Under Armour’s Q1 2027 Earnings Call: North America Stabilization Timelines and Gross Margin Drivers Clash With Past Guidance

Date of Call: Aug 7, 2026

Financials Results

• Revenue: $1.1 billion, declined 3% YOY
• EPS: $0.05 adjusted diluted earnings per share, ahead of outlook range
• Gross Margin: 54.1%, increased 590 basis points YOY
• Operating Margin: Adjusted operating income $52 million, exceeding outlook of $30-$40 million

Guidance:

• FY27 revenue expected to decline at a mid-single-digit rate.
• FY27 adjusted operating income outlook unchanged at $140-$160 million.
• Q2 revenue expected to decline at a high single-digit rate.
• Q2 adjusted operating income expected to be $10-$20 million.
• Q2 adjusted diluted loss per share expected to be $0.01-$0.03.
• Gross margin expected to expand approximately 220-270 basis points YOY.
• Adjusted SG&A expected to decline at a low single-digit rate YOY.

Business Commentary:

Revenue Decline and Consumer Demand:

• Under Armour reported a 3% decline in revenue to $1.1 billion for Q1 2027, with North America revenue decreasing 9%.
• The decline was primarily due to softer consumer demand, particularly in North America and Asia Pacific, and an increasingly promotional marketplace.

SKU Reduction and Product Focus:

• Under Armour plans to achieve an additional 25% reduction in product skews over the next 18 months, building on a 25% reduction already achieved.
• This strategy aims to focus on fewer, more productive products to improve quality and consumer demand by sharpening product focus and enhancing storytelling.

Gross Margin Improvement:

• Gross margin increased by 590 basis points year-over-year to 54.1% in Q1 2027.
• This improvement was driven by benefits from IEPA tariff refunds, lower inventory reserves, and favorable product costs, partially offset by increased discounting.

Marketing and Expense Management:

• Under Armour plans to maintain marketing spend within a range of 10% to 11% of revenue, but expects to be at the lower end of this range by year-end.
• The company is focused on improving the efficacy of marketing spend through better alignment with product and retail execution, while managing expenses tightly to support long-term brand health.

Sentiment Analysis:

Overall Tone: Neutral

• Management lowered revenue outlook due to softer consumer demand and a more promotional marketplace but maintained adjusted operating income expectations, citing improved operational control and cost management. Statements include: 'We're lowering our revenue outlook for the year while maintaining our adjusted operating income expectation' and 'This does not change our strategy. It reinforces it.'

Q&A:

• Question from Jay Soule (UBS): Can you discuss the intentionality behind the Bouncy Tee product and the learnings that can be applied to future product pipelines?
  Response: The Bouncy Tee was designed to articulate Under Armour's brand metaphor, combining innovation (Neolast fiber) with cultural storytelling. Future products will follow this formula: strong product innovation, clear value proposition, and consistent retail execution.

• Question from Sam Poser (Williams Trading): What is sportswear, and does it include the Bouncy Tee? Also, details on SKU reduction and inventory targets.
  Response: Sportswear includes performance apparel for non-sporting environments; the Bouncy Tee fits this. SKU count will be reduced by 25% over 18 months, focusing on less productive skews to improve productivity and margins. Inventory is being managed tightly to align with revenue trends, with Q1 inventory down 3% to $1.1 billion.

• Question from Bob Durble (BTIG): What drove the change in revenue outlook from slightly down to mid-single-digit decline over the last 90 days? Also, what is marketing focused on today?
  Response: The revision reflects softer-than-expected consumer traffic in North America and Asia Pacific, especially after mid-May, and a more promotional competitive landscape. Marketing is focused on improving efficacy and efficiency, with a plan to be within 10-11% of revenue but at the lower end due to cost discipline.

• Question from Brooke Roach (Goldman Sachs): How much of the North America revenue pullback in Q2 is strategic vs. macro-driven? What drives back-half improvement?
  Response: Q2 trends reflect the ongoing macro consumer softness. Back-half improvement is expected from new product launches, key retail initiatives, and disciplined marketplace management, aiming to premiumize the brand while maintaining gross margin.

• Question from John Elias (Guggenheim Partners): What drives the steady operating income outlook despite lower revenue?
  Response: SG&A is being managed more effectively, with run-rate savings from restructuring and tighter cost control. The over-delivery in Q1 adjusted operating income provides cushion for the rest of the year.

• Question from Laurent Veselesque (BNP Paribas): Can you detail traffic trends in North America and China, and shape the second-half revenue/gross margin dynamics?
  Response: North America traffic softened, especially in lower-income segments, with an increasingly promotional marketplace. China and Southeast Asia saw consumer hesitation. Second-half revenue and gross margin are not equally weighted; gross margin should see some improvement from pricing actions in the back half.

