Under Armour, Inc. Q2 FY2026 Earnings Call

Good day, and welcome to the Under Armour Q2 2026 Earnings Conference Call. Please note this event is being recorded. I would now like to turn the conference over to Lance Allega, Senior Vice President of Finance and Capital Markets. Please go ahead.

Good morning, and welcome to Under Armour's Fiscal 2026 Second Quarter Earnings Call. Today's call is being recorded, and a replay will be available on our investor website shortly after it ends. Joining us this morning are Kevin Plank, Under Armour's President and CEO; and Dave Bergman, our CFO. Before we begin, please note that certain statements made on today's call are forward-looking as defined under federal securities laws. These statements reflect management's current expectations as of November 6, 2025, and are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed discussion of these factors, please refer to this morning's press release, filings with the SEC, including our most recent Form 10-K and Form 10-Q and other public disclosures. In today's call, we may reference non-GAAP financial measures. We believe these metrics offer additional insights into the underlying trends of our business when considered alongside our GAAP results. Reconciliations of these measures to the most comparable GAAP metrics are included in today's press release and can be found on our investor website at about.underarmour.com. With that, thank you for being here and for your interest in Under Armour, and I'll now turn the call over to Kevin.

Thanks, Lance, and thank you all for joining us this morning. Before we get started, I want to take a moment to reflect on some important news we shared this morning regarding a leadership transition. To express my deep gratitude to Dave Bergman for more than 2 decades of extraordinary service to Under Armour. For 21 years, Dave has been so much more than our teammate, finance expert, and CFO. He's been a true partner, a steady hand, and a trusted voice. His discipline, integrity, and unwavering commitment to doing what's right for our brand, our teammates, and our shareholders have shaped who we are today. His impact can be felt in every corner of the company, from the strength of our business to the culture that defines us. His leadership has built a foundation that will support Under Armour for years to come. As Dave transitions from his role and continues with us through the first quarter of fiscal '27 to ensure a seamless handoff, I want to sincerely thank him and not just for what he's accomplished, but for the person he's been to all of us. His legacy here will be lasting and deeply felt. Thank you, Dave. Now at the same time, we're excited to welcome Reza Taleghani as our next Executive Vice President and Chief Financial Officer, who will join in February of 2026. Reza brings more than 25 years of global finance leadership across corporate, operational, and investment banking roles. He joins Under Armour from Samsonite Group, where he served as EVP and CFO since 2018, leading financial and operational transformations that significantly improve profitability and efficiency. His prior experience includes senior roles at Brightstar Corp., JPMorgan, and Sterling Airlines. I have every confidence that Reza's extensive experience and strategic mindset will help drive our brand and business forward, and we welcome him to the Under Armour team. Now speaking of the team, over the past few months, I've had the privilege of meeting our closest stakeholders across Shanghai, Hong Kong, Amsterdam, New York, and Portland. The energy has been undeniable everywhere I went. The message remained consistent. Under Armour has the strategy, talent, and brand power to succeed. Our partners are fully committed. Our teams are focused and our brand continues to inspire athletes worldwide. With nearly 2,000 UA-branded stores showcasing our global reach, the road ahead is vast. Now is the time to harness the momentum, align our priorities, ignite our entrepreneurial spirit and turn potential into tangible results. Like the athletes we serve, we know when to push, when to pivot, and when to lock in. This turnaround won't happen through force alone. It's about balance and precision. Staying focused is critical because credibility and trust are lost quickly, but regained slowly. Whereas we say at UA, trust is built in drops and lost in buckets. We have been busy, depositing one drop, one relationship, one product, and one story at a time. Every decision, action, and result shapes how our brand is perceived. Our category management model sharpens our edge, aligning us more closely with athlete needs and boosting precision and speed across the business. We will maintain high standards, staying disciplined, accountable, and continue to earn trust through performance. Anchored by our long-term strategy, this model keeps us focused on what matters most, winning with young athletes and making Under Armour the most trusted authentic performance brand everywhere we do business. This strategy is now global, echoed in every region and market around the world with our clear category focus of training, running and sportswear, then authenticated through the key team sport in each region from American football, basketball, diamond sports and volleyball here in the U.S. to football in Europe and football, basketball, and volleyball in Asia. We deliver performance and build connection wherever athletes play. One of the clear signs our strategy is working is in product, the heartbeat of this brand. When I returned to the CEO role, I made it my priority as product has long 18-month lead times and to reignite the Under Armour edge, that's where we had to start. We streamlined assortments by cutting 25% of our SKUs, refocused our materials library by prioritizing fabrics we can be famous for and constantly raising the bar on design, working to bring innovation and style back to the center of what we do, which are all ingredients that made Under Armour globally famous to begin with. Fall/Winter '25 is when it all starts to show. A bold new design language is evident across training, running, and sportswear, confident, consistent and unmistakably UA. Core apparel collections, including Heat and ColdGear, Unstoppable, Vanish, Meridian, and Icon are driving momentum and beginning to drive demand with key specialty and sporting goods partners. In footwear, we've addressed our contraction by refining our strategy and sharpening our aesthetic. We are not accepting the current state of the business. Our plan is straightforward: build on the franchises that are already successful and return to growth in upcoming seasons. We're leveraging our momentum. The record-breaking Velociti Elite 3 highlighted by Sharon Lokedi's recent New York City Marathon podium this past Sunday demonstrates our performance leadership is resonating. SlipSpeed Echo and Nova extensions, along with our solo sportswear models are creating buzz, increasing sell-through and proving that UA can generate real demand where performance meets style. Accessories, we're gaining renewed energy with breakout hits like the $45 StealthForm hat and $140 No Weigh backpack, driving growth across wholesale and DTC by inventing new products as well as significantly higher price points, validated by UA innovation, which