In Q3 ending 31 December 2024, the drop in revenue to $1.4bn marked a 6% decrease but outperformed the anticipated decline of roughly 10%.
As a result of these outcomes, the company has raised its full-year outlook once again, reflecting the success of its efforts to reposition the Under Armour brand.
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According to the company, a significant factor in this achievement has been its strategy of cutting back on promotions and discounts in its e-commerce business, which has played a key role in enhancing its gross margin this year.
Under Armour president and CEO Kevin Plank said: “We are pleased our quarterly results exceeded expectations. As we sharpen our focus on strengthening the Under Armour brand, our updated product strategy and enhanced marketplace discipline combined with the shift to a category-led operating model are driving our transformation.”
Under Armour’s Q3 operational performance overview
Sales in apparel and footwear segments dropped by 5% to $966m, and 9% to $301m respectively, but accessory sales went against the trend with a 6% rise to $110m.
Revenue in North America saw an 8% decline, totalling $844m, primarily due to a decline in its direct-to-consumer (DTC) business, while international revenue decreased marginally by 1% to $558m over the quarter.
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By GlobalDataWithin the International business, Under Armour’s EMEA region experienced a revenue increase of 5%, contrasting with a 5% drop in the Asia-Pacific and a 16% fall in Latin America.
The company’s wholesale revenue slightly decreased by 1%, amounting to $705m in Q3 FY25 and direct-to-consumer sales saw a more substantial reduction of 9% to $673m.
Within this sector, revenue from owned and operated stores decreased by 1%, while e-commerce revenues plummeted by 20%, largely due to strategic reductions in promotional activities, accounting for 39% of the quarter’s total DTC revenue.
Net income of Under Armour was significantly lower at $1.23m in Q3 FY25 compared to the previous year’s Q3 at $110.75m. Its diluted earnings per share remained flat at $0.00, against the previous year’s $0.25.
The company reported operating income of $14m over the third quarter, but when excluding charges such as impairment and restructuring costs, adjusted operating income was $60m.
Its gross profit marginally declined to $665.15m in Q3 FY25 from $670.63m in the previous year; however, gross margin improved by 240 basis points to 47.5%, thanks to reduced discounting, lower product and freight costs, and favourable currency exchange rates.
The company’s selling, general, and administrative expenses rose by 6% to $638m due primarily to increased marketing investments.
Under Armour’s restructuring efforts
The company is shifting from an operating model centred on apparel, footwear, and accessories to a consumer-driven, category-managed approach. This new model focuses on clear leadership accountability within specific sports categories, including team sports, training, golf, basketball, running, sportswear, outdoor activities, and other key sports, which serve as key influencers in various regions.
“Additionally, we will enter a pivotal new chapter in our marketing strategy by launching a dynamic, multi-year initiative of storytelling that showcases our incredible products, talented athletes, and influential creators. This will greatly enhance our visibility and empower our authentic connection with athletes to elevate our brand like never before,” added Plank.
As part of its restructuring initiative announced in May of the previous year aimed at bolstering financial and operational efficiency, Under Armour decided to shut down a distribution centre in Rialto, California in September.
This move raised the estimated cost of its restructuring plan to between $140m and $160m.
The company expects the remaining costs outlined in the revised restructuring plan to be incurred over the course of fiscal years 2025 and 2026.
Under Armour’s revised fiscal outlook
Reflecting on these Q3 figures, Under Armour now expects annual revenues to decrease by around 10%, an improvement over its earlier prediction of a low double-digit percentage decline.
Gross margin is projected to increase by roughly 160 basis points compared to the previously forecasted range of 125 to 150 basis points.
The projected operating loss has been narrowed to between $179m and $189m from an earlier estimate of between $176m and $196m. The diluted loss per share is now expected to be between $0.48 and $0.50, slightly better than the prior forecast of between $0.48 and $0.51 per share.
