Strategic Reset Fails to Resolve Under Armour's (UAA) Struggles with Profitability

Business Insider

2 days ago

In the early 2000s, Under Armour (UAA) seemingly emerged from nowhere to challenge leading athletic brands, capturing market share and becoming a household name in the process. Yet, after an extended slide in its share price, founder Kevin Plank returned as CEO with a commitment to returning the brand to its glory days. However, one year into the turnaround, the company continues to face revenue decline and negative profitability.
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While the stock trades at a relative discount following its decline, the path to sustainable growth remains uncertain. I prefer to maintain a Neutral stance on the stock until I see meaningful progress on revenue stabilization and margin improvement (perhaps at its earnings call on August 6th, which will hold some good news in that regard).
Under Armour Struggling to Regain Its Swagger
Since its founding in 1996, the Baltimore-based company has built its reputation as a leading manufacturer of performance athletic apparel on technical fabric innovations, particularly its moisture-wicking HeatGear and ColdGear products, which cater to athletes across various sports and climates.
Last year, founder Kevin Plank returned to the CEO role to spearhead a 'strategic reset' focused on premium brand positioning and operational efficiency improvements. This has included shifting from the previous product-focused approach to a more consumer-centric, category-managed operating model, designed to better serve the needs of athletes.
The company's recent Q4 FY2025 results suggest it has yet to get meaningful traction with its turnaround efforts. Revenue declined 11% year-over-year to $1.2 billion, with weakness evident across major markets, as U.S. sales fell 11%, international revenue dropped 13%, and the Asia-Pacific region declined 27%.
Weak top-line performance and ongoing restructuring expenses have resulted in the company posting a net loss for the year of $201 million, with an earnings per share loss of $0.47.
Evaluating UAA's Valuation and Momentum
The stock currently trades near the midpoint of its 52-week range, $4.78 to $11.89. It reached its all-time high in 2015, trading above $50, then cascaded down over the following years, falling to under $5 earlier this year. However, over the past three months, the stock has experienced a notable rise, climbing 27% during that period.
Despite the recent price run-up, the stock still trades at a relative discount, with a price-to-sales ratio of 0.61x, compared to 1x for the Consumer Discretionary sector, 2.42x for Nike (NKE), and 1.61x for Adidas (ADDYY).
The shares exhibit positive price momentum, trading above most major moving averages (except for the 200-day moving average, though it is closing in on surpassing that level as well). Other technical indicators are neutral-to-bullish.
Is UAA a Good Stock to Buy?
On Wall Street, UAA stock carries a Hold consensus rating based on four Buy, 13 Hold, and three Sell ratings over the past three months. UAA's average stock price target of $6.84 implies approximately 4.5% downside potential over the next twelve months.
Analysts following the company have taken a cautious stance, with many lowering their price targets for the shares. For instance, Goldman Sachs analyst Brooke Roach recently lowered the firm's price target on the shares to $6.50 (from $7) while maintaining a Neutral rating, noting the potential impact of elevated tariff rates.
Similarly, Truist's Joseph Civello lowered the price target on Under Armour shares to $7 while reiterating a Hold rating, citing Q1 FY2026 guidance that came in well below expectations. In a research note, the analyst declared himself 'incrementally cautious' about the company's future outlook, with the impact of potential tariffs yet to be resolved.
Conversely, Simeon Siegel at BMO Capital kept an Outperform rating on the shares while lowering his price target to $9 (from $12). He observed that Q4 results marked ongoing improvement in gross margins on lower revenue, as management works to turn the business around. He maintains that focusing on improving margins can act as a lever to enhance profitability and drive share growth over time.
UAA Stock in Summary
Under Armour is undergoing a turnaround effort aimed at regaining brand momentum and strengthening its market position. The company's strategic reset centers on leveraging its core strength in technical performance wear to deliver premium products and stand out in a highly competitive landscape.
However, continued revenue declines across all major regions suggest deeper structural issues that won't be resolved quickly. Negative profitability further clouds the path to sustainable cash flow, especially as well-capitalized competitors like Nike and Adidas maintain pressure on market share.
While the firm's bold reset has delivered some early signs of progress, reversing persistent revenue losses and restoring profitability remains a formidable challenge. Until Under Armour demonstrates measurable improvement in these key areas, the turnaround is likely to remain stalled. The stock trades at a relative discount, but this valuation appears to reflect market doubts about the company's ability to execute a successful transformation. Analyst price targets indicate limited upside in the near term, given the associated risks.
I maintain a Neutral stance on the stock and will look for signs of margin improvement that could support a more constructive view going forward.