Morning Note: Market news and a subdued update from Under Armour.

Market News

Asian stocks rose, while US and European futures climbed on optimism over a meeting between the US and Russian leaders. Volodymyr Zelenskiy said Ukraine won’t cede territory to end the war with Russia. NATO’s Mark Rutte told ABC that any progress toward peace would require territory to be “on the table” in negotiations. Brent Crude dipped to $66 a barrel on fears of increased supply, while gold has fallen back to $3,360 an ounce.

Scott Bessent said the US will largely complete negotiations with countries that have yet to secure a trade deal by the end of October, Nikkei reported. Nvidia and AMD agreed to pay 15% of their revenues from Chinese AI chip sales to the US government in a deal to secure export licenses. The arrangement reflects US President Trump’s efforts to engineer a financial payout for America in return for concessions on trade.

Fannie Mae and Freddie Mac soared on reports the US is preparing to sell shares in an offering that could start as early as this year.

Fed Governor Michelle Bowman said she supports three interest-rate cuts this year, citing recent signs of labour market weakness. The 10-year Treasury currently yields 4.26%.

Lithium prices and stocks surged after CATL suspended production at China’s Jianxiawo mine for at least three months.

Source: Bloomberg

Company News

At the end of last week Under Armour, the sports footwear and apparel company, released results for the first quarter of its financial year to March 2026. Performance came in below expectations and guidance was cut. In response, the shares fell by 20%. This appears to be fairly company specific – we note industry leader Nike was only down by 1% – with the suggestion that Under Armour is likely feeling pressure as retailers prioritise stronger brands at the expense of weaker players in the market.

The company should be well placed to benefit from increased consumer demand for healthier living and the shift to personalised products. However, in response to a downturn in the group’s performance, in May 2024 the Under Armour announced a restructuring plan aimed at improving its financial and operational efficiencies. The strategic focus is to position the brand with premium products and increased average selling prices through innovative offerings. The plan is estimated to cost between $140m and $160m, with $110m in restructuring and impairment charges incurred by the end of the latest quarter, of which $65m was cash-related, and $45m non-cash-related.

In the near term, these deliberate decisions, combined with softer demand, are weighing on the group’s results. In the three months to 30 June, revenue fell by 4% currency neutral terms, to $1,134m, a touch below the consensus forecast.

Revenue to wholesale customers fell by 5% to $649m, while direct-to-consumer revenue was down 3% to $463m, driven by a 1% increase in owned and operated store revenue and 12% decline in eCommerce. By category, apparel fell by 1% to $747m, Footwear was down 14% to $266m, and Accessories increased 8% to $100m.

Revenue in North America fell by 5.5% to $670m, while the international business slipped by 2% on a currency neutral basis, to $467m (41% of total revenue). Within the international business, revenue in EMEA grew by 6%, but fell in Asia-Pacific (-10%) and Latin America (-8%).

The gross margin grew 70 basis points to 48.2%, driven primarily by favourable foreign exchange, pricing, and product mix, partially offset by an unfavourable channel mix and higher supply chain costs compared to the prior year. Adjusted selling, general & administrative expenses fell by 6% to leave adjusted EPS rising from 1c to 2c, versus the market forecast of 3c. The group has a strong balance sheet and ended the quarter with a small net debt position. Inventory rose by 2% to $1.1bn.

Looking forward, the group highlights ongoing uncertainty around trade policies and the broader macroeconomic environment, including potential demand and cost impacts from tariffs, which the company estates at $100m in FY2026. When combined, even with mitigation efforts and disciplined SG&A management, the group’s profitability is projected to be about half of what it was last year.

The company’s guidance for the current quarter is more subdued than expected. Revenue is expected to decline by 6%-7%, versus a 3% drop forecast by the market. This includes an anticipated low-double-digit decrease in North America, high-single-digit growth in EMEA, and a low-teens decline in the Asia-Pacific region. The gross margin is expected to decline 340 to 360 basis points, while adjusted diluted EPS is forecast to come in at 1c-2c.

Source: Bloomberg