Under Armour, Inc. 2027 Q1 Earnings Call

Welcome to Under Armour's fiscal 2027 first quarter earnings call. Today's call is being recorded and a replay will be available on our investor relations website shortly after the call concludes. Joining us this morning are Kevin Plank, President and CEO, and Reza Taleghani, Chief Financial Officer. Before we begin, please note that certain statements made on today's call are forward-looking statements within the meaning of federal securities laws. These statements reflect management's current expectations as of August 7th, 2026, and are subject to risks and uncertainties that could cause actual results to differ materially. For a discussion of these results, and risks and uncertainties, please refer to this morning's press release or filings with the SEC, including our most recent Forms 10-K and 10-Q and other public disclosures. During today's call, we may reference certain non-GAAP financial measures.

We believe these measures provide additional insight into the underlying trends of our business and when considered alongside our GAAP results. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in today's press release and available on our investor relations website at about.underarmour.com. With that, thank you for joining us this morning and for your continued interest in Under Armour. I'll now turn the call over to Kevin.

Good morning, everyone. Thank you for joining us. Let me start with the headline. We're lowering our revenue outlook for the year while maintaining our adjusted operating income expectation. That's not the outcome we wanted on the top line, but it does reflect a business that is more disciplined and flexible than it was just a year ago. Consumer demand remains softer than we expected, particularly in North America and Asia Pacific. Our response isn't to chase that market lower. It's to continue simplifying the business, sharpening our product focus, improving marketplace execution, and investing behind the innovation, athlete credibility, and storytelling that will strengthen Under Armour over the long term. 90 days ago, I said we were entering the next phase of our transformation. The challenge now is to convert internal progress into stronger consumer demand.

That's the work in front of us, and it's what will position Under Armour for healthier growth over time. Last quarter, Sharon Lokedi won the Boston Marathon in our Velociti Elite 3 racing shoe, her second consecutive Boston victory in Under Armour. This quarter, Ferran Torres scored the World Cup winning goal for Spain in our Shadow Elite 4 boot. These are the moments this brand was built for, products performing on the biggest stages under the greatest pressure with the world's best athletes. They show what happens when we build from the athlete back. Incredible performance moments that should, can, and will create stronger demand for both the literal product worn on pitch or course, but especially the commercial expressions we convert into brand demand and wearing beyond sport. They also reinforce why the progress behind the scenes matters.

Over the past 2 years, we've simplified the organization by removing excess weight to create greater focus and agility. Great example is our significant SKU reduction, all while strengthening the connection between product, marketing, and sales so our teams are moving with greater speed and accountability. We've also become more rigorous in how we allocate capital and manage expenses. For instance, in the first quarter, we consolidated parts of our innovation footprint, including rightsizing our Portland office while strengthening Baltimore and New York as hubs where decisions can move faster, product decisions sharpen, and teams manage with greater intentionality. These actions are about improving the quality of the business over time, and that will be proven by execution, not by what we say today. A few years ago, we were too often managing for quantity, more products, more complexity and volume that did not always strengthen the brand.

Today, we're managing for quality. Fewer products with greater purpose, tighter execution, and a clearer reason to buy. This mandate to the organization is incredibly straightforward. We will sell so much more of so many less products at a much higher full retail price, and this mission is well underway. That focus must apply to every channel. In our DTC business, promotion has too often been the reason for consumers to shop. We're testing more full-price product in this environment. What we know is that when the product is differentiated and the value proposition is clear, the sell-through follows. In wholesale, we're taking the same approach where stronger relationships remain central to our turnaround. Since returning to the chair, I've made this a priority. We're beginning to see it pay off in better alignment and stronger execution.

A good example is our back-to-school takeover of a fashion show set at DICK'S House of Sport doors, which puts us front and center as you walk into these elevated presentations with a full expression of UA across men's and women's with our HeatGear icon fleece, tees, and StealthForm hats. The goal is to build more of these executions across the marketplace where differentiated product and strong storytelling can drive healthier full-price demand. That brings us to the central question: How do we turn a healthier business into stronger consumer demand? We know the brand has been too reliant on promotion. The marketplace still carries too much complexity. The issues are clear. The work is underway, and our focus is on 4 priorities. First, rationalize the product line so investment goes beyond the highest potential franchises and innovation platforms with a clear role in the portfolio.