reassures us that where and when we innovate, we will succeed. Spring/Summer '26 only gets stronger and is also filled with innovation. The $160 Velociti distance run shoe, which builds on the Velociti 3 franchise, next-generation Shadow and Magnetico football boots, the Dry Pro clone golf shoe featured on Jordan Spieth and the new No Weigh duffle, all of which build on UA franchises, especially our HeatGear Elite base layer featuring our new UA-built NEOLAST fiber technology, which replaces Lycra stretch with a more durable and groundbreaking sustainable option for athletes and the planet. There will also be another extension of NEOLAST we will launch in the spring that we only tease with the clue of an industry quote that drives us. Whoever invents the next white or black T-shirt wins. Meaning master performance and elegance through something as simple as a T-shirt. It's the best expression of UA and believe we have that coming in the new year. This is what UA does best consumer-relatable innovation where we can drive positive perception and volume. So speaking of volume, we're working to elevate our top 10 largest unit products by enhancing quality and design, aiming to increase price points through innovation and style that help athletes perform better. Every product detail must justify its place by providing confidence, comfort, and performance that set us apart. While higher average selling prices over the long term are a fundamental goal, our progress will be about more than just numbers. It's about building trust and instilling pride in athletes when they wear UA as a symbol of performance and purpose. A strong example, the $75 Assert 11 running shoe, which launched just this week, with a complete Velociti run-inspired redesign, demonstrates how far we've advanced, turning one of our most accessible models into a true performance shoe with a story instead of just price. The Charged+ mid-sole technology and Velociti 3 inspired design lines plus the addition of Los Angeles Dodgers back-to-back World Series champion, Freddie Freeman to support our point-of-sale visuals. Ensure that we can maintain a higher average selling price for this program that pushes millions of units annually, ultimately bringing more profit to the bottom line. We look to do this across our top 10 high-volume styles where each product will reflect our commitment to premium quality at every price point, so every athlete at any level can see and feel the UA difference. These launches embody everything Under Armour represents, athlete-driven innovation, bold design, and performance you can truly feel. The difference now is the energy. You can sense it across the teams, fueled by belief and a shared commitment to win. We're not just back in the game. We're now setting our own pace, demonstrating that performance, style and a premium experience can coexist and thrive at every level. The evolution of our products reflects a transformation happening across our business worldwide with focus and disciplined marketplace management in each region driving progress. EMEA is experiencing healthy profitable growth. APAC is rebuilding back to growth over the next 12 months. North America is a proof point we are decidedly getting behind to redirect our global trajectory and believe we have a positive line of sight. Focusing on North America and recognizing that it's not fully reflected in our financials yet. Our brand heat is increasing, which is an important milestone in our turnaround. As our product strategy accelerates, our storytelling is gaining clarity. By blending creativity with instincts, we're enhancing our cultural edge while staying dedicated to performance. From TikTok to the sidelines, we're showing up where it matters, and it's working. Awareness among 18- to 34-year-olds has increased from the mid-60s just 6 months ago to over 80% today, driven by our We Are Football campaign and activations, which we have also delivered a significant surge in social engagement for UA. From the star-powered main film featuring NFL star Justin Jefferson, #1 draft pick Cam Ward, a host of young high school NIL talent, all the way to recording artist Gunna, who also performed at the Video Music Awards. These have all contributed to related base layer sales. We Are Football wasn't just an activation. It's been a revival for us here in the States, redefining how athletes see us, not just as a performance brand, but as an inspiring, aspirational one. Returning to the field this year through our NFL partnership as an official supplier of gloves and footwear has been a key part of this reset, reminding the world exactly what UA represents: performance, energy, and an authentic cultural connection with the next generation of athletes. And it's delivered big with more than 300 million impressions and 100 million video views, a #2 share of voice among competitors on X, over 90% positive sentiment and awareness among 18- to 34-year-olds at its highest level since 2022, now sitting in the 80s. Besides generating buzz, it also boosted sales. Organic engagement surpassed expectations by promoting our HeatGear Baselayer story and increasing its share of ua.com franchise visits from 6% to 31%. This led to double-digit growth in sales for the category. The VMAs activation with Gunna also caused a fivefold rise in social media mentions and a notable increase in purchase consideration among young athletes. At Under Armour, our currency is product and our voice is amazing story articulated through powerful imagery and film where we bring our brand to life. For a deeper look at the momentum behind our transformation, please visit our Investor Relations page today to explore recent product and storytelling highlights that demonstrate how our brand is growing stronger every day. I think this is incredibly effective and recommended strongly. The combination of sharper products, stronger storytelling and a renewed sense of purpose is revitalizing confidence in Under Armour and redefining how athletes perceive us. We're rebuilding conviction and cultural relevance with the next generation, regaining trust and energy across the marketplace. So what's different? We're connecting more deeply than ever. We're adding attitude and personality to everything we create, applying a brand lens to every product, touch point and story. Our products need to perform and speak, reflecting the mindset of today's athlete: relentless, confident and ready to compete. That's what we mean when we say our products personify performance. Every fabric, fit and finish must convey our unique DNA. When athletes put on UA, they're not just wearing gear, they're underscoring belief. That's the connection we're creating between product and emotion, brand and identity. You'll continue to see us get sharper with personifying our product, giving them individual personality and trust with athletes like our ColdGear Mock has done when it gets cold. That builds a relationship with our consumer, become familiar with and recommend as well as repeat purchase from us season after season. This is our industry's version of recurring revenue, and it is top of mind here at UA: consistency and confidence. Within our North American direct-to-consumer business, we continue balancing pricing discipline with a dynamic consumer environment while making