UAA Q2 Deep Dive: Brand Reinvention and Tariff Pressures Shape Outlook

Athletic apparel company Under Armour (NYSE:UAA) met Wall Street’s revenue expectations in Q2 CY2025, but sales fell by 4.2% year on year to $1.13 billion. On the other hand, next quarter’s revenue guidance of $1.31 billion was less impressive, coming in 4.1% below analysts’ estimates. Its non-GAAP profit of $0.02 per share was in line with analysts’ consensus estimates.

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StockStory’s Take

Under Armour’s second quarter results were met with a significant negative market reaction, as the company reported a year-on-year revenue decline and maintained profit levels in line with Wall Street expectations. Management attributed the performance to ongoing challenges in North America, particularly in the wholesale and e-commerce channels, and highlighted the impact of a more competitive promotional environment. CEO Kevin Plank acknowledged, "The environment is challenging, with limited spending, higher promotions, and a dynamic domestic tariff policy." Plank also emphasized that efforts to streamline product assortments and rebuild brand relevance are underway, but that these changes will take time to reflect in financial outcomes.

Looking forward, Under Armour’s guidance reflects caution as management anticipates continued headwinds from tariffs and softer consumer demand, particularly in North America and Asia-Pacific. CFO Dave Bergman noted that new trade policies are expected to create a $100 million cost headwind, with most mitigation strategies not benefiting margins until next year. Plank stated, “Given the new tariff costs this year and related demand impacts, our profitability is projected to be about half of what it was last year.” Management believes that investments in product innovation, tighter assortments, and brand marketing will drive longer-term recovery, but short-term financial results are likely to remain pressured.

Key Insights from Management’s Remarks

Management emphasized that near-term results reflect deliberate product and channel resets, compounded by external pressures such as tariffs and shifting consumer demand.

• SKU reduction and product focus: Under Armour is in the process of reducing its product assortment by 25% and materials by 30%, aiming to streamline operations and improve pricing power. Management believes this will result in faster execution and reduced costs, with CEO Kevin Plank highlighting efforts to “sell so much more of so much less at a much higher full retail price.”
• Premiumization and pricing discipline: The company is applying lessons from its premium product launches to its top-selling categories by redesigning core items for higher performance and price points. Plank pointed to products like the StealthForm Hat and No Weigh backpack as examples, aiming to mitigate tariff impacts and elevate brand perception.
• Wholesale and DTC challenges: North America remains a difficult market, with continued weakness in wholesale and lower e-commerce sales due to competitive promotions and soft consumer confidence. Plank noted, "Traffic and sell-through still have room to grow," and described the environment as “not ideal for anyone.”
• Regional performance divergence: EMEA (Europe, Middle East, Africa) delivered growth and is viewed as a model for brand-driven execution, while Asia-Pacific continues to experience declines due to weak consumer confidence and promotional intensity. Management cited EMEA’s targeted focus on football and core cities as a blueprint for stability.
• Digital and team sports initiatives: The company is expanding digital engagement, as demonstrated by its successful SMS program and TikTok-driven product launches. Team sports and influencer partnerships, including NIL (name, image, likeness) deals and grassroots campaigns, are being prioritized to rebuild cultural relevance and attract younger consumers.

Drivers of Future Performance

Under Armour’s outlook is shaped by tariff-driven cost pressures and a focus on rebuilding brand strength through product and channel discipline.

• Tariff and cost headwinds: Management expects approximately $100 million in additional tariff-related costs this year, representing a significant gross margin headwind. While selective price increases and alternative sourcing are being pursued, CFO Dave Bergman said, “most of the gross margin offsets will be realized in fiscal '27 and beyond,” indicating limited near-term relief.
• Product innovation and marketing investments: Continued investments in product redesign, category management, and targeted marketing are intended to drive brand health and consumer engagement. Plank cited new launches in running, sportswear, and collaborations, but acknowledged that the benefits will take several quarters to materialize in sales and profitability.
• Wholesale and digital execution risks: The company is prioritizing wholesale partner engagement and digital channel improvements, but management flagged persistent risks from weak traffic, promotional pressures, and uncertain consumer demand—especially in North America and Asia-Pacific. Bergman stated, “We want to stay true to the strategy...even as it creates some extra pressure as we step through Q2.”

Catalysts in Upcoming Quarters

Looking ahead, the StockStory team will be monitoring (1) the effectiveness of SKU reduction and premiumization strategies in driving higher average selling prices and improved margins, (2) the pace of recovery in North American wholesale and digital channels as new product launches and marketing campaigns take hold, and (3) the ability of EMEA and Asia-Pacific to sustain or regain growth amidst challenging macro conditions. Progress on mitigating tariff impacts and the response to new team sports initiatives will also be key factors to watch.

Under Armour currently trades at $5.34, down from $6.64 just before the earnings. In the wake of this quarter, is it a buy or sell? See for yourself in our full research report (it’s free).

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