EPS of $-0.01 decreased by 916.7% from previous year
Gross margin of 48.2%
Net income of -2.61M
"selling so much more of so much left at a much higher full retail price." - Kevin A. Plank
Under Armour Inc (UAA) QQ1 2026 Results — Brand Reinvention Amid Tariff Headwinds: Revenue Decline, Margin Pressure, and Path to Long-Term Value
Executive Summary
Under Armour’s first quarter of fiscal 2026 (QQ1 2026) delivered a modest gross-margin expansion and a net bottom-line loss amid a challenging operating backdrop dominated by tariff headwinds and softer consumer demand. Revenue totaled $1.134 billion, down 14.9% year over year, with gross margin at 48.2% (+70 bps YoY driven by favorable currency, pricing and product mix but offset by channel headwinds). The company reported a GAAP net loss of $2.6 million and an EPS of -$0.006, reflecting ongoing profitability pressures despite a largely intact revenue base and meaningful cost containment initiatives. Management emphasized a brand-led reinvention anchored in two core levers: (1) premiumizing top items and elevating full-price sell-through, and (2) a disciplined SKU reduction (targeting a 25% SKU reduction) to improve speed, pricing power, and storytelling across channels.
Management’s 2Q guidance underscores the near-term strain: revenue is expected to decline 6%–7% YoY, gross margin to deteriorate roughly 340–360 basis points, and adjusted operating income to be in the $30–$40 million range with adjusted EPS of $0.01–$0.02. Incremental tariff costs (~$100 million) and a less favorable regional mix are highlighted as near-term headwinds, with more of the gross-margin offset anticipated to flow into fiscal 2027 and beyond. While the near-term outlook is difficult, the company reiterates a longer-term thesis: rebuilding brand equity, driving higher average selling prices, and expanding premium product storytelling to restore growth and profitability.
Regionally, North America remains the primary drag (soft wholesale and e-commerce channels), while EMEA is showing profitable growth and APAC is stabilizing after a reset. The narrative around the brand is gaining momentum, supported by stronger consumer sentiment in certain demographics (notably 18–34-year-olds) and early success in premium product launches and digital initiatives (e-commerce experience, SMS program, influencer-led campaigns). The balance sheet remains liquid with cash of ~$911 million at QQ1, with a plan to redeem $600 million of near-term notes using June 2025 debt issuances, signaling near-term liquidity management although leverage remains a concern given a subdued EBITDA base.
Overall, the QQ1 2026 results reinforce a difficult near term but offer a roadmap for a multi-year turnaround centered on brand equity, selective pricing, and a tighter product portfolio. Investors should monitor tariff policy developments, the ramp of top-tier product launches, regional execution in NA/EMEA/APAC, the evolution of the top‑line mix (DTC vs wholesale), and the pace of margin recovery tied to the brand-first operating model.
Key Performance Indicators
Revenue
1.13B
QoQ: -19.06% | YoY:-14.86%
Gross Profit
546.50M
48.19% margin
QoQ: -17.84% | YoY:-8.82%
Operating Income
3.32M
QoQ: -75.40% | YoY:151.46%
Net Income
-2.61M
QoQ: -311.67% | YoY:-889.39%
EPS
-0.01
QoQ: -310.34% | YoY:-916.67%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $1.134 billion, down 14.9% YoY; down 19.1% QoQ per company metrics.
Gross margin: 48.2% for the quarter, up 70 bps YoY, driven by 55 bps currency, 30 bps pricing benefits, and 30 bps favorable mix; offset by 45 bps unfavorable channel mix and supply chain headwinds.
Operating income: $3.3 million (GAAP); adjusted operating income $24.0 million excluding transformation and restructuring charges.
Net income / EPS: net loss of $2.61 million; basic/diluted EPS -$0.0061 (undiluted and diluted the same in the report).
Cash flow: Net cash provided by operating activities $48.9 million; free cash flow $13.5 million; capital expenditures $35.4 million; net debt of approximately $764.7 million; cash balance ~$911 million at period end; no revolver usage in the quarter.
Financial Highlights
Revenue and Margin Dynamics (QQ1 2026):
- Revenue: $1.134 billion, down 14.9% YoY; down 19.1% QoQ per company metrics.
