Under Armour Faces Significant Profit Decline Due to Tariffs

Under Armour has projected a dramatic 50% decrease in profitability for the year 2025, attributing this downturn to the impact of tariffs. CEO Kevin Plank disclosed this forecast during a recent analyst meeting, highlighting an expected $100 million in additional costs from trade levies. In response, the Baltimore-based sportswear company is implementing price hikes and refining its product offerings. This approach is part of a broader strategy to elevate the brand's market positioning towards a more premium segment. Notably, the price of Under Armour's flagship tech T-shirt has risen to $25, with potential further increases on the horizon. Additionally, the company is now offering a hat priced at $45, significantly above the market average for similar items.

The financial strain from tariffs compounds existing challenges for Under Armour, including a persistent decline in sales. The first quarter of the year saw a 4% drop in revenue to $1.1 billion, with a further 6% to 7% decrease anticipated in the second quarter. Efforts to streamline operations and improve efficiency through restructuring have also contributed to ongoing earnings pressures. Despite these hurdles, there are signs of progress. The latest quarter reported a 70 basis point improvement in gross margins, driven by a more favorable product mix and disciplined pricing strategies. Neil Saunders of GlobalData observed that while the rate of sales decline has slowed from previous double-digit figures, sales volumes remain over 14% lower than those recorded in 2022.

Saunders pointed out that Under Armour's efforts to curate a more selective product range and enhance quality are steps in the right direction. However, the brand continues to face challenges in distinguishing itself within a highly competitive market. In some retail environments, Under Armour products risk being overshadowed by more fashionable competitors such as Hoka and On, potentially relegating them to commodity status. For more details, visit https://www.citybiz.com.