further progress in enhancing our shopping experience. Our new content management system for e-commerce improves content flexibility and supports modern tools like TikTok, shoppable reels, and product compare. Although sector demand remains tempered due to a very promotional market, our units per transaction are up nicely. Despite traffic headwinds across our sector, in our retail stores, conversion rates are increasing as we improve the shopping experience and boost productivity. Factory House placements of full-price products also continue to exceed expectations. Now our North American wholesale business is undergoing a disciplined rebuild, and we are encouraged. The focus on top-to-top relationship building at our most important retailers has been key and effective. Good news is that we're seeing positive momentum with many of these accounts in some of our core programs as we continue to sharpen our focus on stronger partnerships, more targeted assortments, elevated merchandising and a premium retail brand experience. All of this, of course, is centered on 1 goal: reigniting Under Armour's potential in the marketplace. While this part of our business remains challenged in the near term from an order standpoint, the tone has shifted as we have seen replenishment demand with the brand heat from our We Are Football campaign and even more recently with the weather turning cold. Conversations with our major wholesale partners have moved from caution to collaboration and from hesitation to optimism. The message is clear. They see the progress, they feel the energy and they want to be part of our next chapter. In ongoing discussions with these key partners, we're creating multiyear plans to bring U.S. wholesale back to growth, aiming for stabilization during fiscal '27 and paving the way for expansion beyond. That's exactly it. This is a rebuild and reset with purpose, putting UA back on offense in North America as the brand's green shoots are becoming more consistent. So in EMEA, we're driving real momentum and doing so with style. The team continues to deliver strong results quarter after quarter, driven by a clear strategy and effective execution. Our focus on creating culturally relevant brand moments is making a significant impact. Prime example is our collaboration with Mansory, which generated 38 million organic views and strengthened our premium positioning with younger, style-conscious consumers even seeing sellout online. That's brand heat in action. We're carrying that momentum into fall/winter '25 with our new Be The Problem football campaign led by global ambassador and Arsenal head coach, Mikel Arteta, along with a roster of top UA athletes. Major activations in London and Paris strengthened our connection with EMEA's most passionate communities, highlighting how our brand and culture intersect to inspire and create credibility. It's a powerful reminder of the opportunities ahead across run, train, and sportswear, validated by regional sport authenticity through football. Behind these results is smart, disciplined growth. We're seeing wholesale strength in key cities and steady gains across direct-to-consumer, all while maintaining full price discipline and tailoring our approach to each local market. Mansory and Team Sports stood out this quarter, boosting both energy and profitability. This consistent performance builds confidence that our focused strategy will keep igniting relevance, fueling continued healthy growth and maintaining the Under Armour brand's momentum through the second half of the year in EMEA. So in APAC, after spending 8 days on the ground with stakeholders just a few weeks ago, the takeaway is clear and today's print of down 14% does not reflect the real progress that's underway. Structural challenges are being addressed. Legacy roadblocks are coming down, and we're rebuilding a premium high-integrity marketplace that aligns with Under Armour's true brand strength. Our priority is to stabilize the business and set a clear path to growth in fiscal '27 and beyond. The plan is in motion with the right leadership in place. We're reducing inventory through tighter buys and faster in-season decisions, strengthening purchasing discipline and managing the marketplace with greater precision to protect price and margin. To support this, we're simplifying assortments, sharpening consumer storytelling and driving full price sell-through with disciplined distribution and premium partners. APAC also holds a structural advantage as our second smallest region with a strong base of mono-branded stores. We can move faster than larger markets. Beginning in the fourth quarter, we'll be testing a new digital retail store concept with a highly immersive experience environment that brings our performance story to life. In short, APAC is on a path to regaining momentum and have every confidence in the team we've built to construct a cleaner, more premium marketplace, positioning the region as a proving ground for what will scale globally. Also, the creative edge we build in APAC won't stay in APAC. It will make Under Armour stronger everywhere we play. In closing, here's my perspective on our progress in this turnaround. We don't have a product issue. Our innovation and design are strong, as you'll see in the coming seasons how we've addressed this and we don't have a brand issue. Consumers aren't mad or rejecting Under Armour. They just haven't heard from us in a while. What we do have is a storytelling opportunity. That's exactly where we're concentrating because consistent, compelling storytelling that personifies our brand turns great products into icons, athletes into advocates and moments into momentum. This month marks 20 years since Under Armour went public, 20 years of grit, lessons, humility and ambition. I want to thank everyone who has contributed to this double-decade journey. Not long ago, our leadership focused solely on stability. That operational discipline was essential for Under Armour to rebuild its foundation. Today, that foundation is solid, and our focus is on finding balance and pursuing growth. We're combining that same operational excellence with a brand-first approach because our next chapter is about unlocking the full potential of what Under Armour can become, making the most of all of our assets and resources with the wisdom gained from 20 years as a public company. We recognize a disconnect between our $5 billion in revenue and our current market cap, and that gap drives our sense of urgency. At the center, we have the right team, the right strategy and a clear focus on strengthening the brand through better storytelling, products, marketplace management, and customer experience. True transformation happens when product and story come together. Product fuels story and story elevates product. Together, they build lasting platforms, lead franchises and deepen consumer connection with the brand. And while there's still work to do, the momentum is real. We're seeing progress in North America, early evidence that our balance between performance and purpose, discipline and storytelling is starting to take hold. This is the next chapter of Under Armour, confident, focused, and ready to rise. With that, I'll hand it over to Dave to walk through our second quarter results and outlook for fiscal '26. Dave?