- Gross margin: 48.2% for the quarter, up 70 bps YoY, driven by 55 bps currency, 30 bps pricing benefits, and 30 bps favorable mix; offset by 45 bps unfavorable channel mix and supply chain headwinds.
- Operating income: $3.3 million (GAAP); adjusted operating income $24.0 million excluding transformation and restructuring charges.
- Net income / EPS: net loss of $2.61 million; basic/diluted EPS -$0.0061 (undiluted and diluted the same in the report).
- Cash flow: Net cash provided by operating activities $48.9 million; free cash flow $13.5 million; capital expenditures $35.4 million; net debt of approximately $764.7 million; cash balance ~$911 million at period end; no revolver usage in the quarter.
- Balance sheet highlights: Total assets ~$4.87 billion; total liabilities ~$2.99 billion; cash & equivalents $911 million; inventory ~$1.141 billion; total debt ~$1.676 billion (long-term debt ~$947 million).
- 1Q4Q6 context: Inventory up 2% YoY; cash at end of period ~$925 million (per balance sheet data in QQ1 2026 excerpt).
Key note from the earnings call on guidance: 2Q revenue down 6–7% YoY; gross margin down 340–360 bps; adjacent commentary on adjustments to SG&A and non-cash charges; expected adjusted EPS in the range of $0.01–$0.02 for Q2.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
1.13B
-14.86%
-19.06%
Gross Profit
546.50M
-8.82%
-17.84%
Operating Income
3.32M
151.46%
-75.40%
Net Income
-2.61M
-889.39%
-311.67%
EPS
-0.01
-916.67%
-310.34%
Key Financial Ratios
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key takeaways from the QQ1 2026 earnings call (themes and quotes):
- Brand-first transformation and two-lever strategy: Kevin Plank outlined a reinvention focused on a sharper, more brand-led business with two levers: (a) premiumizing top items across apparel, footwear and accessories to lift ASPs, and (b) optimizing the top 10 volume items for better performance and higher full-price sell-through. He stated: "selling so much more of so much left at a much higher full retail price" and emphasized a SKU-reduction target of 25% as foundational to sharper execution.
- Tariffs as a material headwind; near-term mitigations: Management acknowledged incremental tariff costs (~$100 million) and softness in demand, which translate into margin compression and a lower earnings trajectory for fiscal 2026. The company indicated most gross-margin offsets would likely flow through to fiscal 2027 and beyond, with cost-management efforts and selective pricing actions in place. Kevin noted the tariff challenge and the plan to attack it with a combination of elite product launches and portfolio-wide price discipline.
- Regional dynamics: North America remains challenging, with softer demand and a burden from higher costs due to tariffs, while EMEA is described as the strongest performing region with profitable brand-driven growth. APAC is stabilizing post-reset and will benefit from local storytelling, premium pricing, and disciplined distribution.
- Operational improvements and AI: The company discussed a transition to a category-led operating model, real-time data, and AI-enabled decision-making with more than 80 automations in place to improve pricing, forecasting, and inventory management.
- Near-term growth signals and brand momentum: In North America, metrics cited include a rising e-commerce NPS (from 53 to ~70), growing 18–34-year-old brand perception, and other indicators of rising brand health and consumer engagement. An updated premium product portfolio (e.g., Velociti Elite 3, Halo, HeatGear-based items) is driving early momentum in CAT/footwear and performance segments, with ASPs targeting higher full-price realization.
selling so much more of so much left at a much higher full retail price.
— Kevin A. Plank
The 2-part approach that we have, the 2-lever strategy we have, attacking tariffs, which is number one, it's -- we don't like the environment, we don't like where the math is.
— Kevin A. Plank
Forward Guidance
Outlook and assessment based on management guidance and industry macro factors:
- Q2 guidance: Revenue expected to decline 6% to 7% YoY; Gross margin expected to compress 340–360 basis points; adjusted SG&A growth in the high single digits (excluding transformation costs tied to fiscal 2025 restructuring).
- Profitability trajectory: Management projects adjusted operating income of $30–$40 million for Q2 and adjusted EPS of $0.01–$0.02, with other headwinds including higher interest expense and a tax rate mix that could pressure the effective rate. They note that most gross-margin offsets from tariff costs are expected to be realized in fiscal 2027 and beyond.
