The Baltimore-based athletic brand performed better than expected in Q2 FY26. Initial signs of recovery are particularly evident in North America. However, weak sales in Asia and margin pressure continue to slow down the group.
In the second quarter of the current fiscal year, Under Armour did not reach the previous year’s figure, with sales of $1.3 billion (–5%), but was significantly above the level of the first quarter. Another positive development was that adjusted operating income amounted to $53 million, clearly exceeding the company’s own forecast, issued after Q1, of $30 to $40 million.
Gross margin remains under pressure
Although the gross margin remains under pressure and fell by 250 basis points to 47.3 percent in the second quarter, there are initial positive signs. In North America, long a problem child on the balance sheet, sales rose significantly from the previous quarter: from $670 million in Q1 to $792 million in Q2, an increase of around 18 percent. Although this figure is still 8 percent below the previous year’s level, the direction is right: Q2 closed noticeably stronger than the previous quarter. This development could indeed be interpreted as the “first turnaround moment.”
“We exceeded our previous forecast this quarter and are seeing the first signs of brand momentum in North America – an important milestone in our turnaround.” CEO Kevin Plank
EMEA remains reliable, Asia weakens
The trend in EMEA continues to be robust: Sales rose by 12 percent in Q2 FY26 to around $278 million compared with the previous year – an increase of 7 percent after currency adjustments. The region had already delivered impressive growth of 9.6 percent in Q1, proving itself to be a stable growth driver in international business. By contrast, Asia-Pacific remained under significant pressure, with a 14 percent decline in sales, while Latin America grew by 15 percent – albeit from a comparatively small base.
Product mix with ups and downs
Across the segments the picture is also mixed: Apparel remained largely stable at $936 million, down 1 percent. Footwear, on the other hand, fell 16 percent to $264 million and thus remains a problem. Accessories were also down slightly, by 3 percent, to $113 million.
Change in strategy begins to take effect
This suggests that the realignment launched in the spring, with its focus on premium positioning, a sharper brand profile and targeted campaigns featuring Stephen Curry and Toni Rüdiger, is beginning to show results. The group’s regaining ground in its most important market for the first time in several quarters is likely to be seen internally as confirmation that its present course is correct. Although the gap to the previous year remains significant, management is now focusing on stabilizing this trend for the current year.
Five levers for turnaround in the US
This is to be achieved with five levers, which Plank outlined in the earnings call in response to a question from Jay Sole (UBS). The goal is to stabilize the business in North America by the end of fiscal year 2027: a strong team and operational foundation; a clear focus on innovative, high-margin products; improved brand storytelling; strengthened relationships with retail partners; and a new corporate culture that combines discipline with brand pride.
Unfinished business and changes atop finance department
Despite positive momentum, challenges remain: declining sales in Asia, ongoing margin pressure and structural problems in purchasing, customs duties and distribution channels. Increasing competitive pressure from brands such as Nike, Adidas, Lululemon and On is also slowing momentum at the group level. And, like many other US sports brands, Under Armour is struggling with the consequences of an unfavorable go-to-market model – the path to turnaround has been initiated, but is not yet complete.
Incidentally, this path will be accompanied by a different CFO in the future: after 21 years at Under Armour and almost nine years as CFO, David Bergman has announced his resignation. However, he emphasized his continued confidence in the brand during the earnings call and said he would remain committed as the second-largest internal shareholder.
