Under Armour expects sales to fall more as US tariffs could hit demand

Under Armour shares plummeted 17% premarket after the company projected a steeper-than-anticipated current-quarter revenue decline of 6-7% and adjusted EPS of just 1-2 cents, significantly missing analyst estimates. This bleak outlook, exacerbated by persistent inflation and the looming threat of new tariffs on goods from Vietnam and Indonesia, underscores the sportswear maker's continued struggle to revive demand and casts doubt on its ongoing restructuring efforts, signaling poor near-term turnaround prospects.

Analysis

Under Armour (UA, UAA) is facing a significant deterioration in its business outlook, triggering a 17% premarket share price decline. The company's guidance for the current quarter projects a revenue decline of 6% to 7%, more than doubling the analyst consensus estimate of a 2.9% drop. More critically, expected adjusted earnings per share of 1 to 2 cents represent a massive miss against the 26 cents consensus, signaling severe profitability pressures. These challenges are attributed to persistent inflation and tariff uncertainty weighing on North American consumer demand. The situation raises material concerns about the efficacy of the company's year-long restructuring plan under founder and CEO Kevin Plank, as there is little evidence of a turnaround. Specific operational risks are intensifying, with potential tariffs of 20% on goods from Vietnam and 19% from Indonesia directly threatening its supply chain, where it sources 30% and 15% of its merchandise, respectively. This is the primary driver for the expected 340 to 360 basis point contraction in quarterly gross margin, a metric that even favorable currency exchange and pricing actions cannot fully offset.

Key Decisions for Investors

• Given the severe downward revision to revenue and EPS guidance, which significantly missed analyst expectations, investors should anticipate continued negative pressure on the stock in the near term.
• Monitor developments in U.S. trade policy regarding Vietnam and Indonesia, as the potential 19-20% tariffs represent a direct and quantifiable threat to Under Armour's gross margins.
• Scrutinize the company's strategy of raising prices to offset costs, as this move could further erode demand and market share in a highly competitive and inflation-sensitive North American market.
• Investors should treat the ongoing restructuring efforts with caution, as the lack of a reversal in revenue declines after more than a year suggests fundamental execution challenges persist beyond macroeconomic headwinds.