Under Armour 4Q26 Immediate Call Postmortem
Is Kevin intentionally trying to sink the stock price to take the company private? He sounded more clinical on this call (normally more inspirational), like he was just checking the boxes on what he needs to say so he can move on to whatever else he needs to do today. Despite years of restructuring charges and the benefit of tariff reversal, they will not make money once again in FY27 (~$0.10 in EPS) so of course that means they need $30 million of incremental marketing spend just so they can have yet another annual revenue decline… This does not feel like the “stabilization” that Kevin claims for FY27. Normally we would think he is sandbagging the guide but how many years in a row can we say that and ultimately end up being wrong?
Jay Sole was all over “stabilization” in Q&A and the new CFO Reza pretty much repeated their guidance as the answer. Kevin wants us all to know that they are focusing on quality of revenue. If that’s the case, then why are they not making money once again? Yes, we get that there is a 70-120 improvement in core gross margin, but EPS is the same on down revenue. Kevin “thinks” they are positioned well for sustainable growth in FY28 and beyond.
I will say that Reza did a pretty good job on his first call though – still not sure if he can be the counterweight that is necessary to Kevin though. People should listen to his answer to Drbul’s question to get a sense for his personality and his take on the company. They have the brand and the product, the issue is marketing. Have a huge focus on driving profitability – dunno about that bud.
Kevin certainly made a point to focus on marketing. Apparently have built a modern marketing engine akin to what they used to have in the early years. I agree that marketing is a lot better but not sure would go so far to say anything they are doing is similar to the old “Protect This House” campaign.
Kevin later admitted that they knew the incremental marketing spend would be heavily scrutinized. He sounded a lot better when he talked about marketing so suppose that is a good thing.
At least we are hearing about innovation other than the backpack and hat (think Kevin finally got the message to stop talking about that). Kevin has hinted at updating the basic t-shirt in the past and today talks about the Bouncy T, which will have a price of $65 and be exclusively sold at Dick’s in the US. Went out of his way to say this is not a silver bullet of success but more representative of an improved product process. Not sure if that’s good or bad. Later talked about baselayer compression as an example of innovation for this year.
DTC was up 8% in owned and operated stores, which would normally be very encouraging if it wasn’t for the 90 basis points of gross margin pressure from promotional activity in the channel. Really wish a sell-sider would ask about the international brand house door count, which sequentially dropped by a shockingly high number of stores and is now the lowest it has been since 2017. Laurent’s associate William got them to give some good color on China but they didn’t really touch on this subject.
*These are our unabridged quick thoughts and notes from the call. We get them out as soon as possible after the call ends. Management has given some topics to dig deeper into and will circle back afterwards with much more in depth work on what was mentioned. You can find that work (and more on Under Armour and other retail/consumer research) at our website here: M Squared Capital
Originally posted on X and Substack.