Under Armour, Inc. Q1 FY2026 earnings call

Product Engine Realignment - Simplified product range, aiming to reduce SKUs by 25% and materials by 30% for 2025 products with plans to reduce further in 2026. - Introduced new category management operating model and go-to-market process in March. ### Regional Strategies - North America: Focus on rebuilding brand loyalty, improving revenue quality, regaining cultural relevance through team sports and cultural collaborations. - EMEA: Achieving profitable brand-driven growth through focus on football, key cities, countries, and categories like football, sportswear, training, and running. - APAC: Emerging from reset year stronger, focused on premium marketplace, reigniting relevance through local storytelling and innovation. ### Brand and Marketing - Shift from gym-first to team sports focus, expanding to Gen Z and Alpha, using influencer-led networks and NIL partnerships. - Enhanced cultural collaborations and storytelling, with initiatives like the We Are Football campaign and Curry tour in China. ### Technology and Operations - Integrated AI across business for design, planning, and forecasting, with over 80 automations streamlining workflows. - Streamlined inventory management and distribution, focusing on disciplined pricing and premium partnerships.

First quarter revenue declined 4% to $1.1 billion. North America revenue declined 5%, primarily due to a decrease in full-price wholesale business and lower e-commerce sales. EMEA revenue increased 10% after adjusting for foreign currency fluctuations. APAC revenue decreased 10% on both reported and currency-neutral basis. Latin America revenue declined 15% partially due to foreign currency headwinds. Wholesale revenue declined 5%, DTC revenue declined 3%. Accessories grew 8%, Apparel declined 1%, Footwear was down 14% in the quarter.

Fiscal Year 2026 - Estimated approximately $100 million in additional tariff-related costs and softer demand, projected profitability to be about half of last year. - Q2 revenue expected to decline 6% to 7%, adjusted operating income $30 million to $40 million, adjusted diluted earnings per share $0.01 to $0.02. - Mitigation strategies include cost sharing with suppliers, alternative sourcing, and selective pricing adjustments, with gross margin impacts partially offset by FX and pricing benefits in future years.

• Incremental tariffs announced on July 31, estimating ~$100 million in additional tariff-related costs. - Softer-than-expected demand in fiscal '26. - Supply chain headwinds and unfavorable channel mix impacting gross margin.

Q: Can you talk about how tariffs are impacting demand from wholesale channel partners and green shoots of improving brand health?

A: Tariffs aren't ideal, but the 2-lever strategy of creating premium products and attacking the broader portfolio is underway. Brand health shows through metrics like NPS score, brand perception rising in 18-34 demographics, and positive retailer confidence with some big retailers.

Q: As we think about SKU cleanup and pullback on promotion and pricing, how should we expect AUR and units to develop in Q2?

A: Q2 is tough with North America facing low double-digit decline due to trailing order book challenges and traffic issues. Progress on promotions and discounting is tougher due to tariff environment but increased discipline is in place.

Q: How does the brand improvement start to show up and talk about tax rate?

A: Brand improvement is seen in metrics like NPS, brand awareness, and consumer engagement with new products. Tax rate is impacted by U.S. GILTI tax regulations where U.S. losses can't fully offset foreign earnings, leading to higher effective tax rate this year.

Q: Is the operational structure correct and any additional operational changes?

A: The operating model, category management, go-to-market process, and strategic business plan are in place. Execution is key now, with the foundation set and focus on running the strategy through.

Q: How does the North America transformation execution hold up in the current macro backdrop and DTC actions?

A: Confidence remains with momentum from core products and new sportswear offerings. In DTC, e-com faces pressure from promotions, but Factory House uses better assortments to combat decreased traffic.

Q: Should we assume North America's 2Q guide continues into 2H and impact of broad-based inflation?

A: Expect a little pressure but with new product and marketing efforts, North America may see improvement in Q4. Tariff impacts and demand headwinds are factored in, but new product excitement could drive improvement.

Q: Unpack gross margin guide for 2Q and tariff impact?

A: Gross margin decline of 340-360 basis points in 2Q, with ~300 basis points from higher product costs (2/3 from tariffs) and channel mix. Full-year gross margin hit is ~200 basis points from tariffs.