Under Armour Faces Profit Halving Due to Tariffs Amid Sales Decline
Under Armour anticipates a 50% profit reduction in 2025 due to tariffs, alongside a strategic shift towards premium pricing to mitigate a $100 million cost increase and ongoing sales challenges.
Under Armour, the renowned sportswear manufacturer, has projected a significant 50% decrease in its profitability for the year 2025, attributing this downturn to the impact of tariffs. CEO Kevin Plank disclosed to analysts that the company is preparing for an additional $100 million in costs related to trade levies. This financial strain is compounded by a persistent decline in sales, with a 4% drop in the first quarter to $1.1 billion and an anticipated further decrease of 6% to 7% in the second quarter.
In response to these challenges, Under Armour is implementing strategic measures, including price increases and a streamlined product lineup, to reposition the brand towards a more premium market segment. Notably, the price of its signature tech T-shirt has risen to $25, with potential further hikes, and a new $45 hat has been introduced, significantly pricier than most competitors' offerings. These steps are part of a broader turnaround plan aimed at enhancing operational efficiency and improving gross margins, which saw a 70 basis point improvement in the latest quarter.
Despite these efforts, Under Armour continues to face hurdles in distinguishing itself in a highly competitive market. Neil Saunders of GlobalData pointed out that while the company's strategy of offering tighter assortments and higher-quality products is commendable, it still lags behind trendier brands like Hoka and On, risking perception as a commodity product among third-party retailers. The company's sales remain over 14% below 2022 levels, underscoring the uphill battle it faces in regaining its market position.