You can see that in the SKU reductions underway and the priority behind platforms like HeatGear, Velociti, and StealthForm. Second, rebuild the market engine around fewer, bigger stories that connect our best products, athletes, and cultural moments in a more consistent way. Sharon winning Boston and Ferran scoring on the World Cup stage are the proof points we need to turn into a repeatable system. Third, improve commercialization so consumers can see it, understand it, and buy into it across our own channels and wholesale partners, making it easier for the consumer to say yes to the UA brand. That means tighter launch planning and stronger retail and digital execution so our biggest campaigns convert. Fourth, manage inventory in the marketplace so the business operates with greater consistency and less dependency on discounting.

That means being willing to walk away from lower quality volume, tighten inventory buys, and reduce the amount of product that ultimately has to be cleared through promotion. We should see progress in those areas before revenue fully re-accelerates. That's the nature of this reset. Improve the quality of what we make, how we sell it, and how consistently the marketplace reflects the value of the brand. Against that backdrop, let me talk about both sides of what we're seeing, where the environment has become more challenging and where the playbook is beginning to show up. As the first quarter progressed, particularly from late May forward, traffic softened, especially in North America and Asia Pacific, while the marketplace became increasingly promotional. Given what we're seeing today, we've taken a more cautious view of revenue for the balance of the year. Still, this does not change our strategy. It reinforces it. If consumers are going to choose Under Armour at a premium, we must earn that through more compelling reasons to buy, the right product choices, and a tighter connection between what we make and why athletes should care.

One of the biggest lessons for us has been that athletes don't need more choices. They need better ones. Building on the 25% reduction we've already achieved in our Fall/Winter 2026 assortment, compared to just two years ago, we've begun targeting a further 25% SKU reduction over the next 18 months. That is not about doing less, it's about giving our teams room to build products that matter and concentrating investment behind the franchises and innovation platforms with the strongest potential to create separation. That focus is helping us concentrate talent and investment in the areas where Under Armour can create meaningful advantages for athletes.

Training, team sports, running, and the innovation platforms that define our performance heritage. We're seeing early signs this approach is working. HeatGear base layer has remained strong across regions and channels, and Velociti continues to validate our technical innovation with runners. We're also seeing encouraging reads across newer apparel concepts, which indicate where the consumer is responding. These are signals we can learn from and scale deliberately. Best example of what this looks like when we get it right is the Bouncy Tee. What can happen when product and culture come together at retail. Launched in May, Bouncy has exceeded expectations while selling at its full $65 retail price. Alongside innovations like base layers, SlipSpeeds, StealthForm hats, and the No Way backpack, it shows that we know how to create products with a clear reason to command value.

Combination of new, upcoming innovation, and frankly, the amazing products that we already have, but have not done a good enough job storytelling for yet, gives us a robust platform to leverage. Now we just need to align and firing with a coordinated brand-right marketing approach. Beyond these proof points, the bigger job is to build a more effective marketing engine, not just put more products into the pipeline. For us, that starts with the products that matter most. The top 10 volume drivers I've talked about before. Tech Tee is a great example. It's one of our largest volume programs, but candidly, it's discounted too often. The answer is not to walk away from that business. The answer is to improve the product and reset how it shows up in the marketplace. We are refreshing Tech Tees so it plays a better role at scale.

At the same time, we've created a more premium expression with the Helix Tee. As Helix comes to market later this year, it will launch at $35 with a more complete UA performance story, stretch, recyclable, and an outrageously quick dry time. With the marketing and retail support required to earn that premium. That is the playbook. Improve the essentials that give us scale, build elevated products with a clear reason to trade up. Product strength also must show up in how we market the brand. As we take this story to our consumer, our industry is certainly taking notice. An example is two Women's Wear Daily covers just this week featuring UA brand ambassadors. Wednesday with François Arnaud of Heated Rivalry fame wearing UA HeatGear. Just this morning, another cover showcasing Ferran Torres' World Cup celebrity while wearing our new Bouncy Tee.