Thanks, Kevin. Before I get into the financials, I want to take a moment to share some thoughts about my upcoming transition. After 21 incredible years at Under Armour and nearly 9 as CFO, it feels like the right time for something new, new for me and new for Under Armour. Kevin and I have been discussing this for some time now, and we agreed that if we could identify and secure a great next CFO for Under Armour, I would step down and pass the baton in a well-planned and thoughtful way. With Reza joining the team, we're now ready to do just that. And to be clear, I absolutely believe in this brand and its future. I'm proud to be Under Armour's second-largest internal shareholder. But more than that, I'm proud of the people and the purpose that make this company so special. My main focus now is helping UA and my team onboard Reza and get him fully up to speed to ensure UA can continue to thrive for years to come. Now let's get into our second quarter fiscal '26 results, where we again delivered a quarter that met or exceeded our outlook on every item as we continue to execute our turnaround. Revenue declined 5% to $1.3 billion, slightly better than the outlook we shared in August. This result includes a 1 point benefit from timing shifts that moved some shipments from Q3 into Q2, which will normalize in the back half of the year. Regional results were as follows: North America revenue decreased 8%, primarily due to a decline in our full-price wholesale business and lower e-commerce sales. In EMEA, revenue increased 12% or 7% on a currency-neutral basis, continuing the healthy growth trend in the region, driven primarily by our full-price wholesale business, coupled with strong growth in our DTC channel during the quarter. Revenue in APAC declined 14% on both a reported and currency-neutral basis, mainly driven by our wholesale business, while DTC decreased modestly in the second quarter. Latin America's revenue increased 15% or 14% on a currency-neutral basis with strong growth across wholesale and DTC. From a channel perspective, wholesale revenue declined 6% due to lower full-price sales, partly offset by growth in the off-price channel driven by the timing of sales to third-party partners as well as an increase in distributor sales. Direct-to-consumer revenue declined 2%, primarily due to an 8% decrease in e-commerce sales, driven in part by efforts to more strategically manage discounts in a more promotional North American environment. Sales within our owned and operated stores remained flat in the quarter. Licensing revenues increased 17%, driven by strength in our international business. Finally, by product type, apparel revenue declined 1% with softness in run, outdoor and golf, partially offset by growth in train and sportswear. Footwear revenue declined 16% this quarter, reflecting ongoing pressure from a challenging consumer demand environment and our deliberate efforts to recalibrate key parts of the footwear portfolio. We believe these steps will help us improve efficiency, strengthen brand value and maximize the impact of several high potential launches planned for upcoming seasons. Accessories revenue declined 3% this quarter with decreases across most categories, partially offset by growth in sportswear, especially in headwear. Our second quarter gross margin declined 250 basis points year-over-year to 47.3%. This decline was mainly caused by 275 basis points of supply chain headwinds, primarily due to higher U.S. tariffs and 100 basis points of combined unfavorable channel and regional mix. This was partly offset by 50 basis points of foreign currency headwinds, or tailwinds, I'm sorry, 50 basis points of pricing benefits and 25 basis points from a favorable product mix. Gross margin for the second quarter came in better than our expectation, thanks to less supply chain pressures, including slightly better product costs and inventory return impacts. Shifting to SG&A, which increased 12% to $582 million in the second quarter. Excluding approximately $4 million of transformation expenses related to our fiscal 2025 restructuring plan, adjusted SG&A expenses were $577 million, a 9% increase compared to the prior year. Last year's Q2 SG&A benefited from a $27 million insurance recovery, which explains about 5 points of the year-over-year increase. The rest reflects higher marketing driven by timing shifts that occurred in the back half of last year. On a normalized basis, adjusted SG&A was down slightly year-over-year. In the second quarter, we recorded $32 million in restructuring charges, along with $4 million in transformation-related SG&A expenses, totaling approximately $36 million in expenses and charges under our fiscal 2025 restructuring plan. Since the plan's inception, we have incurred $147 million in charges and transformation expenses, of which $82 million are cash related and $65 million are noncash. We expect total charges and expenses for the plan to be up to $160 million, which will