Under Armour Delivers Better-Than-Expected Q3 Results, Raises FY25 Outlook

Under Armour (NYSE: UAA) reported fiscal third-quarter results that exceeded expectations, providing a much-needed boost to investor sentiment. The company posted adjusted earnings per share (EPS) of $0.08, beating the consensus estimate of $0.03 but down sharply from $0.19 in the prior year. Revenue came in at $1.40 billion, marking a 5.7% year-over-year decline but surpassing Wall Street’s forecast of $1.34 billion. While the numbers still reflect ongoing challenges, particularly in North America, Under Armour's outlook for fiscal 2025 was raised, signaling optimism about its turnaround efforts. Shares initially jumped 9% in premarket trading as investors welcomed the improved guidance, with the stock attempting to break through key resistance at $8.50.

Key Metrics and Earnings Drivers

Under Armour's Q3 revenue performance varied by region, with North America, its largest market, posting an 8% year-over-year decline to $843.6 million, though this was better than the expected $790.1 million. EMEA was a bright spot, with revenue climbing 4.9% to $297.9 million, exceeding estimates of $285.6 million. However, Asia-Pacific and Latin America saw declines of 5.1% and 16%, respectively, highlighting persistent international headwinds. Wholesale revenue slipped 1% to $705 million, while direct-to-consumer (DTC) revenue fell 9% to $673 million, weighed down by a 20% drop in eCommerce sales as the company scaled back promotional activity. Gross margin expanded by 240 basis points to 47.5%, driven by lower discounting, improved freight costs, and favorable foreign currency effects.

Despite the top-line pressure, Under Armour’s cost discipline helped offset some of the revenue declines. Selling, general, and administrative (SG&A) expenses increased 6% to $638 million due to higher marketing investments. The company reported operating income of $13.5 million, an 81% decline from the prior year. Adjusted operating income, excluding restructuring and impairment charges, was $60 million. Inventory levels remained steady at $1.10 billion, down just 0.3% year-over-year, indicating a more balanced supply-demand environment.

Improved Fiscal 2025 Outlook

Under Armour’s raised full-year guidance provided a significant boost to investor confidence. The company now expects adjusted EPS of $0.28 to $0.30, up from its previous forecast of $0.24 to $0.27 and slightly above the consensus estimate of $0.29. Adjusted operating income is projected to be between $185 million and $195 million, higher than the previous range of $140 million to $160 million. The improved forecast suggests that management’s efforts to stabilize the business—through tighter cost controls, less discounting, and a renewed focus on premium branding—are beginning to show results.

However, revenue remains a concern, with the company forecasting a 10% decline for the fiscal year, an improvement from prior guidance for a low double-digit percentage drop. North America revenue is now expected to fall 12-13%, versus the previous expectation of a 14-16% decline. International revenue is projected to decline by a mid-single-digit percentage, slightly worse than the previously forecasted low single-digit drop. Despite these challenges, gross margin is expected to improve by 160 basis points, reflecting a continued focus on reducing promotional activity and optimizing product mix.

Stock Action: Can Under Armour Break Out?

Shares of Under Armour have been attempting to break above the key $8.50 resistance level, and the post-earnings reaction suggests that the improved outlook has provided some near-term momentum. The stock had been trading in a tight range before the earnings report, with technical resistance at $8.50 and the next upside target near $10. If shares can sustain a breakout above this level, it could signal a shift in investor sentiment and a potential re-rating for the stock.

However, while the results were better than expected, challenges remain. The company still faces declining revenue, weakness in North America, and a need to rebuild brand perception. Additionally, the improved outlook largely stems from cost-cutting efforts rather than a fundamental acceleration in demand. For the stock to make a sustained move toward $10, investors will need to see evidence of stronger revenue trends, improving wholesale orders, and further progress in Under Armour’s transition to a more premium brand positioning.

Final Thoughts

Under Armour’s Q3 report delivered better-than-expected results, with revenue and earnings beating estimates, and an improved fiscal 2025 outlook boosting investor sentiment. Gross margin expansion, disciplined cost control, and a focus on brand elevation are driving the company’s turnaround efforts. While the stock is attempting to break out, long-term success will depend on Under Armour’s ability to reignite revenue growth, particularly in North America, and sustain its brand transformation. The stock’s ability to rally toward $10 will likely hinge on continued execution and further signs of improvement in its core business.