Under Armour expects sales to dip as US tariffs could hit demand

Under Armour said on Friday its sales decline would worsen this quarter as still-high inflation and tariff uncertainty weigh on demand in North America, sending the sportswear maker's shares down 17% in premarket trading.

Maryland-based Under Armour had brought back founder Kevin Plank as CEO in March last year to reboot the business.(REUTERS)

The retailer has struggled to drive up demand in the past two years and efforts to revive the business have hit more roadblocks in recent months due to the Trump administration's shifting tariff policies.

Maryland-based Under Armour had brought back founder Kevin Plank as CEO in March last year to reboot the business. In May, it announced plans to raise prices to offset tariff impacts, further risking demand as customers look for cheaper options.

"It's concerning that, going a year into its restructuring plan, there's still little sign of a reversal in its revenue declines and profitability struggles on the horizon," said Emarketer analyst Sky Canaves.

As of May, the company was sourcing about 30% of its overall merchandise volume from Vietnam and 15% from Indonesia. It faces a direct risk from President Donald Trump's 20% tariffs on goods from Vietnam and 19% on Indonesian goods, though it remains unclear if the levies will change.

"The looming impacts of tariffs on and weaker US consumer demand in the second half of the year don't bode well for its turnaround prospects in the near-term," Canaves said.

The company forecast a decline of between 6% and 7% in current-quarter revenue, compared with analysts' average estimate of a 2.9% drop, according to data compiled by LSEG.

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Under Armour expects quarterly gross margin to decline by 340 to 360 basis points due to potential tariff-related supply chain snags, but said favorable foreign exchange and pricing benefits would partially offset the decline.

It expects adjusted profit per share of between 1 cent and 2 cents, compared with estimates of 26 cents.

For the first quarter ended June 30, revenue fell 4% to $1.13 billion, in line with estimates, while adjusted profit per share of 2 cents missed estimates of 3 cents.