Under Armour shares gain as earnings beat fuels turnaround optimism
Sportswear maker raises FY2026 guidance despite 5% revenue decline, CEO cites progress in reigniting brand momentum
Under Armour shares climbed in premarket trading on Friday after the sportswear maker surpassed analyst expectations for its fiscal third quarter and raised its full-year earnings outlook, offering investors evidence that the company's turnaround strategy is gaining traction.
The Baltimore-based company reported adjusted earnings per share of 9 cents, significantly outperforming the consensus estimate for a 2-cent loss. Revenue reached $1.33 billion, edging past analyst forecasts of $1.31 billion despite a 5 percent year-over-year decline. The stock rose approximately 1 percent following the announcement before the market open.
Chief Executive Kevin Plank, who returned to the helm in 2024 to orchestrate a business reset, expressed optimism about the company's trajectory. "We are encouraged by the progress in reigniting brand momentum," Plank said in a statement, noting that the December quarter represented "the most challenging phase" of the North American reset with expectations for "greater stability ahead."
The company raised its fiscal 2026 adjusted EPS guidance to a range of 10 to 11 cents, up from the previous outlook of 3 to 5 cents. Full-year revenue is now expected to decline approximately 4 percent, a modest improvement from the prior forecast of a 4 to 5 percent drop.
Under Armour's performance reflected stark regional contrasts that have become characteristic of its recovery effort. North American revenue fell 10 percent to $757 million, continuing a challenging trend in the company's core market. However, international revenue grew 3 percent to $577 million, with Europe, Middle East, and Africa climbing 6 percent and Latin America surging 20 percent. Asia-Pacific declined 5 percent.
The gross margin contracted 310 basis points to 44.4 percent, pressure the company attributed to higher tariffs, pricing headwinds, and unfavorable regional and channel mix. Operating loss totaled $150 million, though adjusted operating income reached $26 million after excluding litigation reserves and transformation charges.
By category, apparel revenue decreased 3 percent to $934 million, footwear fell 12 percent to $265 million, and accessories declined 3 percent to $108 million. The direct-to-consumer channel, which accounts for nearly half of total sales, slipped 4 percent, with owned-and-operated store revenue down 2 percent and e-commerce falling 7 percent.
Analyst sentiment has been divided on Under Armour's prospects. Of 26 analysts covering the stock, five rate it as a buy while 19 recommend hold. The consensus target price stands at $6.27, just below the current trading level of $6.28. Prior to earnings, some firms including JMP Securities and BMO Capital had reduced price targets amid concerns about weakening consumer spending trends.
The upbeat guidance update may help shore up confidence among investors who have watched the company navigate a complex reset. Plank has emphasized that the transformation is "accelerating" through a focus on better products, bolder storytelling, and more disciplined market presence.
Under Armour ended the quarter with $465 million in cash and cash equivalents and $1.1 billion in available borrowing capacity under its revolving credit facility. Inventory decreased 2 percent to $1.1 billion, suggesting better inventory management amid the sales decline. The company's ability to deliver earnings beats while revenue contracts underscores the cost-cutting measures implemented as part of its restructuring efforts. However, the continued sales decline in North America remains a critical challenge, as the region accounted for 57 percent of total revenue in the quarter.