What’s Next For Under Armour Stock?

[Note: Under Armour’s FY’24 ended March 31, 2024]

Under Armour (NYSE: UA), a sports equipment company that manufactures footwear, sports, and casual apparel, has increased 19% in the last month. Since the beginning of the year UA’s stock is down 6% year-to-date and currently stands at around $8. In comparison, UA’s peer Nike stock (NYSE: NKE) is down 24% YTD to $83. Under Armour’s stock has traded lower this year as it is planning on restoring its premium brand position for long-term success while sacrificing low-margin sales volume. The company expects big losses this year, but its gross margin is trending in the right direction. Under Armour’s gross margins were around 50% after the Covid hit, but macro economic pressures in the industry have driven margins down to 47.5% (in Q1 2025). Still, these margins were up 110 basis points y-o-y, driven by lower levels of discounting in the direct-to-consumer (DTC) business and lower product costs. However, the company’s revenue was down 10% year-over-year (y-o-y) to $1.2 billion in Q1, led by a 14% drop in North American sales and a 10% decline in Asia Pacific sales. Channel-wise, the company’s Wholesale revenue declined 8% while direct-to-consumer  (DTC) sales were down 12%. Within each category, footwear saw the most significant decline in sales of -15%, followed by apparel with a loss of 8%, and a 5% decline in the sale of accessories. Initiatives to lower inventory (down 15% to $1.1 billion), cut back on online discounts, and focus on more profitable men’s apparel contributed to a surprise adjusted profit for Under Armour in Q1 (to $0.01, and diluted loss per share of 70 cents). At the end of Q1, cash and cash equivalents were $885 million, and no borrowings were outstanding under the company’s $1.1 billion revolving credit facility.

UA stock has suffered a sharp decline of 45% from levels of $15 in early January 2021 to around $8 now, vs. an increase of about 45% for the S&P 500 over this roughly 3-year period. Notably, UA stock has underperformed the broader market in each of the last 3 years. Returns for the stock were 21% in 2021, -51% in 2022, and -6% in 2023. In comparison, returns for the S&P 500 have been 27% in 2021, -19% in 2022, and 24% in 2023 – indicating that UA underperformed the S&P in 2021, 2022, and 2023. In fact, consistently beating the S&P 500 – in good times and bad – has been difficult over recent years for individual stocks; for heavyweights in the Consumer Discretionary sector including AMZN, TSLA, and HD, and even for the megacap stars GOOG, MSFT, and AAPL. In contrast, the Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has outperformed the S&P 500 each year over the same period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics. Given the current uncertain macroeconomic environment with high oil prices and elevated interest rates, could UA face a similar situation as it did in 2021, 2022, and 2023 and underperform the S&P over the next 12 months – or will it see a recovery?