Under Armour's International Growth Masks Persistent Domestic Weakness in Turnaround Effort

What happened

Under Armour posted 3% international sales growth in Q3, fueled by a Latin America surge and steady EMEA gains, as reported by Zacks. However, the DeepValue master report underscores that this positive momentum is overshadowed by a 10.3% decline in North America revenue, which represents about 60% of total sales and fell across both wholesale and direct-to-consumer channels. Gross margin deteriorated by 310 basis points to 44.4%, driven by ~200 bps from tariffs and ~140 bps from promotional pricing in North America, highlighting ongoing profitability stress. Inventory remains elevated at $1.075 billion, increasing markdown risks and complicating the turnaround despite restructuring efforts. The company's broader narrative remains dependent on proving a cost reset and demand stabilization in North America during the upcoming Q4 FY2026.

Implication

The international sales growth provides a modest offset to North America weakness but does not address the core issues of profitability and demand quality. Without improvement in North America revenue trends and gross margin, the turnaround thesis lacks the operational proof needed for sustainable earnings. High inventory levels elevate the risk of further promotions, which could worsen margin pressure and delay recovery. Management's guided Q4 SG&A decline is a critical near-term catalyst; failure to deliver would undermine confidence in the cost reset. Therefore, while international momentum is a positive, investors should await Q4 results before adjusting positions, aligning with the 'WAIT' rating.

Thesis delta

The news of international growth does not materially shift the investment thesis, which remains centered on North America stabilization and cost control. It reinforces the narrative of international offset but fails to provide evidence for the key proof points—SG&A decline and reduced promotional pressure—required in Q4 FY2026. Thus, the thesis holds unchanged, with the stock still needing validation from upcoming quarterly results.