• Question from Brian Nagel (Oppenheimer): Is demand weakness across all products, including new launches?
  Response: Weakness is more pronounced in legacy products; new innovations like the Bouncy Tee are performing well. The focus is on premiumizing the brand and improving storytelling to justify full-price selling.

• Question from Peter McGoldrick (Stifel): What are the plans for cash generation and capital structure? Also, update on IEPA refunds and the EMEA promotional environment.
  Response: IEPA tariff refunds have been received, aiding cash position. Capital allocation prioritizes marketing investment, with no M&A plans. EMEA faces a promotional challenge, especially in the UK, but the strategy is to protect brand health over chasing short-term volume.

Contradiction Point 1

North America Revenue Outlook and Drivers

Contradiction on whether the revenue weakness is due to macroeconomic factors or a strategic shift, affecting confidence in the recovery plan.

Brooke Roach (Goldman Sachs) - Brooke Roach (Goldman Sachs)

2027Q1: Q2 North America weakness reflects current macro trends. The back-half improvement is expected from new product launches... and marketplace discipline—not a change in strategy. - [Reza Teleghani](CFO)

What factors are contributing to the North America revenue pullback, and what drives the anticipated back-half improvement? - Simeon Siegel (Guggenheim)

2026Q4: The decline reflects softer carryover from spring/summer 2026 orders and a cautious retail environment. A stronger foundation is now in place... The company is positioned for sustainable growth in FY28+. - [Kevin Plank](CEO) and [Reza Taleghani](CFO)

Contradiction Point 2

Gross Margin Expansion Outlook

Contradiction on the magnitude and primary drivers of expected gross margin improvement, impacting financial forecasting.

Laurent Veselesque (BNP Paribas) - Laurent Veselesque (BNP Paribas)

2027Q1: Gross margin improvement is anticipated in the back half from price actions, partially offsetting supply chain pressures. - [Reza Teleghani](CFO)

Can you detail traffic trends in North America and China and provide insights into second-half revenue and gross margin dynamics? - Simeon Siegel (Guggenheim)

2026Q4: For FY27, gross margin is guided to expand 220-270 bps, with about 150 bps from a potential tariff refund. Excluding the refund, the expected expansion is 70-120 bps, driven by brand elevation, pricing actions, and better channel/product mix. - [Kevin Plank](CEO) and [Reza Taleghani](CFO)

Contradiction Point 3

Focus and Quality of Marketing Spend

Contradiction on the strategic focus and measurement of marketing investment, affecting perceived brand strategy and efficiency.

Bob Durble (BTIG) - Bob Durble (BTIG)

2027Q1: Marketing is about improving efficacy—using fewer, bigger activations... with clearer measurement, and better alignment... - [Kevin Plank](CEO)

What drove the revenue outlook change from "slightly down" to "mid-single-digit down" over the last 90 days, and what is marketing focused on today? - Bob Drbul (BTIG)

2026Q4: A structural review is being implemented to drive greater synergy. The ~$30M additional marketing investment is targeted, focused on celebrating existing products... The goal is to be more product-led, brand-elevating, and data-driven, ensuring every dollar spent drives ROI... - [Kevin Plank](CEO) and [Reza Taleghani](CFO)

Contradiction Point 4

Wholesale Performance and Revenue Stabilization

Contradiction on the trend and health of the North America wholesale business, impacting confidence in the recovery narrative.

Brooke Roach (Goldman Sachs) - Brooke Roach (Goldman Sachs)

2027Q1: The back-half improvement is expected from new product launches (with productive early wholesale sell-in), key retail initiatives... and marketplace discipline—not a change in strategy. - [Reza Teleghani](CFO)

What factors are driving the North America revenue pullback (strategic vs. macro-driven) and the expected back-half improvement? - Simeon Siegel (Guggenheim Securities, LLC, Research Division)

2026Q3: North America wholesale is no longer showing significant declines, and the fall order book is shaping up positively. - [Kevin Plank](CEO)

Contradiction Point 5

Definition and Timeline for North America Stabilization

Contradiction on the timeline and confidence level for achieving revenue stabilization, affecting market expectations for recovery.

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2027Q1: Q2 North America weakness reflects current macro trends. The back-half improvement is expected from new product launches... Not a change in strategy. - [Reza Teleghani](CFO)

What factors are contributing to the North America revenue pullback—strategic versus macro-driven—and what drives the expected back-half improvement? - Jay Sole (UBS Investment Bank)

2026Q2: What makes you confident that North America will see stabilization before the end of fiscal '27?... The turnaround is grounded in discipline and a brand-first approach. - [Kevin Plank](CEO)