Under Armour Losses Mount but Less Than Expected

This story was updated Aug. 8 at 5:44 p.m.

No pain, no gain.

That exercise analogy could be the mantra for Under Armour, which is doubling down on its authenticity as a sports brand despite some short-term challenges.

On Thursday morning, the Baltimore-based company reported an operating loss of $300 million in the first quarter of fiscal 2025 on sales that dropped 10 percent to $1.2 billion. Excluding transformation expenses and other charges that totaled $308 million, however, the company’s adjusted operating income was $8 million.

These figures, while not especially pretty, were better than expected and the company’s stock closed up 19.2 percent to $7.71 on Thursday.

In its earnings call with analysts, Kevin Plank, president and chief executive officer, characterized the results as part of a deliberate “protective sales strategy.”

Plank said that strategy centers around Under Armour as “a sports house.” He said there are only a handful of brands from Europe who can rightfully refer to themselves as “fashion houses. Across the sports brand landscape, we believe there are less than five brands that could be represented on this podium for sports globally, and that we are one of them, earned over a 29-year history. [We have] the credibility to show up in virtually any athletic endeavor on the field, pitch or court, as an outfitter and be seen by athletes in the more than 100 countries where we do business today … as an authentic sports brand.”

He said this authenticity gives the company an advantage “as we reconstitute our brand strength and execute our strategy.”

Plank added that the company’s primary focus is on the “underdog”— the athletes who were not born with exceptional talent but who “have to stay late after practice to work on a skill or study harder than the rest. We expect every product we build to provide an edge for our athletes, just to give them a fighting chance to compete.”

Since returning as CEO four months ago, Plank said the company has been working to shorten its product pipeline to nine months from 18 — its StealthForm Uncrushable Hat was the first product to be delivered on this calendar — reduce the number of styles it creates by 25 percent within 18 months, and reduce head count by an unspecified number. He also pointed to the announcement earlier this week that Eric Liedtke, a 30-year industry veteran who spent 26 years at Adidas, has been named executive vice president of brand strategy. He will oversee brand marketing, corporate strategy, consumer insights, sports marketing, creative and loyalty functions, Plank said. He will also build out the company’s marketing organization, which will report to him.

Under Armour also purchased the company that Liedtke founded after leaving Adidas, Unless Collective, Inc., a zero-plastic regenerative fashion brand.

Plank said Under Armour has spent time over the past few months meeting with its key retail partners, factories and franchisees — as well as its 16,000 employees — to encourage them to “take better care of our brand” and to help it return to “premium positioning” in the market.

Plank said this will be accomplished by the creation of better products and storytelling under chief product officer Yassine Saidi, who is overseeing a “more centralized vision across product, merchandise and marketing that will enable us to correct our past inconsistencies.”

However, it will take until the fall 2025 season before these efforts show up, Plank said.  Until then, there is still work being done to elevate its core men’s apparel offering while investing in footwear and womenswear to help those smaller categories grow.

For the fall ’24 season, Plank said, there will be more sportswear for its target 16-to-24-year-old varsity team athlete that will include “high-performance streetwear in Unstoppable, versatile style and athletic performance in Meridian, elevated warm-ups and sport-inspired looks in our Icon Fleece collection, Infinite and Phantom Running launches. And, finally, in basketball, the Curry 12, along with the first signature shoe for De’Aaron Fox of the Sacramento Kings.”

Plank said the company’s messaging is also being cleaned up. “Last year, when we sent an e-mail to consumers, two-thirds of these messages were about discounts or promotions, and one-third were focused on full-price selling and storytelling. This year, that ratio is now inverted, which, although early, is showing signs of positive traction and perception.” He said that while this move ate into sales in the quarter, the number of full-price sales also rose significantly.

He said the company is testing a new full-price brand house concept with cleaner sightlines, a more-curated product assortment with nearly 50 percent less product and an improved in-store presentation. The culmination of these efforts will be evident in December in Baltimore when a new flagship opens.

He also said that over the next few years, Under Armour will double the number of influencers it works with, many at the college level, such as newly named women’s college basketball players Haley and Hannah Cavinder.

In the first quarter, North American sales, the company’s largest market, continued to struggle with a 14 percent decline in volume to $709 million. International revenue also decreased in the quarter, falling 2 percent to $473 million. Revenue in EMEA was flat, Under Armour reported, was down 10 percent in Asia-Pacific and up 16 percent in Latin America.

Wholesale revenue decreased 8 percent to $681 million, and direct-to-consumer revenue was down 12 percent to $480 million. Owned and operated store sales declined 3 percent. Because of planned decreases in promotional activities, sales in the e-commerce channel, which represents 34 percent of the company’s total direct-to-consumer business, decreased 25 percent.

By category, apparel revenue decreased 8 percent to $758 million, footwear revenue was down 15 percent to $310 million, and accessories revenue was down 5 percent to $93 million.

As a result of these numbers, which are part of a restructuring plan announced in May, Under Armour updated its fiscal 2025 outlook, projecting revenue to now be down in the low double digits. In North America, sales are now expected to be down 14-16 percent, compared to the 15-17 percent previously projected, as the company “works to reset this business meaningfully” following years of heightened promotional activity, particularly in its direct-to-consumer business, the company said. Internationally, a low-single-digit percent decline is now projected, which includes flat results in EMEA offset by a high-single-digit decline in its Asia-Pacific business “due to developing macroeconomic pressures.”

For the full year, the operating loss is now expected to be $194 million to $214 million with adjusted operating income expected to be $140 million to $160 million versus the previous expectation of $130 million to $150 million. Wholesale volume is expected to be down between 10-12 percent and direct-to-consumer is seen dropping approximately 10 percent, the company said on the earnings call.

In May, Under Armour announced a restructuring plan estimated at $70 million to $90 million. This came soon after Plank, also Under Armour’s founder, stepped back in as CEO on April 1, ousting Stephanie Linnartz, the former Marriott International executive who had helmed the Baltimore-based sports brand for just over a year.

Despite the company’s upbeat spin on the results, not everyone was convinced. Zachary Warring, research analyst from CFRA Research, maintained his sell opinion on the company, citing Under Armour’s underperformance against its peers in all categories.

Neil Saunders, managing director of GlobalData, called the first quarter results “dismal and reflect[ing] a company that is struggling for relevance in a market that has become more unforgiving of merchandising mistakes and brand blunders.”

He cited the poor results in North America as well as lower direct-to-consumer and wholesale sales and attributed them to a problem with the brand itself rather than the larger macro environment and a “sign that brand loyalty has become a lot weaker.” He said Under Armour “has dropped down the consumer radar in terms of consideration and has been overshadowed by newer and more interesting brands. This underlines the scale of the problem the company must address: it isn’t just about creating new and better products, it’s also about reconnecting the brand to consumers who have disconnected from it.”

But Saunders is not giving up on the company completely. He said Under Armour is moving in the right direction, but it’s going to take some time before the efforts pay off and he’s pretty much looking at this fiscal year as a “write-off.”

The lifestyle and leisure brands team at William Blair agrees. They wrote in a research note that while setting a goal to reset the brand to more premium positioning and focusing on core fundamentals could “prove to be a meaningful catalyst over the longer term, the reality is that this will take time to unfold with the impact of a critical mass of new product not expected until the second half of fiscal 2026.” As a result, the company reiterated its market perform rating on Under Armour stock.