Under Armour Cuts Fiscal 2027 Gross Margin Growth Outlook to 170–220 Basis Points

Key Facts

Under Armour reported second-quarter results for fiscal 2027 on November 6, for the quarter ended September 30, showing revenue down 7% to $1.2 billion. The company cut its expected gross margin growth range for the fiscal year to 170–220 basis points from 220–270 basis points previously. The outlook adjustment came despite CEO Kevin Plank saying the company met its revenue expectations and exceeded its operating income expectations. Adjusted operating income for the quarter was $25 million, while the company posted a net loss of $0.4 million. Plank said: "We met our revenue expectations and exceeded our operating income expectations."

Revenue contraction extended across the company's two main regions, with North American sales falling 7% to $737 million. International revenue declined 7% to $509 million, or 9% on a constant-currency basis. By sales channel, wholesale revenue fell 6% to $725 million, while direct-to-consumer sales declined 8% to $494 million. The results therefore showed declines across both geographies and distribution channels. The regional picture in the first quarter was different: North American revenue fell 9% to $609.8 million, while international revenue rose 5% to $472 million.

Apparel revenue fell 6% to $880 million, while footwear sales declined 11% to $234 million. Accessories revenue dropped 7% to $105 million, with all three categories posting year-over-year declines. Gross margin contracted 30 basis points to 47.0%. The company attributed the decline mainly to foreign exchange effects, sales channel and regional mix, and pricing. Supply chain benefits and product mix offset some of those pressures, according to the earnings statement.

On expenses, selling, general and administrative expenses fell 4% to $557 million. Excluding transformation costs and reversals of prior legal reserves, adjusted expenses were $559 million, down 3%. Inventory rose 4% to $1.1 billion at quarter-end. Reported operating income was $15 million, before excluding transformation and restructuring costs and reversals of certain prior legal reserves. After excluding those items, adjusted operating income was $25 million, while net loss was $0.4 million.

The company said the lower gross margin growth range reflects higher fuel and freight costs, inventory management actions, and currency fluctuations. It nevertheless expects gross margin to rise by 170–220 basis points in fiscal 2027, compared with its previous forecast of 220–270 basis points. About 150 basis points of the expected improvement from the prior year is attributable to recovery of costs related to tariffs under the International Emergency Economic Powers Act, which were recorded in fiscal 2026 and recovered in the first quarter of fiscal 2027. In that quarter, revenue fell 3% to $1.1 billion, while gross margin rose 590 basis points to 54.1%, mainly driven by recovery of those costs. These figures show that tariff recoveries support the full-year margin outlook, while operating costs and currencies continue to weigh on it.

Under Armour raised its fiscal 2027 operating income outlook range to $99–119 million from $96–116 million previously. But it kept its adjusted operating income forecast, excluding expected transformation and restructuring costs, at $140–160 million. The outlook includes a benefit of about $70 million from recovery of prior tariffs, offset by an expected negative impact of about $45 million from the ongoing conflict in the Middle East. The company's previous estimate for the conflict's impact was $35 million, meaning the estimate increased by $10 million. The company tied the impact to supply chain costs, rather than weak consumer demand in the region.

The company held a conference call to discuss second-quarter fiscal 2027 results on November 6, at about 8:30 a.m. Eastern Time. Its shares closed at $5.36 on November 5, according to EL7 daily data. EL7's tracking did not include a closing price for the November 6 session, so no verified figure for the stock's performance during the results-announcement session is available here. Sales, margins and fiscal-year guidance remain central to the disclosure discussed by the company on its call. The current outlook covers fiscal 2027.