Executive Summary
In Q2 FY2025, Under Armour reported revenue of $1.40 billion, down 10.7% year-over-year and up 18.2% quarter-over-quarter, as the company pressed through a hard reset aimed at premiumizing its product and consumer experience. Gross margin expanded 200 basis points to 49.8%, driven by lower product costs, favorable channel mix from reduced off-price activity, and pricing benefits from reduced discounting in the DTC channel, partially offset by currency headwinds. Operating income rose to $173.1 million, with net income of $170.4 million and diluted EPS of $0.39, aided by a $27 million insurance recovery and ongoing cost controls. Management framed the results as an inflection point in the brand’s repositioning toward a “Sports House” that outfits athletes end-to-end, with stronger product storytelling and premiumization in the second half of fiscal 2025. The company affirmed guidance for a low-double-digit full-year revenue decline, raised gross margin expectations to 125–150 basis points for the year, and projected adjusted operating income of $165–$185 million with adjusted EPS of $0.24–$0.27. Notably, management signaled a deliberate shift in investment: roughly half of the Q2 outperformance is being reinvested in marketing to accelerate the premium brand position, and about $40 million more of marketing spend is planned in the back-half of the year. The North America revenue backdrop remains a headwind, while EMEA and APAC show relative resilience to a continued macro backdrop.
Key Performance Indicators
QoQ: 18.19% | YoY:-10.70%
QoQ: 157.75% | YoY:24.10%
QoQ: 155.79% | YoY:62.72%
QoQ: 155.71% | YoY:56.00%
Key Insights
Revenue: $1.399B (-10.7% YoY; +18.2% QoQ). Gross margin: 49.8% (+200 bps YoY). Operating income: $173.1M; Operating margin: 12.37%. Net income: $170.4M; Net margin: 12.18%. Diluted EPS: $0.39. Adjusted operating income: $166.0M (exclusions: insurance recovery, transformation, restructuring). Gross margin outperformance driven by (1) lower product costs and freight, (2) favorable channel mix from reduced off-price sales, and (3) pricing benefits from reduced discounting in DTC; Headwinds: 10 bps ...
Financial Highlights
Revenue: $1.399B (-10.7% YoY; +18.2% QoQ). Gross margin: 49.8% (+200 bps YoY). Operating income: $173.1M; Operating margin: 12.37%. Net income: $170.4M; Net margin: 12.18%. Diluted EPS: $0.39. Adjusted operating income: $166.0M (exclusions: insurance recovery, transformation, restructuring). Gross margin outperformance driven by (1) lower product costs and freight, (2) favorable channel mix from reduced off-price sales, and (3) pricing benefits from reduced discounting in DTC; Headwinds: 10 bps FX; back-half inventory clean-up actions. Operating cash flow: -$321.4M; Free cash flow: -$367.2M. Cash at period-end: $549.8M; Total debt: $1.333B; Net debt: $801.1M. Inventory: down 3% YoY; DTC revenue down 8%; E-commerce down 21%. Regional mix: NA down mid-teens; Europe flat to up modestly; APAC down ~11%; LatAm down ~13% YoY. Guidance highlights: FY25 revenue down low-double digits; 125–150 bps gross margin expansion; SG&A decline (low-to-mid single digits) with ~half of Q2 upside reinvested in marketing; Q3 adj. OI guidance of $20–$30M and adj. EPS of $0.02–$0.04.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
1.40B |
-10.70% |
18.19% |
| Gross Profit |
696.13M |
-7.00% |
23.72% |
| Operating Income |
173.08M |
24.10% |
157.75% |
| Net Income |
170.38M |
62.72% |
155.79% |
| EPS |
0.39 |
56.00% |
155.71% |
Key Financial Ratios
operatingProfitMargin
12.4%
operatingCashFlowPerShare
$-0.74
freeCashFlowPerShare
$-0.85
Management Commentary
Key themes from management commentary and the earnings call: (1) Brand reset and strategy: Kevin Plank and leadership reiterated the ’Sports House’ thesis and underdog positioning, emphasizing a two-pronged plan to strengthen product storytelling and accelerate premiumization, supported by a major marketing campaign in 2025. (2) Margin upside and cost discipline: Dave Bergman highlighted a 200 bps gross margin expansion in Q2, driven by supply chain benefits, lower markdowns, and improved channel mix, with SG&A down 15% (adjusted down 13%), partially offset by planned marketing investments in the back-half. (3) Product pipeline and go-to-market: Management signaled a robust product pipeline (SlipSpeed update anticipated in Q1 calendar 2025; Vanish Training; Infinite running collection) and stronger retail partnerships, including SKU rationalization (targeting 25% SKU reduction over 12–18 months) and a more premium, curated assortment in Brand House stores. (4) Market dynamics and retail strategy: Global demand remains uneven with NA softness, while DTC is pivoting toward premiumization; management cited a better e-commerce mix (full-price share at ~50% of e-commerce revenue vs ~30% a year ago) and a beta-test of higher-margin direct-to-consumer approaches. (5) Investor engagement and cadence: The company plans an investor meeting in December 2024 to discuss premium marketplace strategies and long-term shareholder value creation. Notable qualitative remarks include the emphasis on “underdog” storytelling, the Curry brand and Stefan Curry’s global expansion, and a leaner SKU footprint to improve shelf-space efficiency and consumer clarity.
"At the halfway point of fiscal 25, we're pleased with another quarter of profitability ahead of our outlook."
— Kevin Plank
"Our second-quarter gross margin increased by 200 basis points to 49.8%."
— Dave Bergman
Forward Guidance
Management provides a cautious but constructive macro backdrop with a defined path to margin expansion and profitability. They reiterated FY25 revenue decline in the low-double-digit range, with North America down 14–16%, flat to modestly down in EMEA, and a high-single-digit decline in APAC. Gross margin is expected to improve 125–150 bps for the full year, driven by reduced promotions in DTC, improved product costs, and favorable pricing. SG&A is targeted to decline only in the low-to-mid single digits on an adjusted basis, acknowledging higher marketing spend in H2 totaling roughly half of the Q2 upside. The back-half acceleration in marketing (approximately an additional $40 million) is intended to fund premium positioning and a broader, deeper brand narrative ahead of key seasons, including Fall/Winter 2025. The company projects adjusted OI of $165–$185 million and adjusted diluted EPS of $0.24–$0.27 for the year, with Q3 adjusted operating income of $20–$30 million and Q3 adj. EPS of $0.02–$0.04. Investor focus should be on: (a) the durability of gross margin gains amid a higher ASP mix and inventory normalization; (b) the success of SKU rationalization and the transition to a premium, story-driven consumer experience; (c) progress in North America re-acceleration and shelf-space recovery through stronger wholesale relationships; and (d) the pace of marketing effectiveness and the ultimate brand inflection. Achievability hinges on successful execution of the product pipeline, retailer partnerships, and a disciplined, timely shift of marketing investments into the back-half.