- Full-year considerations: The incremental tariff costs (~$100 million) and softer-than-expected demand in fiscal 2026 are expected to depress profitability versus the prior year, but the company maintains a brand-first strategy with a longer-term path to profitability through higher ASPs, premium product launches, and improved sell-through at full price.
- Catalysts to monitor: 1) Execution of top-10 SKU premiumization and price-point realignment, 2) North America fuel from premium product launches and enhanced DTC, 3) EMEA/APAC momentum and distribution discipline, 4) the pace and efficacy of category-management and AI-enabled planning, 5) tariff policy developments and potential mitigation strategies with suppliers and sourcing partners.
- Assessment: The company’s ability to translate brand momentum into sustained top-line growth and margin recovery hinges on tariff relief/duration, successful acceleration of premium product launches, improved channel mix (DTC penetration), and disciplined pricing. Given the magnitude of tariff headwinds and near-term demand softness, the macro downside risk remains meaningful, while the upside is tied to execution of the brand transformation and a favorable pricing/mix cycle in 2H fiscal 2026 and into 2027.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
UAA Focus
48.19%
N/A
N/A
N/A
LEVI
62.10%
12.50%
6.64%
12.65%
HBI
41.70%
10.50%
-21.80%
-53.92%
VFC
52.00%
-12.60%
-18.70%
-5.07%
RL
70.50%
13.80%
7.12%
16.41%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Base-case view: Under Armour is midway through a multi-year brand transformation. Near-term headwinds from tariffs and soft demand pressure profitability, but the dual-lever approach (premiumizing top items and tightening SKU count) provides a credible path to higher full-price realization and improved mix. The company’s emphasis on North America stabilization through high-ASP product launches, stronger storytelling, and premium DTC experiences is promising, with EMEA demonstrating the strongest near-term profit-generation signal and APAC stabilizing after a reset.
Upside scenarios depend on tariff relief or smoother demand, faster execution of the top-10 SKU redesigns leading to meaningful ASP uplift, and a faster-than-expected recovery in NA wholesale and DTC demand. Downside risks include continued tariff shocks, slower-than-anticipated consumer recovery, and delayed monetization of the pricing strategy across wholesale partners.
Investment takeaway: The QQ1 2026 print confirms initial progress on brand transformation but highlights meaningful near-term profitability challenges. Investors should weigh the improving brand sentiment and regional execution against the elevated leverage and tariff headwinds. A constructive stance hinges on visibility into tariff policy, continued execution of the premiumization and SKU rationalization playbook, and evidence that higher full-price sell-through translates into consistent margin expansion into 2H fiscal 2026 and beyond.
Key Investment Factors
Growth Potential
Brand-led premiumization alongside top-10 item redesigns positions Under Armour to lift average selling prices and improve full-price sell-through. EMEA momentum and APAC stabilization, coupled with a more connected DTC ecosystem (AI-enabled pricing, inventory management, and real-time analytics), could drive mid-to-long-term growth as consumer sentiment stabilizes and product storytelling strengthens.
Profitability Risk
Tariff-related cost headwinds (~$100 million in fiscal 2026) and ongoing demand softness; higher interest expense and tax rate pressures; channel mix risk from promotion-heavy markets; reliance on wholesale for near-term volume; elevated debt burden relative to current EBITDA base; execution risk in SKU rationalization and pricing power across regions.
Financial Position
Solid cash position (~$912 million) with a plan to redeem near-term debt using a June 2025 senior notes issuance; total debt ~$1.676 billion and net debt around $764.7 million; liquidity remains adequate to fund the brand transformation, though near-term profitability is pressured by tariffs and weaker demand; free cash flow generation in Q1 was positive at ~$13.5 million despite a negative net income.
SWOT Analysis
Strengths
Renowned authentic brand credibility in performance apparel and footwear.
Two-lever strategic framework (premiumization of top items; SKU rationalization) aimed at higher ASPs and faster time-to-market.
Regional diversification with improving EMEA profitability and stabilizing APAC post-reset.
DTC and data-driven operating model including AI-enabled pricing/inventory management (80+ automations).
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