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Athletic apparel, footwear, and equipment maker Under Armour (UAA) can't protect itself against a steep selloff in the wake of yesterday's Investor Meeting that was meant to inspire confidence in the company's ongoing turnaround plan. Instead, uncertainty regarding the timing and effectiveness of UAA's strategy only seemed to increase, prompting a nasty 14% drop over the past two sessions. While the company reaffirmed its FY25 EPS guidance of $0.24-$0.27, participants were left wanting for more, looking for concrete evidence that its new plan will yield stronger results in the coming quarters.

• There are several pieces to that plan, but the primary mission is to strengthen the product, brand, and commercial strategies, making UAA more competitive and improving its ability to deliver strong value creation for shareholders. While UAA's brand already lagged behind larger rival NIKE (NKE) -- which is dealing with its own innovation-related setbacks -- rising competition in the footwear category from brands like On Holdings (ONON) and Skechers (SKX) have only added to the challenges.
• Reinvigorating its product lineup and shifting more towards the premium side are key pillars of its strategy to reset and strengthen the brand, especially in the core North America market where UAA continues to struggle. In Q2, North American revenue fell by 13% yr/yr to $863 mln, compared to a decrease of just 5% for international in constant currency.
• It won't be a quick fix, though, as UAA's new product lineup won't launch until the fall of 2025, with a ramp up of those products not occurring until 2026. When the company reported Q1 results in early November, it guided for a 14-16% revenue decline in North America, which still appears to be the expectation after UAA reaffirmed its FY25 guidance yesterday.
• On a more positive note, UAA has reined in promotional and discounting activities, and it has kept a tight lid on expenses. As a result, gross margin expanded by 200 bps to 49.8% in Q2, while SG&A expenses decreased by 13% to $530 mln, leading to a 63% yr/yr surge in EPS to $0.39. Maintaining this pricing and cost discipline are also key components of UAA's turnaround plan, as reflected in its expectation for gross margin to improve by 125-150 bps in FY25.

Overall, UAA offered a detailed view of its strategy to turn its struggling business around, but the lack of progress that's expected for the remainder of FY25 is creating disappointment. Furthermore, without many details surrounding its new product lineup for the fall of 2025, there's still plenty of uncertainty regarding whether UAA's turnaround plan will even bear fruit next year.