Core Viewpoint - Under Armour's Q1 FY2026 earnings report indicates operational progress with improved gross margins and adjusted operating income, despite a decline in GAAP revenue and adjusted EPS falling short of expectations [1][2][3] Financial Performance - GAAP revenue for Q1 FY2026 was $1,134 million, a decrease of 4.2% year-over-year and 2.0% below analyst expectations of $1,155 million [1][3] - Adjusted EPS was $0.02, below Wall Street's estimate of $0.03, reflecting ongoing sales declines and an uncertain outlook [2][3] - Adjusted operating income increased to $24 million from $8 million in the prior year, while GAAP net income improved to -$2.6 million from -$305 million [10][11] Revenue Trends - North America, Under Armour's largest market, saw a 5.5% revenue decline to $670 million, while international revenue fell 1% to $467 million [6] - EMEA revenue grew by 9.6% to $248.6 million, contrasting with declines in Asia-Pacific (down 10.1%) and Latin America (down 15.3%) [6] - Direct-to-consumer (DTC) sales contracted by 3.5%, with e-commerce revenue shrinking by 12% [7][13] Product and Market Dynamics - Apparel revenue decreased by 1.5%, while footwear revenue dropped 14.3%, indicating competitive challenges [8] - Accessories revenue increased by 8.1%, showcasing some product category resilience [8] - The company is focusing on premiumization and brand strength through high-profile partnerships and innovative product launches [5][12] Strategic Focus Areas - Under Armour is prioritizing digital engagement and expanding its DTC and e-commerce channels, despite a deliberate pullback on discounting [5][13] - Supply chain management remains critical, with ongoing risks related to sourcing and tariffs [14] - The company aims to streamline operations and cut costs through a transformation plan, expecting annual savings of $75 million by the end of FY2026 [11][12] Future Outlook - For Q2 FY2026, management anticipates a revenue decline of 6-7%, with gross margin projected to drop by 3.4-3.6 percentage points [16] - Adjusted operating income is expected to be in the range of $30-40 million, with adjusted diluted EPS forecasted between $0.01 and $0.02 [16] - There is significant uncertainty regarding tariffs, cost inflation, and consumer demand, leading to no full-year guidance [16][17]