Under Armour added $43.4 million of operating income on a sales base that shrank by roughly $36 million. That is the cleanest way to read the three months ended June 30: the company kept more of each dollar, but sold fewer dollars.
Shares closed at $6.39 on August 6, down 5.3%. The latest report puts the operating improvement in sharper terms. Gross margin rose to 54.1% from 48.2%, operating margin reached 4.3% from 0.3%, and operating cash flow more than doubled to $109.1 million.
The sales line did not participate. Revenue fell 3.2% to $1.1 billion. Apparel declined on unfavorable channel mix and lower average selling prices, while footwear lost both price and unit volume.
Under Armour’s own explanation for apparel is blunt:
"Apparel decreased primarily due to unfavorable channel mix and lower average selling prices, partially offset by the impact of foreign exchange rates."
10-Q 2026-08-07
The margin improvement came alongside weaker pricing in apparel and lower pricing and unit volume in footwear.
The strongest receipt is also the one that makes the improvement harder to treat as a simple operating reset. Management says the gross-margin expansion was mostly tied to supply-chain benefits, including the recovery of U.S. tariffs incurred in the prior year.
"This increase in gross margin of approximately 590 basis points was primarily driven by favorable impacts of 690 basis points from supply chain, including 640 basis points due to the recovery of certain U.S. tariffs that were incurred in the prior year."
10-Q 2026-08-07
The arithmetic is revealing without needing much interpretation: the tariff recovery alone was larger than the total gross-margin improvement. Lower restructuring, marketing, and salaried compensation expenses also helped operating income, while the filing quantifies the tariff item most prominently in its gross-margin explanation.
Cash generation improved at the same time. Capital spending fell 58.7% year over year, and free-cash-flow margin improved by 7.4 percentage points. Inventory declined 2.9%, while accounts receivable rose 3.6%, so the working-capital picture was not simply a larger stockpile of goods.
The balance sheet tells a separate story. Cash fell to $396.0 million from $911.0 million, largely because Under Armour used restricted investments to satisfy and discharge $600 million of senior notes due in 2026.
"Investing Activities Cash flows provided by investing activities increased by $620.8 million primarily due to proceeds from restricted investments held to satisfy and discharge our $600 million Senior Notes due 2026 upon maturity."
10-Q 2026-08-07
That cash outflow reflects a debt maturity, not a deterioration in quarterly operating cash flow. It does leave the company with less cash and with interest expense tied to the Senior Notes due 2030 and its revolving credit facility.
The longer record supplies the missing scale. Under Armour’s annual revenue fell 3.8% in the year ended March 31, to $5.0 billion, while net margin was negative 10.0%. The latest three-month period is therefore a sharp profitability improvement inside a business whose recent annual sales trajectory remains negative, not a return to the 2021 revenue peak of $5.7 billion.
Under Armour’s next quarterly report can add one useful piece of evidence: whether the supply-chain contribution to gross margin remains material after this tariff recovery rolls out of the comparison. The unanswered question is how much of the 54.1% gross margin belongs to the business Under Armour is running now, rather than to the prior year’s tariff bill coming back.
Source: Under Armour’s 10-Q filed August 7, 2026, and comparable company-reported annual results.