Under Armour's Third Quarter Performance: A New Strategic Outlook for 2025

Financial Overview of Under Armour's Q3 2025

On February 6, 2025, Under Armour, Inc. (NYSE: UAA) released its unaudited financial results for the third quarter of fiscal year 2025, which concluded on December 31, 2024. The announcement highlighted key aspects of the company's financial performance, including a 6% drop in revenue, amounting to $1.4 billion.

Revenue Insights

The revenue was comprised of $844 million from North America, representing an 8% decline, while international revenues saw a slight decrease of 1%, totaling $558 million. Notably, performance varied across international markets; revenue in EMEA rose by 5%, whereas Asia-Pacific and Latin America saw declines of 5% and 16%, respectively.

The breakdown of revenues revealed that wholesale sales dropped by 1% to $705 million, while direct-to-consumer sales decreased by 9% to $673 million. The downward trend in eCommerce revenue was particularly concerning, falling by 20%, which Under Armour attributed to reduced promotional activities. Despite these challenges, accessory revenues slightly increased by 6%, reaching $110 million.

Operational Margins and Expenses

Under Armour experienced a 240 basis point increase in gross margin, now at 47.5%. This improvement was largely due to a reduction in direct-to-consumer discounting and lower product costs. However, selling, general, and administrative expenses rose by 6% to $638 million, primarily driven by increased marketing efforts.

Operating income stood at $14 million, and adjusted operating income, excluding certain impairment charges and restructuring fees, was reported at $60 million. The quarter resulted in a net income of merely $1 million, whereas adjusted net income amounted to $35 million, suggesting a tight financial situation. The diluted earnings per share remained flat at $0.00, with adjusted earnings per share reported at $0.08.

Share Buyback Program and Restructuring Plans

In efforts to enhance shareholder value, Under Armour initiated a share repurchase program, acquiring $25 million worth of Class C common stock during the quarter, totaling 2.8 million shares. Over the past year, they have repurchased 8.7 million shares worth $65 million, as part of a larger three-year strategy aimed at a $500 million buyback.

Additionally, Under Armour is navigating a pivotal restructuring plan announced in May 2024, aimed at improving operational efficiency. This plan includes the closure of a distribution center in Rialto, California, with anticipated restructuring charges revised to range between $140 million and $160 million. As of the end of Q3 2025, the company recognized $42 million in costs associated with this initiative.

Updated Fiscal 2025 Outlook

Despite the challenges, Under Armour raised its fiscal 2025 outlook. Revenue is now expected to decline by about 10%, an improvement over previous projections. The company anticipates a gross margin increase of approximately 160 basis points, mainly due to lower promotional activities and product costs.

Marketing Initiatives and Brand Transformation

In conjunction with its financial strategies, Under Armour plans to launch a multi-year marketing initiative focused on storytelling to enhance brand visibility. CEO Kevin Plank expressed confidence in the updated product strategies intended to foster a deeper connection with athletes and influencers alike.

The upcoming conference call will provide further insights into these developments, highlighting Under Armour's commitment to turning around its brand amidst a challenging retail environment. As the company emphasizes its narrative, it aims not just to recover from recent setbacks but to redefine its market position in the athletic apparel industry moving forward.

Conclusion

While Under Armour faces significant headwinds with declining revenues and operational challenges, its strategic initiatives and renewed focus on branding may pave the way for recovery. Investors and stakeholders will be keen to monitor the effectiveness of these measures in the upcoming quarters.