be recognized by the end of fiscal 2026. The actions executed under our plan have already delivered approximately $35 million in savings in fiscal 2025 and are on track to generate an additional $45 million in fiscal '26. Moving down the P&L, we reported operating income of $17 million in the second quarter. Excluding transformation expenses and restructuring charges, our adjusted operating income was $53 million, outperforming our outlook. Looking at the bottom line, our reported diluted loss per share was $0.04, while our adjusted diluted earnings per share was also $0.04 in the quarter. Regarding our balance sheet, inventory at the end of Q2 was $1 billion, a 6% decrease compared to the same period last year, and our cash balance was $396 million at the end of the period. During the second quarter, we used the net proceeds from the issuance of the senior notes due 2030, along with the borrowings from our revolving credit facility and cash on hand to satisfy and discharge our $600 million in Senior Notes due in June of 2026. Funds were placed in a restricted investment account to cover all remaining principal and interest payments on those notes. At the end of the second quarter, we had $200 million in outstanding borrowings under our $1.1 billion revolving credit facility. Next, looking ahead to outlook. We expect full year revenue to decline 4% to 5% in fiscal '26, an improvement compared to fiscal '25's 9% decline. This incorporates our expectation that North America and APAC revenues will decrease by high single-digit percentages, while business in EMEA is projected to grow by a high single-digit percentage. For gross margin, we expect the full-year rate to decline by 190 to 210 basis points, mainly due to higher U.S. tariffs. These headwinds should be partly offset by foreign currency gains, a more favorable product mix and slight pricing benefits. Amid these headwinds, we remain focused on improving SG&A efficiency. For fiscal '26, we expect adjusted SG&A to be down at a mid-single-digit rate with a goal of leveraging. As such, we will continue to reduce discretionary spending and sharpen our marketing investments, ensuring that we protect and build on the brand momentum that is beginning to take hold. This translates to an expected adjusted operating income of $90 million to $105 million. When taken to the bottom line, we expect adjusted diluted earnings per share for fiscal '26 in the range of $0.03 to $0.05. This outlook accounts for higher projected other expenses below operating income, mainly driven by interest expense from increased debt levels as well as a significantly higher tax rate in fiscal '26, primarily due to the interplay of an unfavorable regional mix and decreased profitability. Next, our outlook for the third quarter of fiscal '26. We expect revenue to decline 6% to 7%. As noted earlier, this includes approximately 1 point of revenue that shifted from Q3 into Q2 due to shipment timing. In North America, we anticipate a low double-digit decline driven by continued wholesale softness, especially in footwear. We expect EMEA to grow at a high single-digit rate, while APAC is projected to decline by a high single-digit rate, an improvement from Q2. It's important to note that our Q3 revenue outlook suggests a moderately smaller revenue decline in Q4 as we regain momentum toward a potential inflection point in fiscal '27, as Kevin noted. Moving on to gross margin. We anticipate a decline of 310 to 330 basis points in the third quarter due to a full quarter impact of new U.S. tariff costs. Adjusted SG&A is expected to decline by a mid-single-digit percentage in the third quarter as it compares against last year when our marketing spend was distorted to the second half of the year. Additionally, we continue to focus on cost management in the current environment, supported by the increasing benefits of restructuring actions we have undertaken. This results in a third quarter adjusted operating income expectation that ranges from a $5 million profit to a $5 million loss, which translates to approximately $0.02 to $0.03 of adjusted loss per share. In closing, we're entering this next phase with focus and discipline, executing a strategic transformation that unites sport, performance, and style with the financial and operational rigor required to reignite top line growth. Our innovation pipeline is strong, and our opportunity lies in converting that strength into brand and financial momentum through sharper storytelling, better marketplace execution, and disciplined capital deployment. We're grounding every decision in data, optimizing costs, and prioritizing investments that drive margin expansion, operating leverage and sustainable returns. With a clear road map and the right team in place, we intend to close the gap between our brand strength and financial performance, resetting UA to deliver consistent profitable growth and long-term shareholder value. Now we'll open the call to questions.

