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Under Armour, Inc. UAA has witnessed a significant decline over the past three months, with its shares plummeting 24%, underperforming the Zacks Textile – Apparel industry’s drop of 20.6%. The company also trailed the broader Consumer Discretionary sector’s slip of 5.2% and the S&P 500's dip of 6.1% during the same period. This downturn in the stock price can largely be attributed to growth challenges of the company, and intense competition in the athletic footwear, apparel and accessories market.
UAA Stock Past Three-Month Performance
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Closing at $6.35 in yesterday’s trading session, the stock stands almost 46.6% below its 52-week high of $11.89. UAA is trading below its 50 and 200-day simple moving averages of $7.25 and $7.95, respectively, signaling bearish sentiment in maintaining the recent performance levels.
UAA Trades Below 50 & 200-Day Moving Averages
Image Source: Zacks Investment Research
A key factor behind UAA’s recent bearish performance could be revenue declines across the key markets. Under Armour faced a 5.7% year-over-year dip in overall revenues for the third quarter of fiscal 2025 to $1.4 billion. The North America market saw a 7.8% revenue drop due to a strategic pullback in e-commerce promotions. Wholesale revenues slipped 1% to $704.8 million, whereas direct-to-consumer (DTC) sales declined 9.1% to $672.9 million.
E-commerce revenues dropped 20%, which accounted for 39% of the DTC business. International sales saw a 1.4% fall, with the Asia-Pacific and Latin America experiencing 5.1% and 15.5% declines, respectively. These figures highlight Under Armour’s ongoing challenges in sustaining growth across key global markets.
Performance in core product segments remained weak, with apparel revenues declining 5% and footwear sales dropping 9%. While outdoor and golf apparel showed some resilience, broader category softness impacted overall results. Footwear struggles continued, underscoring the company’s ongoing difficulties in competing with industry leaders like Nike and Adidas. The lack of significant product innovation and differentiation contributed to this underperformance, raising concerns about UAA’s competitive positioning.
Under Armour expects substantial headwinds in the fiscal fourth quarter, particularly in the Asia-Pacific and North America. Currency fluctuations and a tougher comparison base due to heavy promotions in the prior year add to the challenges. The company revised its full-year revenue outlook downward to a 10% decline, with North America sales dropping 12-13% and international sales decreasing in the mid-single digits. Weaker Spring/Summer 2025 order books indicate continued softness in demand, suggesting that meaningful top-line growth may remain elusive in the near term.
Under Armour has significantly reshaped its DTC business, emphasizing full-price sales and premium brand positioning. By minimizing promotions and discounts, the company has successfully increased average unit retail prices and order values, leading to improved brand equity and profitability. This strategic shift ensures a more sustainable revenue model while reinforcing UAA’s image as a high-performance athletic brand.
The company’s loyalty program has experienced remarkable growth, with 4 million members joining in the fiscal third quarter. This expansion has pushed the North America membership base to 17 million, fostering higher repurchase rates and deeper consumer engagement. By leveraging this growing customer base, Under Armour continues to enhance its direct relationships with consumers, strengthening brand loyalty and repeat sales.
A key element of UAA's transformation is its flagship store in Baltimore, which serves as a testing ground for optimizing consumer experiences. Insights gained from this store are applied across its 200 North America locations and nearly 2,000 global retail stores, ensuring consistent and improved consumer interactions. A well-executed DTC strategy has not only improved profit margins but also reinforced customer connections, laying a solid foundation for sustained long-term growth.
UAA’s focus on margin expansion has yielded significant results, with a 240-basis-point increase in its gross margin in the fiscal third quarter to 47.5%. This achievement stems from reduced discounting, lower product and freight costs and favorable currency fluctuations. Additionally, the company's marketing evolution and international expansion efforts, including grassroots programs and high-profile athlete collaborations, continue to enhance brand reach and global market penetration.
Under Armour revised its fiscal 2025 guidance with a cautiously optimistic stance. The company expects a low-single-digit percentage decline in adjusted selling, general and administrative expenses, marking an improvement from its prior forecast of a low to mid-single-digit decrease. Adjusted operating income is projected between $185 million and $195 million, up from the previously stated $165-$185 million.
Likewise, UAA has increased its adjusted earnings per share forecast to 28-30 cents from the earlier mentioned 24-27 cents. This updated guidance underscores the company’s focus on cost management, operational efficiency and strategic growth initiatives, all of which are aimed at delivering sustained value for shareholders.
The company is currently trading at a notable low price-to-sales (P/S) multiple, below the averages of the industry and the sector. Its forward 12-month P/S ratio is 0.53, lower than the industry and the sector’s ratios of 1.76 and 1.66, respectively. This undervaluation highlights its potential for investors seeking attractive entry points. Moreover, UAA's Value Score of A underscores its appeal as an investment option.
UAA Looks Attractive From a Valuation Standpoint
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Despite recent revenue declines and competitive challenges, the UAA stock still appeals to value-focused investors. The company’s strategic shift toward premium pricing, improved margins and strong direct-to-consumer engagement support its long-term growth potential. An expanding loyalty program and disciplined cost management strengthen its market position, while its low valuation offers an attractive entry point.
That said, current investors may benefit from holding their positions, while potential investors might consider waiting for a more favorable opportunity. The company currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks are The Gap, Inc. GAP, Stitch Fix SFIX and G-III Apparel Group, Ltd. GIII.
The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for The Gap’s fiscal 2025 earnings and revenues indicates growth of 7.7% and 1.6%, respectively, from the fiscal 2024 reported levels. GAP delivered a trailing four-quarter average earnings surprise of 77.5%.
Stitch Fix delivers customized shipments of apparel, shoes and accessories for women, men and kids. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for SFIX’s fiscal 2025 earnings implies growth of 64.7% from the year-ago actuals. SFIX delivered a trailing four-quarter average earnings surprise of 48.9%.
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. It carries a Zacks Rank #2 at present.
The Zacks Consensus Estimate for GIII’s fiscal 2025 earnings and revenues implies declines of 4.5% and 1.2%, respectively, from the year-ago actuals. GIII delivered a trailing four-quarter average earnings surprise of 117.8%.
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This article originally published on Zacks Investment Research (zacks.com).
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