Under Armour, Inc. (NYSE:UAA) stock traded lower Friday after the apparel maker reported second-quarter fiscal 2027 results and issued a disappointing third-quarter outlook.

Despite beating revenue expectations, investors weighed continued sales declines, weakness in North America and a weaker-than-expected holiday-quarter earnings forecast.

Management emphasized headwinds related to the Middle East conflict and unfavorable foreign exchange impacts.

The company reported revenue of $1.242 billion, beating the $1.225 billion estimate.

Revenue fell 6.9% year over year, or 7.3% in constant currency.

Adjusted operating income declined to $24.9 million from $53.4 million a year earlier, while adjusted net loss was $2.1 million compared to net income of $15.3 million in the prior year.

President and CEO Kevin Plank emphasized that the ongoing transformation focuses on improving operational efficiency, refining its product portfolio, and strengthening global marketing efforts.

Margin Decline Amid Cost Pressure

Gross margin contracted 30 basis points to 47%, primarily due to unfavorable foreign exchange, channel and regional mix, and pricing headwinds. The impact was partially offset by supply chain benefits and favorable product mix.

Selling, General, and Administrative expenses declined 4% to $557 million, primarily due to lower marketing expenses and disciplined cost management.

North America revenue and International revenue both fell 7% to $737 million and $509 million, respectively.

EMEA and Asia-Pacific declined 9%, while Latin America rose 3%.

North America operating income was $131.8 million at a 17.9% margin, while EMEA posted $39.4 million at a 13.6% margin.

Quarter-end cash totaled $285 million, long-term debt was $580.4 million, and $190 million was outstanding under the $1.1 billion revolver.

Wholesale, DTC And Product Trends

Wholesale revenue fell 6% to $725 million, while direct-to-consumer revenue declined 8% to $494 million.

Apparel revenue fell 6% to $880 million, footwear dropped 11% to $234 million and accessories declined 7% to $105 million.

Inventory increased 4% to $1.1 billion.

Restructuring Costs Reach $280 Million

Under Armour recorded $13 million of restructuring and transformation costs during the quarter.

Costs under the Fiscal 2025 Restructuring Plan to date reached $280 million, with total program costs expected at about $305 million, to be substantially complete by December 31, 2026.

Outlook

The company updated its fiscal 2027 outlook to reflect additional external cost pressures and planned inventory actions.

For the third quarter, Under Armour expects GAAP diluted EPS of a 3-cent to 1-cent loss versus a 4-cent estimate.

Adjusted diluted EPS for the third quarter is expected at a 3-cent to 1-cent loss versus a 4-cent estimate, while revenue decline is expected at 8% to 9%.

For fiscal 2027, the athletic wear company expects revenue to decline at a mid-single-digit rate.

Management now expects gross margin to increase 170 to 220 basis points, compared with its prior expectation of a 220 to 270 basis point improvement, impacted by higher fuel and freight costs, planned inventory actions and foreign exchange headwinds partially offset by benefits from prior-year IEEPA tariff refunds.

Management raised GAAP diluted EPS guidance to a 2-cent loss to 2-cent earnings, from a 5-cent loss to 1-cent loss, versus a 2-cent estimate.

Adjusted diluted EPS guidance remains 8 cents to 12 cents versus an 11-cent estimate, and adjusted operating income remains at $140 million to $160 million.

Expected headwinds from the ongoing Middle East conflict increased to about $45 million from $35 million, while the full-year outlook includes $70 million in benefits from prior-year IEEPA tariff refunds.

The company expects increased supply chain headwinds from the ongoing conflict in the Middle East and unfavorable foreign exchange impacts, and plans to counter them with pricing actions, lower discounting, and a more favorable channel and product mix.

UAA Price Action: Under Armour shares were down 3.23% at $5.11 at the time of publication on Friday, according to market data.