Under Armour (UA) Q2 2026: EMEA Grows 12% as Turnaround Hinges on Storytelling and Premiumization
EMEA’s double-digit growth and robust brand activations contrast with North American and APAC softness, as Under Armour’s leadership bets on product storytelling, premiumization, and wholesale reset to drive stabilization by fiscal 2027. Investor focus now shifts to execution on pricing power and innovation pipeline amid ongoing tariff headwinds and leadership transition.
Summary
- Brand Heat Drives EMEA Expansion: Cultural campaigns and full-price discipline propel regional momentum.
- North America Rebuild Relies on Storytelling: Leadership doubles down on narrative and premiumization to regain share.
- Fiscal 2027 Stabilization in Focus: Execution on innovation and price elevation is critical as tariff pressures persist.
Performance Analysis
Under Armour’s Q2 2026 results reveal a business in transition, with total revenue declining 5% to $1.3 billion, slightly ahead of internal expectations due to shipment timing. Regional divergence is stark: EMEA delivered 12% reported growth (7% currency-neutral), buoyed by strong full-price wholesale and direct-to-consumer (DTC) performance, while North America fell 8% and APAC dropped 14%—both pressured by wholesale weakness and deliberate recalibration of product and channel mix. Latin America provided a bright spot, rising 15% on both wholesale and DTC strength.
Gross margin contracted by 250 basis points, primarily from higher U.S. tariffs and adverse channel mix, though partially offset by better pricing and product mix. SG&A rose 12%, influenced by last year’s insurance recovery and increased marketing. Apparel declined only 1%, but footwear tumbled 16% as Under Armour intentionally restructured its portfolio and faced consumer demand headwinds. Accessories slipped 3%, with headwear as a relative outperformer. Adjusted operating income of $53 million exceeded outlook, but bottom-line profitability remains thin, with adjusted EPS at $0.04.
- Tariff Impact Intensifies: U.S. tariffs drove nearly all of the margin decline, with further headwinds expected in Q3.
- Wholesale Weakness in North America: Full-price sell-through remains a challenge, though replenishment orders and partner sentiment are improving.
- Product Mix Shifts: Higher-margin sportswear and innovation-led launches partially offset softness in legacy categories.
Inventory fell 6% year-over-year, reflecting tighter buys and improved discipline, while cash ended the quarter at $396 million after refinancing $600 million in senior notes. The business is positioned for stabilization, but near-term pressure—especially from tariffs and North America—will persist.
Executive Commentary
"We don't have a product issue. Our innovation design are strong, as you'll see in the coming seasons how we've addressed this. And we don't have a brand issue. Consumers aren't mad or rejecting Under Armour. They just haven't heard from us in a while. What we do have is a storytelling opportunity. That's exactly where we're concentrating, because consistent, compelling storytelling that personifies our brand turns great products into icons, athletes into advocates, and moments into momentum."
Kevin Plank, President and Chief Executive Officer
"Gross margin for the second quarter came in better than our expectation, thanks to less supply chain pressures, including slightly better product costs and inventory return impacts... The actions executed under our plan have already delivered approximately $35 million in savings in fiscal 2025 and are on track to generate an additional $45 million in fiscal 2026."
Dave Bergman, Chief Financial Officer
Strategic Positioning
1. Premiumization and Innovation Pipeline
Under Armour is shifting from volume-driven, lower-priced product to a premiumization strategy, aiming to elevate average selling prices (ASP) through design, innovation, and storytelling. The launch of the Assert 11 running shoe at $75, supported by athlete partnerships, exemplifies this approach. The Neolast fiber (a Lycra replacement developed in partnership with NC State and Celanese) underpins the next generation of technical apparel, with sustainability and performance at its core.
2. Regional Market Execution
EMEA’s momentum is anchored by culturally relevant campaigns (such as the Mansory collaboration and “Be a Problem” football campaign), full-price discipline, and tailored local assortments. In APAC, leadership is resetting the marketplace with tighter inventory, premium distribution, and a new immersive retail concept launching in Q4, seeking to restore growth by fiscal 2027. North America’s turnaround hinges on rebuilding wholesale relationships and converting brand heat (e.g., “We Are Football” campaign) into sell-through and order book stabilization.
3. Storytelling as a Growth Lever
Leadership identifies storytelling as the key unlock, aiming to connect emotionally with younger athletes and drive brand heat. Data-driven campaigns have already lifted awareness among 18- to 34-year-olds by nearly 20 points, with double-digit sales growth in base layer categories linked to activations. The focus is on turning product launches into cultural moments, using sports marketing and NIL (Name, Image, Likeness) talent to amplify reach.
