Is Cost Optimization the Key to Under Armour's Gross Margin Strength?

Core Insights - Under Armour, Inc. (UAA) reported a gross margin of 46.7% for Q4 fiscal 2025, a year-over-year increase of 170 basis points, driven by lower product and freight costs, reduced discounting, and improved royalty terms [1][2][3] Financial Performance - For fiscal 2025, the gross margin was 47.9%, up 180 basis points from the previous year, attributed to reduced supply-chain costs and strategic discount reductions [3] - The company anticipates a gross margin expansion of 40-60 basis points in Q1 fiscal 2026, supported by favorable product mix and continued supply-chain efficiencies [5] Strategic Initiatives - Under Armour is focusing on "higher quality revenue" and regaining pricing power by reducing reliance on markdowns, which is central to its brand elevation strategy [4] - The ongoing restructuring program has led to $89 million in transformation charges but yielded $35 million in savings for fiscal 2025, with expectations of reaching a $75 million annualized cost-saving run-rate by the end of fiscal 2026 [7][9] Cost Management - Selling, general and administrative (SG&A) expenses are projected to decline by 40% from the prior-year quarter, reflecting disciplined spending and enhanced productivity [8][9] - The combination of restructuring-driven savings and tighter cost control positions Under Armour to support gross margin gains and improve overall profitability [9] Market Performance - UAA shares gained 0.8% in the past month, outperforming the Zacks Textile – Apparel industry's decline of 16.5% and the broader Consumer Discretionary sector's performance [10]