Under Armour reported its first quarter of fiscal 2027 before Friday’s open. Revenue was $1.10 billion, down 3% year over year and 4% in constant currency, slightly under the $1.11 billion analysts polled by LSEG expected. Adjusted earnings came in at 5 cents a share against roughly 2 cents expected. Net income was $1 million, against a $2.6 million loss a year ago. Shares were down about 4% in premarket trading.
Gross margin is where the quarter gets loud. It rose 590 basis points to 54.1% — a number that would be extraordinary for any apparel company in any year. The company attributed it primarily to refunds of tariff costs paid under the International Emergency Economic Powers Act and expensed back in fiscal 2026. Money that went out the door last year came back in this one, and it landed in cost of sales.
Then the guidance. Full-year revenue is now expected to fall at a mid-single-digit percentage rate, down from a prior view of a “slight decline.” Full-year operating income guidance did not change: $96 million to $116 million, with adjusted operating income of $140 million to $160 million and adjusted EPS held at $0.08 to $0.12. Management said cost discipline is what holds the profit line while revenue falls further.
Our take: Do the arithmetic the press release doesn’t. The company said its profit outlook includes an approximately $70 million benefit from IEEPA tariff refunds, plus an estimated $35 million hit from the Middle East conflict. Set that $70 million against a full-year operating income guide of $96–116 million and the refund is somewhere between 60% and 73% of the entire number. Even measured against the adjusted figure of $140–160 million, it’s roughly half. “Maintained” is doing enormous work in that headline. Under Armour did not hold its profit forecast by selling more or costing less — it held it with a legal outcome that arrives once. Strip the refund out and the maintained guide is a cut, on top of the revenue cut they did disclose.
The refund quarter is becoming a genre
This is the second time this week a company has printed a margin line flattered by returned duties. Nintendo booked roughly $300 million of refunded US tariffs as a reduction of cost of sales on Thursday and posted a 150.5% jump in operating profit on a 9.5% revenue decline. The mechanic is identical: a prior-year expense reverses, the reversal hits the current period, and a margin chart goes vertical for reasons that have nothing to do with the business.
The difference is what sits underneath. Nintendo’s refund landed on top of a real mix shift — digital sales up 90%, software attach holding steady. Under Armour’s is landing on North America down 9%, footwear down 8%, apparel down 2% and accessories down 4%. One windfall arrived on a growing base. The other arrived on a shrinking one.
The turnaround has now cost $266 million
Kevin Plank returned as chief executive in 2024 and has been running a repositioning built on scarcity: cut the product assortment by roughly 25%, push into higher-priced training, running and team-sport gear, chase a younger buyer. New footwear this year spans about $30 to $275. The restructuring and transformation program has absorbed $266 million to date and is expected to complete by year-end.
What it has not yet produced is a quarter where North American revenue goes up. Morningstar’s David Swartz put it plainly: “There isn’t much evidence that its turnaround efforts are having a significant impact.” International did grow, up 5% to roughly $490 million — the one clean operating positive in the release, and one the guidance cut partly walks back, since management now expects softer results in Asia-Pacific and EMEA too.
The pattern investors have been punishing all week is a company whose reported profitability improves while its forward growth deteriorates. Block posted a record 27% adjusted operating margin and fell anyway after guiding gross profit growth down to 18%. Datadog beat and raised and had its worst day ever because of one disclosure about future usage. The market is grading the direction of travel, not the current print — and it is getting quicker at spotting profit that came from somewhere other than operations.
What to watch
- Whether a second refund arrives. The $70 million is a one-time legal recovery baked into this fiscal year. Fiscal 2028 guidance starts from a base without it unless more duties come back.
- North America in Q2. Down 9% is the number the entire turnaround thesis has to reverse. Another quarter near that level and the assortment cut looks like shrinkage rather than strategy.
- The $35 million Middle East drag. An estimate sitting inside a maintained guide. If it grows, there is no offsetting windfall left to absorb it.
- Gross margin without the refund. Next quarter’s comparison strips most of the benefit out — the first clean read on whether the higher-price strategy is actually holding price.
Under Armour did the honest thing on revenue and told investors the year will be worse than it thought in May. On profit it did something subtler: it kept a number intact by leaning on a government refund and a cost program that finishes this year. The quarter’s best headline — 590 basis points of margin expansion — is the one least likely to repeat. The quarter’s worst number — North America down 9% — is the one most likely to.