4. Wholesale and DTC Channel Reset
Wholesale remains challenged, but partner sentiment is improving as Under Armour demonstrates discipline in product, pricing, and merchandising. Factory house placements and DTC conversion rates are rising, aided by e-commerce upgrades and content management investments. The strategy is to drive fewer returns, higher full-price sell-through, and multi-year growth plans with key accounts.
5. Cost Discipline and Capital Allocation
Restructuring actions have delivered $35 million in savings to date, with another $45 million targeted for fiscal 2026. SG&A leverage is a focus, as is prudent marketing spend. The recent refinancing of senior notes strengthens liquidity, while inventory and SKU discipline support working capital efficiency.
Key Considerations
Under Armour’s Q2 reveals a business balancing turnaround urgency with foundational investments in product, people, and brand narrative. Execution on premiumization and innovation are critical as regional dynamics diverge and macro headwinds persist.
Key Considerations:
- Tariff Headwinds Remain Structural: U.S. tariff costs are compressing gross margin, with mitigation strategies (pricing, vendor cost sharing, sourcing shifts) only partially offsetting the impact until fiscal 2027.
- North America’s Path to Stabilization: Leadership defines stabilization as low-single-digit growth or decline, with a focus on product elevation, storytelling, and wholesale partner confidence as leading indicators.
- Innovation as a Differentiator: Proprietary materials (Neolast), franchise footwear launches, and athlete-driven marketing are central to regaining pricing power and ASP expansion.
- EMEA as a Model for Brand Execution: Consistent growth and profitable expansion in EMEA provide a template for other regions, leveraging local activations and disciplined channel management.
- Leadership Transition Adds Uncertainty: Incoming CFO Reza Talghani brings transformation experience, but continuity risk remains during a critical phase of the turnaround.
Risks
Persistent tariff costs and ongoing North American and APAC softness threaten margin recovery and top-line stabilization. Execution risk is elevated amid leadership transition, and pricing elasticity remains uncertain given a highly promotional environment. Competitive intensity, especially in running and performance categories, could challenge Under Armour’s efforts to regain share and pricing power.
Forward Outlook
For Q3 2026, Under Armour guided to:
- Revenue decline of 6% to 7%, with North America expected to fall low double digits and EMEA to grow high single digits
- Gross margin contraction of 310 to 330 basis points, driven almost entirely by tariffs
- Adjusted SG&A down mid-single digits, with adjusted operating income ranging from $5 million profit to $5 million loss
For full-year 2026, management maintained guidance:
- Revenue down 4% to 5%
- Gross margin down 190 to 210 basis points
- Adjusted operating income of $90 to $105 million
- Adjusted EPS of $0.03 to $0.05
Management highlighted tariff headwinds, disciplined cost management, and the need to convert brand heat into financial momentum as key themes for the back half and into fiscal 2027.
- EMEA and Latin America expected to remain growth drivers
- North America and APAC stabilization targeted for fiscal 2027, with Q4 2026 as a potential inflection point
Takeaways
Under Armour’s turnaround is gaining ground in EMEA but remains a work in progress in North America and APAC. The path to stabilization depends on executing premiumization, innovation, and narrative-driven marketing while managing persistent cost headwinds.
- Regional Divergence: EMEA’s consistent performance underscores the value of localized brand activations and disciplined channel management, in contrast to North American and APAC challenges.
- Execution on Premiumization: The Assert 11 and Neolast launches will test Under Armour’s ability to command higher prices and shift consumer perception, with storytelling as the critical lever.
- Stabilization Watch: Investors should monitor North American wholesale order books, APAC retail resets, and the impact of tariff mitigation strategies heading into fiscal 2027.
Conclusion
Under Armour’s Q2 2026 shows real momentum in EMEA and early green shoots in North America, but the turnaround remains fragile as tariff costs and regional resets weigh on results. The next 12 months are pivotal for proving that innovation, premiumization, and a revitalized narrative can translate into sustainable growth and margin recovery.
Industry Read-Through
Under Armour’s results highlight the importance of regional agility, premiumization, and authentic storytelling in the global athletic apparel market. EMEA’s growth validates the power of local activations and disciplined channel management, while APAC’s reset mirrors challenges faced by other brands in China and Southeast Asia. Tariff-driven margin compression is a sector-wide headwind, underscoring the need for supply chain agility and pricing power. Competitors with strong innovation pipelines and brand heat will be best positioned to navigate a promotional, cost-pressured landscape.