Under Armour Q2: Revenue Falls but Profit Outlook Improves

A quarter of mixed signals

Under Armour closed the second quarter of fiscal 2027 with a smaller top line but a better-than-expected operating result. Revenue slipped 7 per cent to $1.2 billion for the three months ended 30 September 2026, in line with the company’s own expectations, while operating income came in ahead of the outlook it had previously set.

The Baltimore-based sports brand reported operating income of $15 million, down from $17 million in the same period a year earlier. Adjusted operating income reached $25 million, compared with $53.4 million previously. The net loss narrowed sharply to $0.4 million from $18.8 million, although on an adjusted basis the business posted a net loss of $2 million against adjusted net income of $15.3 million a year ago.

According to Kevin Plank, the company’s president and chief executive, the group delivered on its revenue guidance and beat its operating income target. He framed the quarter as part of an ongoing transformation, pointing to improved efficiency, a sharper product range and heavier global marketing as levers for strengthening the brand and lifting financial performance.

Weakness almost everywhere

The regional picture was broadly negative. North American revenue declined 7 per cent to $737 million, and international sales also fell 7 per cent to $509 million, or 9 per cent at constant currency. Europe, the Middle East and Africa dropped 9 per cent, Asia-Pacific fell 9 per cent, and only Latin America managed growth, up 3 per cent.

Channel performance followed a similar pattern. Wholesale revenue declined 6 per cent to $725 million, while direct-to-consumer fell 8 per cent to $494 million. Within DTC, sales at owned and operated stores were down 7 per cent and e-commerce dropped 12 per cent.

By product category, apparel revenue fell 6 per cent to $880 million, footwear was the weakest performer with an 11 per cent decline to $234 million, and accessories slipped 7 per cent to $105 million.

Gross margin contracted 30 basis points to 47.0 per cent. The company put the erosion down mainly to unfavourable foreign currency movements, a less favourable channel and regional mix, and pricing. Selling, general and administrative costs fell 4 per cent to $557 million, helped by lower marketing spend and tighter cost control, while inventory rose 4 per cent to $1.1 billion.

Guidance: better profit, thinner margin

Under Armour lifted its operating income outlook for fiscal 2027 to between $99 million and $119 million, up from a previous range of $96 million to $116 million. Adjusted operating income is still projected at $140 million to $160 million, a figure that includes an approximately $70 million benefit from refunds of prior-year IEEPA tariff expenses. That gain is partly offset by roughly $45 million in headwinds linked to the conflict in the Middle East, an estimate the company has raised from $35 million.

The gross margin forecast has moved in the opposite direction. The company now expects an improvement of 170 to 220 basis points, down from 220 to 270 basis points, citing higher fuel and freight costs, planned inventory management actions and foreign exchange pressures. Revenue is still expected to decline at a mid-single-digit rate, and adjusted diluted earnings per share remain guided at $0.08 to $0.12.

For the third quarter, Under Armour anticipates an operating loss of $20 million to $30 million. On an adjusted basis, the range runs from a $5 million loss to $5 million of operating income.

Restructuring and store footprint

The turnaround programme is nearing its end. Under Armour booked $13 million in charges under its Fiscal 2025 Restructuring Plan during the quarter, taking cumulative costs to $280 million against an expected total of $305 million. The plan is expected to be substantially complete by 31 December 2026.

The company operated 438 owned stores at the end of the quarter, down from 447 a year earlier, as it continues to refine its physical retail presence.

What to watch

The coming quarters will test whether cost discipline and marketing investment can translate into a return to sales growth. A 12 per cent drop in e-commerce and an 11 per cent fall in footwear suggest the product and digital propositions still need work, while the raised operating income outlook offers some reassurance that the transformation is delivering on profitability even as the top line lags. Investors will also be watching the tariff refund benefit and Middle East headwinds, both of which add unusual volatility to the full-year numbers.