The first question comes from Jay Sole from UBS.

Kevin, a lot of great information and insight in the prepared remarks. I want to ask you about North America. What makes you confident that North America will see stabilization before the end of fiscal '27? And what is your definition of stabilized for North America?

Thank you, Jay. We've invested considerable time analyzing our outlook. For us, stabilization indicates achieving a performance level that's around plus or minus 1 or 2, which we see as healthy. We believe this can be realized through five key points. First is structural, which involves having the appropriate team, operational model, business strategy, and go-to-market approach in place. It's crucial for us to allow these elements to develop further. Our extensive experience as a public company will start to reflect positively as this unfolds. From a product perspective, we've seen a significant enhancement in design and deliverable innovation that can be monetized and increase volume. We're focused on leveraging our successful products, like the heat and cold gears, Unstoppable pant collection, Vanish, and others. Our strategy includes a dual approach to enhance our brand with new innovations, such as the Velociti Elite 3, which benefits from credible endorsements like Sharon Lokedi's recent podium finish in that shoe. We're proving that consumers are receptive to innovations, especially at higher price points that Under Armour offers. Additionally, we have legacy programs focused on average selling price (ASP), like the Assert 11. Not only do we emphasize a price point of $75, but we also highlight the partnership with athletes, such as Freddie Freeman, and the technology behind our products. The third point is storytelling. We don’t face a brand issue; rather, we haven't engaged with consumers recently. We don’t have a product problem either; you'll see the evolution of our brand presence in retail. However, we do have an opportunity to improve our storytelling. For example, we introduced the Assert shoe without effectively communicating its value to consumers. We've relied too much on brand strength, which can decline over time. Thankfully, this is a correctable issue. Our product represents our value, and our compelling stories will be key to success. I encourage everyone to visit our website, where we've shared engaging content since our last call. For instance, the We Are Football campaign has transitioned us from speculation to data-driven insights. Our awareness scores among consumers aged 18 to 34 were in the 60s about six months ago, but following our comprehensive campaign and the 400 to 500 pieces of related content we created, awareness increased nearly 20 points. This is an impressive result and indicates that our brand is ready for significant growth. Fourth, our relationships with wholesalers have strengthened; we've had more top-to-top meetings in the past 18 months than in the previous three to four years. These interactions have evolved from cautious to collaborative, as we've consistently exceeded our plans. In some cases, this means achieving results that surpass what we anticipated last year. Lastly, and perhaps most importantly, there's a renewed energy among our team. Our recent move to a new headquarters aligns well with this fresh momentum. We are eager to pursue a new chapter for our brand, where we will prioritize discipline while keeping a brand-first perspective in every decision we make. Our growth and performance will be judged by how effectively we encourage consumers to choose Under Armour products, making them feel empowered. I’ve had the chance to connect with many of our teammates recently, and I'm confident they are motivated and ready to succeed.

Got it. Well, I mean, that's super helpful. I mean it's pretty clear that the North America brand heat is increasing. There's a lot of great things happening, product storytelling. I'll pass it on, but I just want to ask one quick one. You mentioned NEOLAST, and it was just a quick mention. But it sounds like you're excited about what you have and what you have coming. Can you just tell us a little bit what it is, what makes it special? I know it's a little bit obscure, but I want to just ask that question before I pass it on.

Yes. Thank you. NEOLAST is a fiber we spent more than 5 years in partnership with NC State, Celanese and Under Armour. The 3-way partnerships are not easy to do. From it, we've built a 3-story machine that from the output of that is a fiber that is completely sustainable that effectively replaces Lycra. So it gives us Lycra stretch, which is a great product, but we've built something that's actually better than it. So it's not just sustainable, but it's actually a better product. We're showcasing that with some of our upcoming HeatGear Elite and OG, and you'll see us start incorporating NEOLAST as we get the fiber up and running throughout the majority of Under Armour products, and that's going to take a little bit of time. But meanwhile, we'll put it in our compression gear, which, as we all know, to the broader population, probably 5% or 6% or 7% people can walk down the street in a compression T-shirt. But as I mentioned, we also are going to be showing this some products that we think can be incredibly beautiful, including a product a shirt that we have coming out in the spring that will feature NEOLAST and I think really be important for the consumer. So we're excited about what this innovation means.

The next question comes from Sam Poser from Williams Trading.

I have two points. First, I’ve been hearing a lot of positive feedback regarding your work in track and field, and it seems to be reflected in the results of events like the New York Marathon. However, you often discuss football, yet I believe track and field and running represent a much larger potential market. I'm curious about how you plan to raise your profile in this area, given that you're one of the few brands that encompasses all aspects of track and field. It appears that the number of long-term athletes participating in these various sports is increasing compared to those playing football, despite your strong football heritage. What are your plans to ensure that your voice in this space is as strong or stronger than the products currently available?

Sure, Sam. I think it's a great unlock for us. Run as a category, we talk about the progression that we try to get through in footwear and running is certainly a category that we can win. There's nothing like having the credibility of a Sharon Lokedi, who is a former New York City Marathon winner, the reigning champion of the Boston Marathon and then just pulling another podium in New York this past weekend. The Velociti Elite 3 is something that gives us enormous credibility in running. Again, when we say running, there's a $250 expressions like we have in the Velociti 3. But if you go to the website as well on Investor Relations, you'll see as we've been driving the story is that it's not just the $250, but we've taken that design aesthetic, and we're taking it all the way down to $160, $130, $100, and $75 price points. Yes, we believe that it drives our credibility. With the 430 colleges that Under Armour outfits here in the United States and the nearly 3,000 high schools, it's certainly an opportunity for our track-specific product. But all this is about leveraging us into using this as a marketing vehicle to tell the story that when you wear Under Armour, there's a superpower included inside and will allow you to maybe someday if you dream to win the Boston Marathon. But I don't know, it might be a fallen ambition for some of us.

I have one more question to follow up on this. I'm referring to the marketing voice. I know you're doing a lot, but I noticed you aren't running the large We Are Football campaign. How do you ensure the broader audience is aware? You mentioned increasing your voice, so that's the first point. The second point is regarding the improvement in the U.S. or North American business. Can you provide some insights into the sell-through rates and the performance at full price compared to a year ago, and explain why that gives you confidence, perhaps with some specific data to support that?

