Under Armour's Q2 Sales Could Be Weakest Of 2025: BofA Securities Explains

Under Armour (UAA) reported softer Q1 sales, with adjusted earnings in line due to cost control, but issued a weaker-than-expected Q2 outlook, projecting a 6-7% sales contraction and 340-360 basis points gross margin decline. BofA Securities reiterated a Neutral rating while lowering its price target to $6.50, citing near-term margin pressure from tariffs and wholesale uncertainty, and forecasting weaker sales and margins through fiscal 2026-2027. Shares declined 4.50% on the news, reflecting investor concern despite management indicating Q2 should mark the weakest sales growth quarter of the year.

Analysis

Under Armour's first-quarter results revealed underlying weakness, as in-line adjusted earnings were achieved through cost controls that masked softer-than-expected sales. The company's forward-looking guidance for the second quarter amplified these concerns, projecting a significant 6% to 7% contraction in sales and a severe gross margin decline of 340 to 360 basis points, both falling short of consensus expectations. This negative outlook was echoed by BofA Securities, which reiterated a Neutral rating but slashed its price target on UAA from $8.00 to $6.50, citing near-term pressures from tariffs and uncertainty within the wholesale channel. The analyst's thesis anticipates this weakness will persist, forecasting subpar sales and margins through fiscal 2026 and 2027. Management acknowledged that hesitant purchasing behavior from both consumers and wholesale partners is driving the downturn, though they suggested the second quarter should represent the trough for sales growth this year. The market reacted decisively to the negative catalysts, with UAA shares falling 4.50% to $5.20.

Key Decisions for Investors

• The combination of weak Q2 guidance, severe margin erosion from tariffs, and cautious consumer behavior warrants a cautious stance, as near-term headwinds appear significant.
• Given management's commentary that Q2 will be the weakest quarter, investors should closely monitor subsequent earnings reports for signs of a sales trough and, more critically, a stabilization in gross margins before reassessing the outlook.
• With BofA's price target reduced to $6.50 and the stock trading at $5.20, investors should assess whether the current price fully reflects the multi-year weakness forecasted or if further downside risk remains from persistent wholesale and consumer headwinds.