Under Armour Inc.’s latest earnings report has shaken investor confidence in its comeback bid, sending shares down more than 20% in a single session. While gains in gross margin and overseas sales offered some bright spots, persistent weakness in North America—its largest market—combined with tariff headwinds and rising expenses, have clouded near-term prospects. The sportswear maker’s Class A shares (UAA) now trade at a roughly 7% premium to its non-voting Class C shares (UA), a gap some analysts say is unwarranted.

The Baltimore-based company reported fiscal first-quarter earnings of 2 cents a share, in line with guidance, on revenue down 4% from a year earlier. Sales in Europe, the Middle East and Africa rose 10%, while accessories climbed 8%. Gross margin improved to 48.2%, continuing a steady upward trend. Selling, general and administrative expenses fell sharply year-over-year, though part of that decline reflected the absence of one-time legal costs.

But management’s second-quarter outlook quickly erased any goodwill. The company projected a gross-margin drop of 340 to 360 basis points, citing tariff impacts and an unfavorable sales mix, and forecast SG&A expenses to rise at a high single-digit pace. That combination is expected to squeeze earnings, with adjusted profit seen at just 1 to 2 cents a share. For fiscal 2026, analysts currently expect 32 cents a share—a bar that now looks difficult to clear.

Under Armour’s debt profile has also drawn scrutiny. In June, the company issued $400 million in senior notes at 7.25%, replacing lower-cost debt maturing in 2026. That doubling of interest costs suggests bond investors see higher risk, and adds another layer of pressure on margins already under strain.

Competition in the athletic-apparel and footwear market remains fierce. In addition to Nike and Adidas, brands such as Lululemon, Deckers’ Hoka, and On Holding’s On Cloud are capturing market share and outspending Under Armour in marketing. With North America representing more than 60% of revenue, CEO Kevin Plank’s strategy to streamline products and cut costs may not be enough without meaningful top-line growth.

Short interest in Under Armour has climbed above 21%, signaling heightened skepticism. While a string of strong quarters or an external catalyst could spark a short-covering rally, the near-term path appears rocky. For now, some see better value in the Class C shares, which the company itself favors in buybacks, while others will wait for firmer signs that the turnaround is more than a marketing play.

Pull Quote

“The combination of lower margins, higher expenses, and tariff headwinds was too much for the market to ignore.”

Data Highlights

• Stock reaction: UAA shares fell more than 20% on Aug. 8 following earnings release.
• Earnings: Q1 FY2026 EPS of $0.02, in line with guidance.
• Revenue: Down 4% year-over-year; EMEA sales +10%, accessories +8%.
• Margins: Gross margin rose to 48.2%, up 70 bps from prior year.
• Debt: $400M in new senior notes issued at 7.25%, replacing 3.25% notes.
• Short interest: Up to 21% from 17.5% earlier this year.

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