Yes. Our global strategy is clear, focusing on training, running, and sportswear, while ensuring authenticity in each local market. A recent partnership in the U.S. with BSN Sports, which works with over 1,400 representatives covering high schools, has enabled us to sell our full range of products for track and field, from discus to spikes to weightlifting. Our goal is to establish authenticity, particularly in specialty running, which will drive our presence in sporting goods and specialty mall retail. As we look towards growth, we're eager to discuss sell-through rates. Currently, we are seeing positive indicators; although we lack orders in hand, we're optimistic about stabilization as we approach fiscal year '27. By February, we expect to have clearer insights. Meanwhile, we are experiencing good success at retail, which isn't yet reflected in our numbers, but we are outperforming our plans. Certain categories are generating replenishment orders, and we're confident in our relationships with key retail partners. They're preparing to place orders for fall '26 based on our success in fall '25. We are maintaining better gross margins and minimizing returns, which contributes to our positive outlook. Our tone today is not based on hope but rather on a pragmatic and thoughtful approach, giving us confidence for the next chapter.

The next question comes from Bob Drbul from BTIG.

And Dave, congratulations, and thanks for all the help over the last 20 years. Best of luck to you.

Thanks, Bob.

And 2 questions really. I think the first one is, in terms of the sports marketing portfolio, you got a really good portfolio. You've made some changes to it. Can you just expand a bit just how that can work better in your storytelling approach? And then the second question is just a bit more general. But when you look at the footwear business overall, some of the challenges that you're seeing, can you just expand a bit more how you're approaching the changes that you need to make in that category?

Certainly. First of all, you're correct that our sports marketing portfolio needs to remain dynamic, and we are continually assessing it. Given the current landscape of NIL, especially with high school athletes, I believe our ongoing campaign has been effective, and we still have more to go. Our campaign features five NIL athletes, three of whom are five-star players, including the top player and quarterback in the nation. We’re focused on accessing top talent while thoughtfully considering everyone in our portfolio. Balancing whether to highlight an athlete, a team, or a league is ongoing, and I’m pleased with our portfolio at the moment. There's always room for improvement, and we will continue to be deliberate in our approach. Regarding footwear, I understand that the current number is concerning, showing a decline of 16%. It’s essential to frame this correctly: Under Armour is a footwear brand and we are committed to that aspect. We are very disappointed with our current standings, and we find the results unacceptable. We are shifting our strategy from primarily selling lower-priced footwear to a more ambitious approach. While this transition has led to some growing pains reflected in that decline, we realize we have relied too heavily on brand presence to drive sales. Our goal is to create aspirational products at higher price points while still recognizing that a significant portion of our business comes from items under $100. We are working on maintaining our average selling price closer to the desired levels. Under Armour’s identity lies in providing performance footwear, supported by our history with high-quality performance apparel. We are focusing on key product categories, starting with cleated footwear and then expanding to training shoes and running. It’s an opportunity we are just beginning to tap into, particularly with our recent successes in running. The focus has been on maximizing our offerings and creating additional opportunities across various categories, including basketball, which represents a significant market for us. By clarifying our strategy and prioritizing areas where we can perform better, we believe we can enhance our overall position in the footwear market.

The next question comes from Laurent Vasilescu from BNP Paribas.

Dave, thank you for all your help over the years. My first question is about pricing elasticity. How should we consider pricing for the spring/summer 2026 product? Should we expect mid-single-digit increases to compensate for the tariff impact? What are you currently observing regarding demand elasticity among consumers? For my second question, you provided valuable insights on the tariff impact for the second quarter, mentioning 275 basis points. How should we approach that figure for the third quarter and the full year?

Yes, Laurent, this is Dave. Relative to pricing, it is one of the different mitigation strategies that we're driving through relative to the tariff implications. In the short term, this year, we're really focused a lot more on kind of managing the SG&A and protecting the bottom line that way. There's a little bit of vendor cost sharing we can drive through where reasonable, also working on some production shifts where reasonable. Those can't be done overnight, though. To your point, we are pursuing some selected price increases. They're partially dependent, though, on competitor actions and consumer sentiment as well based on where we stand. We're definitely going to be strategic in those. We don't expect much of that to be real visible until fiscal '27 and beyond, to your point, but it will definitely help us as we offset more of a full-year impact next year on the tariff side. I don't think it's going to come across as dramatic, and I don't know that we're in a position to be able to go dramatic relative to what other brands might be doing. But we're going to be in there, and we think there's a lot of great product that have the right price to value that could warrant some of those increases, but we're going to be very prudent and strategic in how we do that. But then there's also a couple of other things that we're driving through to help offset as well, being a lot smarter and more data-driven in how we look at SKU by SKU profitability and make tougher decisions about what SKUs we're going to get behind versus what ones we might wane back a little bit based on the profitability of that SKU and just some more diligence around that to be careful as we navigate some of those cost pressures. Longer term, I think we're going to be in a really good spot there. Relative to Q3 and Q4, yes, Q3, we're seeing down 310, 330 basis points, and that is almost entirely driven by tariffs. That number in the tariff range is probably around 300, 330 basis points. So there's other minor puts and takes that are going on within that, but that's really the lion's share for Q3. Q4, just based on the mix of product and the sourcing countries that it's coming through, the tariff impact will be a little bit less in Q4, but it's still going to be the primary driver of the Q4 headwind as well.

The next question comes from Peter McGoldrick from Stifel.

I was curious about the shape of the guidance. Previously, the commentary pointed to the second quarter as the deepest declines of the year. I recognize there's a 1 percentage point shift. But now with the outlook for the fiscal third quarter, that looks like that could be the deepest decline. I was curious about the progression. What has changed over the last 90 days? And how should we think of the pathway towards the stabilization in fiscal '27?

