Expense control supports profitability, but weakening consumption further delays UAA's revenue recovery

Overview

This report reviews Under Armour Inc.'s F1Q27 results and updated FY27 guidance. The company achieved better-than-expected adjusted EPS and EBIT margin through SG&A control, but revenue, gross margin, and consumer traffic were all weaker than expected. Since late May, demand in North America and Asia Pacific has weakened noticeably, with macro pressures offsetting progress in product innovation, brand marketing, and wholesale partnerships. Goldman Sachs has therefore become more cautious on the pace of revenue and profit recovery, maintaining a Neutral rating and lowering the target price.

Core views

The earnings beat was mainly driven by cost cuts rather than substantive improvement on the revenue side. Management maintained FY27 adjusted EBIT and EPS guidance by reducing marketing spend, controlling compensation, and advancing efficiency measures, but the trade-off was a significant downgrade to full-year revenue expectations. Goldman Sachs believes near-term sales momentum has weakened simultaneously across multiple regions, and the recovery path lacks clarity. At the same time, existing cost leverage has begun to take effect, and the scope to further offset revenue pressure through additional cost reductions may be limited. Given UAA's weaker performance versus covered peers and relatively high valuation, more durable evidence of sales improvement is needed before taking a more constructive view.

Analysis framework

The report compares quarterly actual results with Goldman Sachs forecasts and FactSet consensus expectations, breaking down variances in revenue, gross margin, SG&A, and adjusted EBIT margin. It then assesses structural changes in management's FY27 guidance and adjusts FY27 to FY29 earnings forecasts accordingly. The target price is derived using a relative EV/EBITDA valuation method based on the fifth to eighth forward quarters, while incorporating improved cost control, peer valuations, and revenue recovery risks to determine the target multiple.

Methodology notes

• Results analysisComparison of actual results with market expectations

  Earnings expectations variance analysis

  Compares actual F1Q27 revenue, EPS, gross margin, SG&A, and EBIT margin with Goldman Sachs forecasts and FactSet consensus expectations to identify the sources of the earnings beat and operational weaknesses.

• Valuation analysisFifth to eighth forward-quarter EV/EBITDA valuation method

  Enterprise value multiple relative valuation

  Goldman Sachs rolled the valuation window forward and applied a 9.75x target EV/EBITDA multiple, up from the prior 9.00x, to reflect stronger expense control; this yields a 12-month target price of $5.50.

• Factor analysisGoldman Sachs factor profile

  Growth, financial returns, valuation, and composite factor rankings

  This framework uses standardized rankings of forward revenue, EBITDA, EPS, ROE, ROCE, CROCI, and multiple valuation metrics to compare UAA with covered Americas stocks and apparel accessories brand peers.

• M&A analysisGoldman Sachs M&A ranking

  Potential acquisition target probability classification

  UAA's M&A ranking is 3, corresponding to an approximately 0% to 15% probability of becoming an acquisition target, which is viewed as not materially impactful; therefore, no M&A premium is included in the target price.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Under Armour Inc. (UAA.US) stock

  Target company stock directly covered by this report

  Strengths

  SG&A control was stronger than expected, while product innovation, brand marketing, and wholesale partnerships are still progressing; renewed acceleration in the direct-to-consumer business and recovery in international markets could drive upside to margins and revenue.

  Weaknesses

  Sales momentum is weakening simultaneously across multiple regions, and brand and product initiatives have not yet produced sustained demand improvement; medium-term EPS forecasts have been significantly lowered, and the recovery is more dependent on expense reductions.

  Comparison

  Management's latest outlook is more cautious than that of other consumer companies covered by Goldman Sachs; UAA shows weaker resilience in the current consumer environment, and its valuation is relatively high versus peers.

  Risks

  Prolonged weakness in North America, promotional and cost pressures, intensified competition, declining brand relevance, and further macro weakness suppressing discretionary consumer demand.

