Under Armour Fiscal Q1 2027 Earnings: Tariff Refunds Lift Margin as Revenue Falls

Under Armour (NYSE: UAA, UA) reported fiscal Q1 2027 revenue of $1.098 billion, down 3.2% from $1.134 billion, while GAAP diluted EPS improved to $0.00 from a loss of $0.01. Gross margin expanded 590 basis points to 54.1%, mainly because of refunds tied to IEEPA tariff costs expensed in fiscal 2026, lifting operating income despite weaker demand. Adjusted diluted EPS rose to $0.05 from $0.02, and operating cash flow increased to $109.1 million.

Core Earnings Results

Revenue declined across North America, direct-to-consumer operations and every major product category, with international growth providing a partial offset. Gross profit nevertheless increased because the tariff-cost refunds materially reduced cost of goods sold.

SG&A expense rose 2% as targeted brand investments outweighed expense discipline. However, the gross-margin increase and lower restructuring charges lifted GAAP operating margin to 4.3% from 0.3%.

Adjusted results are non-GAAP measures. They exclude restructuring and transformation expenses, as well as related tax effects where applicable.

Business and Segment Performance

The geographic results remained divided. North America contracted 9%, while total international revenue increased 5%, or 2.2% in constant currency. EMEA was the largest source of growth, whereas Asia-Pacific remained under pressure.

Currency movements supported reported international growth. EMEA increased 10.3% in constant currency, while Latin America grew only 0.7% on that basis. Asia-Pacific fell 9.5% in constant currency.

North American segment operating income increased to $170.9 million from $121.4 million, and its segment margin expanded to 28.0% from 18.1%, despite the revenue decline. EMEA operating income moved in the opposite direction, falling to $28.2 million from $39.6 million even as revenue increased. Asia-Pacific operating income declined to $12.5 million, while Latin America increased to $9.0 million.

By channel, wholesale revenue fell 1.6% to $638.5 million, while direct-to-consumer revenue declined 5.8% to $436.5 million. Within DTC, e-commerce revenue decreased 12% and represented 29% of DTC sales; company-operated store revenue fell 3%.

Footwear was the weakest major product category, declining 7.7% to $245.3 million. Apparel revenue fell 1.7% to $734.0 million, and accessories decreased 4.4% to $95.7 million.

Profitability, Cash Flow and the Balance Sheet

The 590-basis-point gross-margin expansion was primarily attributable to refunds related to prior-year IEEPA tariff costs. Foreign exchange, unfavorable regional and channel mix, and pricing pressure partially offset that benefit. Adjusted SG&A increased about 4% to $541.4 million, reflecting targeted brand investments alongside ongoing cost controls.

The improvement in operating income did not fully reach the bottom line. Under Armour recorded $29.1 million of pretax income but incurred $28.3 million of income tax expense, leaving GAAP net income at just $0.5 million. Net interest expense also increased to $10.6 million from $4.1 million.

Operating cash flow rose to $109.1 million from $48.9 million. Inventory used $193.5 million of cash during the quarter, while the increase in accounts payable contributed $243.4 million. Reported inventory of $1.109 billion was down 3% year over year but approximately 21% above the March 31, 2026 balance of $914.8 million.

Cash and cash equivalents reached $396.0 million, up from $309.2 million at the end of March. Under Armour used proceeds from restricted investments to settle $600 million of previously discharged senior-note obligations. The company also had $200 million outstanding under its $1.1 billion revolving credit facility at quarter-end.

Under Armour recorded $4.0 million of restructuring charges and approximately $2 million of transformation-related SG&A expense during the quarter. Cumulative costs under the Fiscal 2025 Restructuring Plan reached $266 million against an expected total of approximately $305 million, with the program expected to be substantially completed by December 31, 2026.

Tariff Refunds and Cost Cuts Are Protecting Profitability

The quarter’s central issue was the divergence between falling revenue and improving profitability. The tariff refunds helped gross profit rise by $47.3 million even though revenue declined by $36.1 million, allowing operating income to increase despite higher SG&A spending.

That benefit is also important to the full-year outlook. Under Armour expects approximately 150 basis points of its projected fiscal 2027 gross-margin expansion—and about $70 million of operating income benefit—to come from recovering IEEPA tariff costs expensed in fiscal 2026. Excluding that benefit, management still expects margin expansion from pricing, lower discounting and channel mix, but foreign exchange and supply-chain pressures remain offsets.

With the revenue forecast reduced, Under Armour plans to protect its unchanged operating-income outlook through deeper expense reductions. This means delivery of the profitability target increasingly depends on executing those cost actions while preserving brand investment and full-price selling.

Fiscal 2027 Guidance

Under Armour lowered its fiscal 2027 revenue outlook because of softer demand, particularly in North America and Asia-Pacific. It maintained its gross-margin, operating-income and adjusted EPS ranges after announcing larger planned SG&A reductions.

The outlook includes approximately $35 million of expected headwinds related to the conflict in the Middle East. For fiscal Q2 2027, Under Armour expects a GAAP operating loss of $1 million to $11 million and adjusted operating income of $10 million to $20 million. GAAP diluted loss per share is projected at $0.03 to $0.06, with an adjusted loss of $0.01 to $0.03.

Risks for Investors to Watch

• Demand weakness is spreading geographically. North American revenue fell 9% in the quarter, and the full-year forecasts for both EMEA and Asia-Pacific were revised from growth to contraction.
• A significant part of margin expansion comes from tariff refunds. Approximately 150 basis points of the expected full-year gross-margin improvement and $70 million of operating income benefit are tied to recovering prior-year costs rather than current-period revenue growth.
• Foreign exchange and Middle East disruptions remain cost pressures. Under Armour expects about $35 million of full-year headwinds from the Middle East conflict, while unfavorable currency effects weighed on first-quarter margin.
• Inventory requires monitoring as sales decline. Inventory was lower year over year but rose approximately 21% from the end of March, creating a potential working-capital and markdown consideration if demand remains weak.
• The unchanged profit outlook depends on cost execution. Under Armour is planning larger SG&A reductions to offset the weaker revenue forecast while continuing to fund selected brand and product investments.

Summary

Under Armour’s fiscal Q1 2027 results combined weaker sales with substantially better operating profitability. Tariff-cost refunds drove most of the gross-margin expansion, while EMEA growth and improved North American segment income provided support against declines in North America, Asia-Pacific, DTC and footwear. The main question for the remainder of the year is whether deeper expense reductions and underlying margin actions can preserve the unchanged profit outlook as the company now expects a broader revenue contraction.

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