Under Armour Inc. on Friday lowered fiscal 2027 outlook as it faces a demand challenge environment ahead, but founder and chief executive officer Kevin Plank is undaunted as he says he knows what needs to be fixed.
“A few years ago, we’re too often managing for quantity, more products, more complexity and volume that did not always strengthen the brand,” Plank told investors Friday during the conference call after the firm reported first quarter earnings results. “Today, we’re managing for quality. Fewer products with greater purpose, tighter execution and a clear reason to buy.”
Plank said the mandate is straight forward: “We will sell so much more of so many less products at a much higher full retail price, and this mission is well underway. That focus must apply to every channel.”
He acknowledged that in the direct-to-consumer business, promotion was too often the reason consumers shopped. “We’re testing more full-priced product in this environment. What we know is that when the product is differentiated and the value proposition is clear, the sell-through follows,” Plank said.
The CEO said the company is taking the same approach in wholesale, where stronger relationships remain core to the company’s turnaround.
The Baltimore-based firm over the past two years has simplified its organization to create greater focus and agility. That includes a significant reduction in stock-keeping units and strengthening the connection between the product, marketing and sales teams. It was one reason for rightsizing the Portland office and allowing the decision-making by teams in the New York hub and Baltimore headquarters to move faster.
Plank cited four priorities moving forward: rationalizing the product line, building the market engine around fewer big stories that connect with Under Armour’s best products, athletes and cultural moments, improving commercialization so consumers can “see it, understand it and buy into it across our own channels and wholesale partners,” and managing inventory in the marketplace.
“That means being willing to walk away from lower quality volume, tighten inventory buy, and reduce the amount of product that ultimately has to be cleared for promotion,” Plank said.
Plank did have a bit of good news for investors: “We should see progress in those areas before revenue fully reaccelerates. That’s the nature of this reset, improve the quality of what we make, how we sell it and how consistently the marketplace reflects the value of the brand.”
Plank said there’s some softness in North America and in Asia-Pacific as foot traffic slowed against a backdrop of a marketplace that became increasingly promotional. And one big lesson from that is that “athletes don’t need more choices — they need better ones,” the CEO said, adding that there are early signs that the Under Armour playbook is working.
Plank cited to its HeatGear base layer across regions and channels, Velociti sneakers in technical innovation with runners, and the Bouncy Tee as the best example of what happens when the company gets it right.
“Launched in May, Bouncy Tee has exceeded expectations, while selling at its full $65 retail price,” he said. “Alongside innovations like Baselayer, SlipSpeed, StealthForm Hats and No Weigh Backpack, it shows that we know how to create products with a clear reason to command value.”
Plank said that where the company has not done a good enough job is on storytelling, an area that Under Armour sees as a robust platform to leverage. The work now is on aligning the brand with the right marketing approach.
The company revised its topline outlook for fiscal 2027, saying it expects revenue to decline at a mid-single digit percentage rate. The diluted loss per share is now expected to range from 1 cent to 5 cents. On an adjusted basis, excluding anticipated transformation expenses and restructuring charges, adjusted diluted earnings per share (EPS) remained in the prior guidance range of 8 cents to 12 cents.
For the quarter ended June 30, the Baltimore, Md.-based sportswear firm posted net income of $545,000, or 0 cents a diluted share, on a net revenue decline of 3.2 percent to $1.1 billion. Footwear sales were down 7.7 percent to $245.3 million, accessories sales fell 4.4 percent o $95.7 million, and apparel sales slipped 1.7 percent to $734.0 million.
BTIG’s Robert Drbul, managing director and consumer retail analyst, has shares of Under Armour rated at “Neutral.”
“We believe Under Armour’s efforts to simplify the business and improve the quality of demand are key to the success of the brand,” Drbul said. He added that while the focus on building a more premium assortment and reducing promotional dependency, among other initiatives, “we believe the company still has work to do translating internal progress into sustained consumer demand and consistent top-line growth.”
Jefferies’ managing director and equity analyst Randall Konik has a “Hold” on shares of Under Armour. While the profit guidance was reaffirmed for the year, he noted that North American weakness underscores existing challenges. “Under Armour is improving profitability, but a durable revenue inflection remains elusive with international now softening alongside North America,” he said.