Key data

• F1Q27 adjusted EPS$0.05Above Goldman Sachs' forecast of $0.01 and FactSet consensus expectations of $0.02.
• F1Q27 net revenue growth-3.2%Excluding FX effects, it was -4.4%, below Goldman Sachs' forecast of -2.3% and consensus expectations of -2.2%.
• F1Q27 gross margin54.1%Expanded by approximately 590 basis points year over year, but was slightly below Goldman Sachs' forecast and consensus expectations of 54.3%.
• F1Q27 adjusted SG&A expense ratio49.3%Significantly better than Goldman Sachs' forecast of 51.2% and consensus expectations of 51.1%, reflecting the effectiveness of expense control.
• F1Q27 adjusted EBIT margin4.8%Above Goldman Sachs' forecast of 3.1% and consensus expectations of 3.2%.
• FY27 adjusted EPS guidance$0.08-$0.12Unchanged; Goldman Sachs' forecast is $0.10, and consensus expectation is $0.11.
• FY27 adjusted EBIT guidance$140mn-$160mnUnchanged; Goldman Sachs' forecast is $149.3mn, and consensus expectation is $148.7mn.
• FY27 revenue guidanceMid-single-digit declinePrior guidance was for a slight decline, indicating a clear deterioration in the demand outlook.
• F2Q27 revenue guidanceHigh-single-digit declineNorth America and Asia Pacific are both expected to decline by high single digits, while Europe, Middle East and Africa is expected to decline by low double digits.
• FY27 to FY29 EPS forecasts$0.10/$0.14/$0.22Prior forecasts were $0.10/$0.22/$0.30, mainly reflecting weaker sales growth and a slower medium-term recovery.
• 12-month target price$5.50Previously $6.00; implies approximately 10.0% downside relative to the closing price of $6.11.
• Target EV/EBITDA multiple9.75xPreviously 9.00x; the multiple increase reflects improved cost control capabilities.
• Market capitalization and enterprise value$2.6bn/$2.7bnMarket capitalization and enterprise value disclosed in the report.
• Share price performance on report dateUAA -4.5%The S&P 500 rose 0.6% over the same period, with UAA significantly underperforming the market.

Impact & implications

For investors, the positive aspect of these results is that expense discipline can support near-term profitability when revenue is under pressure, but earnings quality remains skewed toward cost-cutting. The revenue guidance cut, deterioration in traffic across regions, and sharp reductions to FY28 to FY29 earnings forecasts indicate a significant slowdown in the medium-term recovery slope. While reduced marketing spend helps protect profits, it may limit brand heat and demand recovery. Since the target price is below the current price and valuation is relatively high versus peers, the risk-reward does not currently support a more constructive rating.

Risks

• Prolonged weakness in North American demand could hinder brand repositioning and sales recovery.
• Increased promotional activity and cost pressures could cause gross margin and overall margin recovery to stall.
• Intensifying competition in the athletic apparel industry could limit market share recovery and improvement in brand relevance.
• Further weakening in the macro environment could continue to pressure global discretionary consumer demand and traffic.
• Maintaining profits through reduced marketing spend could weaken subsequent brand building and revenue growth.
• Cost control measures are already being implemented; if sales continue to deteriorate, additional expense leverage available to offset revenue pressure may be limited.

What to watch

• Whether North America and Asia Pacific consumer traffic shows sustained improvement in F2Q27 and the second half after deteriorating from late May.
• Whether F2Q27 revenue can meet guidance for a high-single-digit decline, and whether the low-double-digit decline in Europe, Middle East and Africa narrows.
• Whether product innovation, brand marketing, and wholesale partnerships can translate into sustainable full-price sales and market share gains.
• Whether the direct-to-consumer channel can reaccelerate and drive structural margin expansion.
• Whether SG&A savings can continue to be realized without damaging brand investment and medium-term growth.
• Whether FY27 adjusted EBIT can remain within the $140mn to $160mn range, and whether gross margin can withstand promotional and cost pressures.
• The pace of international market recovery, and whether FY28 and FY29 revenue and EPS forecasts still face downside risk.