Under Armour Faces Profitability Challenges Amid Tariff Impacts and Sales Decline

Under Armour, a leading name in the sportswear industry, has forecasted a notable decrease in its profitability for the year 2025, with tariffs accounting for half of the expected decline. The company's CEO, Kevin Plank, revealed to analysts that an additional $100 million in costs related to trade levies is anticipated, exacerbating the challenges posed by a continuous sales slump. In an effort to mitigate these financial pressures, Under Armour is adopting price increases and refining its product lineup as part of a comprehensive strategy to enhance its standing in the market.

The financial strain on Under Armour is evident from its first-quarter revenue, which fell by 4% to $1.1 billion, with a further 6% to 7% drop expected in the second quarter. These figures highlight the critical nature of the company's turnaround initiatives, including restructuring charges designed to improve operational efficiency. Despite these obstacles, there are signs of improvement, such as a 70 basis point enhancement in gross margins in the most recent quarter, attributed to a more advantageous product mix and stringent pricing strategies.

Neil Saunders from GlobalData noted that while the rate of Under Armour's sales decline has decelerated from previous double-digit figures, it remains substantially lower than the levels seen in 2022. Saunders commended the company's shift towards more selective product assortments and higher-quality offerings as positive developments. Nevertheless, he pointed out the ongoing difficulty Under Armour faces in distinguishing itself in a fiercely competitive market, where it is at risk of being eclipsed by rising brands such as Hoka and On.

To address these challenges, Under Armour is implementing premium pricing strategies, including raising the price of its signature tech T-shirt to $25, with potential further increases, and launching a $45 hat, which is considerably more expensive than most competitors' products. These actions underscore the company's intent to reposition itself within a higher market segment, even as it contends with the compounded difficulties of tariff-related expenses and a tough retail landscape.