Yes. I mean, to be honest, there's not a lot of big developments from 90 days back. There is maybe $10 million to $15 million of movement relative to Q2 and Q3. These are mainly wholesale shipments in North America and EMEA that were originally planned to go out in early Q3, and we actually had the product, and the customer wanted it, and we were able to get it out in late Q2. So that was a little bit of a change versus our expectation. Outside of that, no real big changes. I think when you think about Q4, we do see that the Q4 decline will be less versus Q3. If you look at the math in our outlook, it does back into a pretty broad range for Q4. One of the points within that range is flat and that stabilization that we've been talking about. If you drill down into that, we continue to see solid growth in EMEA, which is awesome. APAC is likely to actually be up a little bit with Q4, but that's mainly, to be honest, relative to comping a really challenged Q4 of last fiscal year in APAC. So that's something to keep in mind. All the points that Kevin went through on North America coming to fruition and, therefore, less pressure on North America in Q4 than previous quarters. So again, it's the focus on stabilizing and resetting APAC, stabilizing and turning around North America and continuing to fuel the growth in EMEA, and that's what we're driving against.

Thank you for that. I would like to follow up on the pricing. You mentioned some assumptions related to the higher pricing of your largest products. Can you elaborate on your strategy for balancing your product portfolio and your pricing plans?

Yes. I mean we are looking at it in a lot of different ways. There are some very specific new launches that we're going to be addressing pricing on a couple of the resets, but then also even on some of our core, we do feel there's an opportunity on the kind of better and best product a little bit more than the good level product. We want to be a little bit more careful with that consumer. But as Kevin can probably touch on, there's also a lot of exciting stuff we're doing relative to some of the new product launches that are in that good and better, best level that could have better prices associated with them.

The next question comes from Brooke Roach from Goldman Sachs.

Kevin, Dave, I was hoping to dive a little bit deeper into the trends that you're seeing in the APAC business and the drivers and cadence of the path that you see ahead to drive some stabilization there.

Thank you. I understand that seeing a minus 14 can be surprising and challenging to interpret. We don’t accept this outcome, and I've mentioned that multiple times today. We are in the process of a turnaround, and this is part of that journey. I appreciate the opportunity I had to spend eight days in the market visiting stores, engaging with our teams, franchisees, distributors, and manufacturers, and holding town halls to gather insights. I also spent individual time with key stakeholders discussing our forward strategy. Simon Pestridge, who joined us about a year ago and took on this role a few months back, has been wonderful. He recently announced a new head for our operations in China, who is an experienced professional with a solid background in the region. He is assembling a strong team. Similar to the U.S., we don’t believe we have a brand problem in China; Under Armour is recognized as a professional brand there. The issue lies in our storytelling and how we position our products at retail. Simply placing a T-shirt next to a price tag without a compelling narrative is ineffective. As brand excitement has cooled, we've noticed this trend across the region. The positive aspect is that China is among the fastest retail markets globally, allowing us to adapt quickly. We're applying lessons learned from EMEA to the U.S., including reducing promotions on our sites, which also benefits partner sites, enabling us to focus on future growth. Simon and the team are aiming for stabilization, which we will elaborate on in the February call, and also in fiscal '27. We see this as a reset year to return to growth. We believe that the worst is behind us, and it's time for us to pivot. We’re looking forward to unveiling a new store in January, which will be very exciting and will support the more than 700 locations we have in China and over 1,000 in APAC.

Our last question will come from Paul Lejuez at Citi.

This is Kelly speaking on behalf of Paul. I wanted to follow up on the commentary regarding North America wholesale. If you are seeing better sell-through rates this fall, do you think there is a chance for increased reorder demand in the holiday quarter? Additionally, regarding the order book, you mentioned a stabilization in wholesale in North America for the fourth quarter. Is this reflected in your order books? Given the improved sell-through this fall, should we expect that for fall 2026, the order books might be higher? Any additional insights would be appreciated.

Thank you. We are experiencing stronger demand, moving towards stabilization after a period of weaker performance. The best way to describe our current situation is that we now have a stable order book. In the past, we've faced higher rates of returns and cancellations, but that is not the case at this moment. This shift is not solely due to the cold weather; I believe it also stems from the brand momentum we have built in the U.S. Specifically, we faced brand inconsistency, and we didn't have a cohesive story to share. Now, our key partners are perceiving a more consistent Under Armour as we effectively connect our narrative with the product. They are noticing how we are personifying our products, and our strategy to elevate the brand is resonating with them. While we are not entirely satisfied with the numbers, our plans for fall 2025 set us up for future success. Our core message is that the $5 billion business we currently have shows potential for stabilization and growth. We do not just want to create good-level products; we are focusing on enhancing our better and best offerings, which will help us elevate the brand and drive sell-through across all levels wherever consumers engage with us.

And Kelly, I think just pointing out too, that Q3 is a very high mix of direct-to-consumer. It's a little bit lower mix of wholesale. So even though we are seeing some favorability on replenishment orders, which is great and really points towards the future, it doesn't necessarily create a significant upside for Q3 or Q4. But obviously, we're going to keep driving and fueling, and we're excited about where those conversations are heading.

This concludes our question-and-answer session, and the conference has now concluded. Thank you for attending today's presentation. You may now disconnect.