Under Armour's 2026 Q2: Contradictions Emerge on North America Stabilization, APAC Strategy, and Pricing Approaches

Date of Call: November 6, 2025

Financials Results

• Revenue: $1.3B, down 5% YOY; included ~1 point benefit from shipments shifted from Q3 into Q2
• EPS: Reported diluted loss per share $0.04; adjusted diluted EPS $0.04; fiscal '26 adjusted diluted EPS outlook $0.03–$0.05
• Gross Margin: 47.3%, down 250 basis points YOY (~275 bps supply‑chain/tariff headwind, partly offset by pricing and mix)
• Operating Margin: Operating income $17M; adjusted operating income $53M; fiscal '26 adjusted operating income outlook $90M–$105M

Guidance:

• Full‑year revenue down 4%–5%; North America and APAC expected to decline high‑single digits; EMEA expected to grow high‑single digits.
• Full‑year gross margin expected to decline ~190–210 bps (tariffs primary headwind); Q3 gross margin down ~310–330 bps due to tariffs.
• Fiscal '26 adjusted SG&A expected to be down mid‑single digits.
• Fiscal '26 adjusted operating income $90M–$105M; adjusted diluted EPS $0.03–$0.05.
• Q3 revenue down 6%–7% (includes ~1 point timing shift); Q3 adjusted operating income roughly $5M profit to $5M loss (~$0.02–$0.03 adjusted loss per share).

Business Commentary:

• Revenue Decline and Regional Performance:
• Under Armour reported a 5% decline in revenue to $1.3 billion for Q2 FY2026, with North America's revenue decreasing by 8% and APAC declining by 14%.
• 

• The decline was due to a reduced full-price wholesale business in North America and challenges in APAC's wholesale segment.

• Gross Margin and Supply Chain Headwinds:

• Under Armour's gross margin declined by 250 basis points year-over-year to 47.3%.

• This was primarily due to 275 basis points of supply chain headwinds, including higher U.S. tariffs, and unfavorable channel and regional mix.

• Footwear Challenges and Strategic Realignment:

• Footwear revenue declined by 16% in Q2, reflecting ongoing pressure from a challenging consumer demand environment.

• The company is addressing this by prioritizing key footwear franchises and refining its strategic approach to improve efficiency and brand value.

• Product Innovation and Market Positioning:

• Under Armour has introduced new product innovations like the Velociti distance run shoe and the No Weigh duffle, with a focus on higher price points and sustainable materials such as NEOLAST fiber technology.
• This shift is aimed at enhancing product quality, elevating brand perception, and driving growth in strategic product categories.

Sentiment Analysis:

Overall Tone: Positive

• Management said the quarter "met or exceeded our outlook," repeatedly highlighted that "momentum is real," and cited rising brand heat (awareness among 18–34 increased from mid‑60s to >80%) and improving retail replenishment as evidence supporting a constructive turnaround narrative.

Q&A:

• Question from Jay Sole (UBS Investment Bank, Research Division): What makes you confident that North America will see stabilization before the end of fiscal '27? And what is your definition of stabilized for North America?
  Response: Stabilization = revenue within roughly ±1–2%; confidence rests on five levers—right team/operating model, elevated product (SKU edits and innovation), stronger storytelling, improved wholesale partnerships and renewed internal culture—driving awareness and replenishment.

• Question from Jay Sole (UBS Investment Bank, Research Division): You mentioned NEOLAST; can you explain what it is and what makes it special?
  Response: NEOLAST is a sustainable Lycra‑replacement fiber co‑developed with NC State/Celanese that Management says outperforms Lycra; it will roll into HeatGear Elite and other high‑value products to support premiumization.

• Question from Samuel Poser (Williams Trading, LLC, Research Division): Running/track seems an addressable market—what will you do to increase your voice and match product presence in running where you have credibility?
  Response: Running is a priority: leverage Velociti Elite podium credibility to authenticate specialty run, cascade design/technology across price tiers ($75–$250) and use college/high‑school distribution and specialty run to amplify the category.

• Question from Samuel Poser (Williams Trading, LLC, Research Division): How are you increasing marketing voice beyond We Are Football, and what are you seeing in sell‑throughs/velocity at full price versus a year ago?
  Response: Management is raising voice via targeted partnerships and retail programs; they report beating internal plans, improving full‑price sell‑throughs, replenishment orders arriving and rising retailer confidence—improvements not yet fully reflected in reported numbers.

• Question from Robert Drbul (BTIG, LLC, Research Division): How will changes to the sports marketing portfolio improve storytelling?
  Response: The marketing mix will be dynamic and targeted—combining star ambassadors, NIL athletes, teams and cultural activations (e.g., Justin Jefferson, Gunna, high‑profile NIL) to drive authenticity and youth engagement.

• Question from Robert Drbul (BTIG, LLC, Research Division): Footwear is down 16%—how are you addressing category challenges?
  Response: They are deliberately recalibrating footwear—editing low‑value SKUs, focusing on franchise/performance lines (Velociti, cleated boots, trainers), pushing premium ASPs while keeping accessible $75 offerings; accepting near‑term pain to rebuild credibility.

• Question from Laurent Vasilescu (BNP Paribas, Research Division): How should we think about pricing elasticity for Spring/Summer 2026; could mid‑single digit price increases offset tariffs?
  Response: Short‑term focus is SG&A mitigation, vendor sharing and production shifts; selective, modest price increases will be strategic and limited now, with more visible pricing actions expected in fiscal '27.

