Under Armour CEO Kevin Plank’s turnaround plan has hit a wall, with the athletic apparel and footwear maker forecasting worse-than-expected adjusted EPS and revenue, both missing Bloomberg Consensus estimates.
The struggling Baltimore-based brand, once expected to challenge Nike but now severely falling short, said it expects revenue this quarter to decline between 6% and 7%, compared with the nearly 3% drop projected by analysts tracked by Bloomberg.
The takeaway from Under Armour’s Q2 guidance is that its turnaround plan is losing momentum amid mounting macro headwinds, tariffs, and soft consumer demand:
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Revenue Drop: A projected 6–7% decline, more than double Wall Street’s expected 3% fall, points to weaker demand, especially in the North America market, despite efforts to reposition the brand with premium products.
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Margin Pressure: A sharp gross margin contraction of 340 to 360 bps from tariffs, supply chain costs, and unfavorable channel mix suggests cost pressures are outweighing pricing gains.
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Earnings Downturn: Adjusted EPS guidance of just 1 cent to 2 cents versus the 26-cent consensus is a massive shortfall, implying that higher costs and weaker sales will erode profitability.
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Limited Profitability: Even excluding restructuring costs, projected operating income of $30 million to $40 million is modest for a brand trying to reestablish growth.
While the new tariffs are creating major headwinds, the more unexpected and ominous sign is that demand across its North American market is shrinking amid Plank’s turnaround plan.
“Moving ahead, we’re focused on strengthening our brand positioning with premium products and increasing our average selling prices through innovative offerings, optimizing our top-volume programs, and creating a more compelling full, price-to-value proposition. Regardless of the backdrop, this is about building a fearless, thoughtful, and stronger Under Armour,” Plank wrote in a statement.
Under Armour delivered mixed Q1 results, slightly better than last year in profitability but still showing soft top-line growth and ongoing demand issues in key markets.
Summary of Q1 results (courtesy of Bloomberg):
Adjusted EPS 2.0c vs. 1.0c y/y, estimate 2.5c (Bloomberg Consensus)
Loss per share 1.0c vs. loss/shr 70c y/y, estimate EPS 1.2c
Net revenue $1.13 billion, -4.2% y/y, estimate $1.13 billion
Apparel revenue $747 million, -1.4% y/y, estimate $735.5 million
Licensing revenue $24.4 million, +12% y/y, estimate $22.6 million
Footwear revenue $266 million, -14% y/y, estimate $291.8 million
North America revenue $670.3 million, -5.5% y/y, estimate $672.1 million
Asia Pacific revenue $163.4 million, -10% y/y, estimate $155.7 million
EMEA revenue $248.6 million, +9.6% y/y, estimate $244.5 million
Latin America revenue $54.6 million, -15% y/y, estimate $57.5 million
Adjusted operating income $24.4 million vs. $8 million y/y, estimate $20.7 million
Inventory $1.14 billion, +2% y/y, estimate $1.1 billion
Total location count 442, +0.2% y/y, estimate 443 (2 estimates)
Operating income $3.32 million vs. loss $299.7 million y/y, estimate $6.04 million
Shares are down as much as 20% in premarket trading, set for the largest decline in three years.
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