Under Armour (NYSE:UAA) shares fell sharply on Tuesday after Citi cut its rating on the stock to Sell from Neutral, citing growing challenges facing the company’s North America turnaround and a risk profile tilted to the downside.
The sportswear group’s shares were down roughly 6% in premarket trading by 05:39 ET.
The downgrade follows a strong rally last week, when Under Armour lifted its full-year outlook after reporting better-than-expected third-quarter results, pushing the stock higher.
Despite the earnings beat in the third quarter of fiscal 2026, Citi analyst Paul Lejuez said there are “several reasons we are cautious on the NAM brand turnaround,” pointing to an intensely competitive landscape, weak traffic in the direct-to-consumer channel and the likelihood of higher marketing spend.
He also highlighted a deceleration in the EMEA region, where constant-currency sales growth slowed from high single digits in the first half to just 2% in the third quarter, with macroeconomic pressures — particularly in the U.K. — weighing on demand.
Under Armour has reiterated that fiscal 2027 will be a year of stabilization in North America, with sales expected to be broadly flat. Lejuez said the company still needs to prove that the brand is gaining traction with consumers before major wholesale partners materially increase shelf space or orders.
“DTC trends in NAM remain weak due to weak traffic trends,” the analyst wrote, adding that promotions in the region created a 140-basis-point drag on gross margin in the third quarter.
“3Q results show UAA is still needing to promote to drive traffic, implying the need to invest more in brand building/marketing to prove to their key retailer partners that their customer is seeking out the brand,” he said.
“This is a tough proposition to underwrite given how competitive the athletic environment is in the U.S., where other brands like Nike, On, Hoka, Salomon, Adidas (among others) are focused on gaining market share in wholesale,” Lejuez added.
In EMEA — previously described as a bright spot — Citi now sees softer momentum, with the bank forecasting fiscal 2027 constant-currency growth of 1.5%, below market consensus, due to ongoing macro headwinds.
Lejuez also warned that Under Armour is likely to post another year of negative free cash flow in fiscal 2026 and said it will be “tough for UAA to grow EPS in F27.” With the shares up about 25% since the earnings release and trading at 15.2 times fiscal 2027 EV/EBITDA, “we see the risk/reward skewed to the downside,” he said.
Citi raised its fiscal 2026 EPS estimate to $0.15 from $0.06, reflecting lower SG&A and tax costs in the third quarter, but left its fiscal 2027 forecast unchanged at $0.14, well below the consensus estimate of $0.22. The bank maintained its $6.20 price target.
In guidance issued last week, Under Armour said it now expects fiscal 2026 adjusted EPS of 10 to 11 cents, compared with prior guidance of 3 to 5 cents. Management said the fall order book in North America was “encouraging” and noted that while traffic remains soft, “underlying indicators are improving.”
The company continues to forecast a 4% decline in annual revenue, narrowing its previous guidance for a 4% to 5% drop. Analysts had been expecting a 4.2% fall to $4.95 billion, according to LSEG data.
Third-quarter revenue declined 5% to $1.33 billion, beating expectations for a 6.3% drop to $1.31 billion, while adjusted earnings came in at 9 cents per share, compared with forecasts for a 2-cent loss.