• Question from Laurent Vasilescu (BNP Paribas, Research Division): You cited ~275 bps tariff impact in Q2—how should we think about tariffs in Q3 and full year?
  Response: Q2 had ~275 bps tariff headwind; Q3 gross margin impact expected ~310–330 bps (largely tariffs); Q4 tariff impact should be somewhat lower but remains the primary headwind for the back half.

• Question from Peter McGoldrick (Stifel, Nicolaus & Company, Incorporated, Research Division): Guidance shape changed—why might Q3 be worst quarter now and how should we think about the path to fiscal '27 stabilization?
  Response: Change driven mainly by a ~$10–15M timing shift of wholesale shipments into Q2; otherwise outlook unchanged—expect Q4 moderation and stabilization into fiscal '27, powered by EMEA growth and North America improvements.

• Question from Peter McGoldrick (Stifel, Nicolaus & Company, Incorporated, Research Division): How will you balance portfolio pricing and where will increases be targeted?
  Response: Pricing will be selective—targeting 'better' and 'best' tiers and specific new launches, using a good/better/best approach to incrementally walk consumers up while preserving entry‑price aesthetic and value.

• Question from Brooke Roach (Goldman Sachs Group, Inc., Research Division): Can you dive into APAC trends, drivers and cadence to stabilization?
  Response: APAC is being reset—management cites leadership hires, tighter buys, fewer promotions, premiumized assortments and a digital store test; they expect stabilization and a return to growth into fiscal '27.

• Question from Kelly Crago (Citigroup Inc., Research Division) on behalf of Paul Lejuez: With improved sell‑through this fall, could stronger reorder demand drive upside in holiday; do order books reflect stabilization and should we expect up orders for fall 2026?
  Response: Sell‑through and replenishment have improved, cancellations/returns have declined and order books are more stable; near‑term upside for Q3/Q4 is limited given DTC mix, but these trends set up potential stronger fall '26 wholesale orders.

Contradiction Point 1

North America Stabilization Timeline and Definition

It involves differing expectations and definitions of stabilization in North America, which are crucial for investor understanding of Under Armour's strategic direction and financial performance.

What gives you confidence that North America will stabilize by fiscal '27 end? How do you define stabilization for North America? - Jay Sole(UBS Investment Bank, Research Division)

2026Q2: Stabilization is defined as seeing a business get to a healthy version, ideally a plus or minus 1 or 2. - Kevin Plank(CEO)

How is the North America reset progressing, and what are expectations for FY26? - Bob Drbul(BTIG, LLC, Research Division)

2025Q3: The focus is on growing the business for long-term success. - Kevin Plank(CEO)

Contradiction Point 2

APAC Structural Challenges and Pricing Strategy

It highlights disparities in the approach and expectations for APAC's structural challenges and pricing strategy, which could impact Under Armour's international growth and revenue.

What factors and timing are expected for APAC's business stabilization? - Brooke Roach(Goldman Sachs Group, Inc., Research Division)

2026Q2: APAC's stabilization is driven by addressing structural issues, reducing inventory, and enhancing distribution. - Kevin Plank(CEO)

Are Under Armour's brand strengthening strategies showing results? What are the current trends in APAC? - Jay Sole(UBS)

2025Q3: In APAC, we continue to face challenges similar to what we've seen in prior regions, but given the size of the business and our existing infrastructure, we're — we have every opportunity to bring it back and do it as a quick turnaround. - Kevin Plank(CEO)

Contradiction Point 3

Pricing Strategy and Pricing Elasticity

It involves conflicting statements on pricing strategy and the impact of tariffs on pricing elasticity, which are critical to understanding the company's financial strategy and market competitiveness.

How is pricing elasticity expected for the 2026 spring/summer product? What are the tariff impacts for Q3 and the full year? - Laurent Vasilescu(BNP Paribas, Research Division)

2026Q2: Pricing strategy includes selective price increases to mitigate tariff impacts, with focus on 2027 for significant changes. - David Bergman(CFO)

Have there been any key course corrections or major changes that have started showing results? - Brian William Nagel(Oppenheimer & Co. Inc.)

2026Q1: We're focused on selling more with less at higher full retail prices. - Kevin A. Plank(CEO)

Contradiction Point 4

North American Stabilization and Brand Momentum

It involves differing expectations and timelines for the stabilization of Under Armour's North American business, which is crucial for the company's overall performance and investor confidence.

What factors support the expectation of North America stabilization by fiscal 2027's end?How do you define stabilization for North America? - Jay Sole(UBS Investment Bank, Research Division)

2026Q2: Stabilization is defined as seeing a business get to a healthy version, ideally a plus or minus 1 or 2. Confidence is built on factors like having the right team, structural alignment, and a focus on product innovation and brand storytelling. - Kevin Plank(CEO)

Can you elaborate on the North American reset and its progress for fiscal '26? - Jay Sole(UBS)

2025Q4: The brand momentum should build before revenue. The brand will be more inspired and less focused on transactional aspects. - Kevin Plank(CEO)

Contradiction Point 5

EMEA Growth and Market Performance

It highlights differing expectations and assessments of Under Armour's performance and growth potential in the EMEA region, which is an important market for the company's international expansion.

What is the pricing elasticity for spring/summer 2026 products? What are the tariff impacts for Q3 and the full year? - Laurent Vasilescu(BNP Paribas, Research Division)

2026Q2: EMEA is performing well with strong brand authentication in sports, particularly football, and a presence in key markets like France and the UK. - Kevin Plank(CEO)

How has the order book been affected by tariffs, and what are EMEA growth expectations? - Laurent Vasilescu(BNP Paribas)

2025Q4: EMEA growth is expected due to improved product design and style. EMEA is performing well with strong brand authentication in sports, particularly football, and a presence in key markets like France and the UK. - Kevin Plank(CEO)