2026. The main problem here is what drove this decline, with management attributing it to a poor spring/summer 2025 wholesale order book, falling retail traffic, and competition from the e-commerce environment Under Armour: No Faith In Near-Term Turnaround Potential^[2].

The company's footwear category, which should be a key driver of the turnaround, has also seen a 14% y/y revenue decline in the first quarter of 2026. The decision to sunset the Infinite running franchise may be the right call strategically, but it will create a major sales vacuum that will hurt the P&L as the company reallocates resources to new products like the recently launched Halo Under Armour: No Faith In Near-Term Turnaround Potential^[2].

The quarter-to-date sales are well in the negative zone and way below consensus, further highlighting the company's struggles. Until there is clear evidence of a turnaround in both North America and footwear, the fundamental equity story remains deeply impaired Under Armour: No Faith In Near-Term Turnaround Potential^[2].

The company's valuation remains high, with the market pricing in a turnaround in FY27, despite the lack of visibility to such a recovery. The current valuation embeds overly optimistic expectations for FY27, leaving significant downside risk if guidance cuts persist Under Armour: No Faith In Near-Term Turnaround Potential^[2].

While there are potential upside risks, such as strong performance in the EMEA region and early strategic initiatives showing traction, the current negative sales trajectory suggests that Under Armour remains a broken equity story Under Armour: No Faith In Near-Term Turnaround Potential^[2].