Under Armour, the athletic apparel retailer, has reported a decline in sales across its business, but its fiscal first-quarter results were better than expected. The company exceeded Wall Street’s expectations for both earnings per share and revenue. This news caused the company’s stock to surge more than 20% in early trading.
In the first quarter, Under Armour reported a loss of $305.4 million, or 70 cents per share, compared to a profit of $10 million, or 2 cents per share, in the same period last year. However, after excluding one-time expenses, the company actually reported a profit of $4 million, or 1 cent per share. Sales for the quarter dropped to $1.18 billion, a 10% decrease from $1.32 billion a year earlier.
One significant event for Under Armour in the past year was the settlement of a securities lawsuit. The company agreed to pay $434 million to settle a lawsuit accusing it of defrauding shareholders about its revenue growth. Under Armour stated that it was not admitting fault or wrongdoing but chose to settle the case due to the costs and risks associated with litigation.
Moving forward, Under Armour expects to experience a loss in fiscal 2025. The company forecasts losses per share to be between 53 cents and 56 cents, with adjusted earnings per share between 19 cents and 22 cents. This is a significant change from its previous expectations of earning 2 cents to 5 cents per share.
To combat its sales slump and boost profits, Under Armour has implemented a broad restructuring plan. The company has laid off employees, reduced promotions and discounts, and streamlined its assortment to be more competitive. It is also looking to position itself as a premium brand, taking inspiration from Nike.
Under Armour’s sales in North America, its largest market, dropped 14% to $709 million. However, this was still higher than analysts’ expectations. Wholesale revenue fell 8% to $681 million, while direct-to-consumer sales declined 12% to $480 million. Sales at Under Armour’s owned and operated stores fell 3%, and online sales plummeted 25%, which the company attributed to planned decreases in promotion activities.
While customers are adjusting to fewer promotions, the reduction in discounting has actually increased Under Armour’s gross margin. The company’s gross margin rose 1.1 percentage points to 47.5%, surpassing analysts’ expectations.
In an effort to position itself as a premium retailer, Under Armour has acquired sustainable fashion brand Unless Collective. The company will bring on the brand’s founder, former Adidas executive Eric Liedtke, as executive vice president of brand strategy. Unless Collective focuses on using plants to replace plastics in apparel and footwear manufacturing.
While Under Armour’s first-quarter results were better than expected, analysts caution that it will take time for the brand to regain growth. The company’s focus on becoming a more premium brand and narrowing its product offerings may prove to be a catalyst for future success, but the impact of new products is not expected until the second half of fiscal 2026. There are also risks associated with maintaining a strong brand image and product portfolio in a highly competitive industry, as well as turnover in senior management and CEO Kevin Plank’s majority voting control.
Overall, Under Armour’s first-quarter results show some promising signs, but the company still has work to do in order to revive its sales and profitability. The restructuring plan and focus on becoming a premium brand are steps in the right direction, but it will take time to see the full impact of these changes. Investors will be closely watching to see if Under Armour can successfully navigate the challenges it faces in the athletic apparel market.
