Under Armour cuts margin growth target as Middle East conflict raises costs
Rising oil prices and supply-chain pressure linked to the Middle East conflict are increasing costs for companies across multiple industries. Under Armour says the disruption is set to take a larger toll on its operating income and has reduced its full-year gross margin growth outlook.
Highlights
- Under Armour raised its expected 2024 Middle East conflict impact to $45 million, up from $35 million, citing higher transportation and supply-chain costs.
- The company revised its annual gross margin growth forecast to 170–220 basis points, narrowing the range from its earlier 220–270 basis-point outlook.
- Quarterly revenue fell 7% to $1.24 billion, North America net revenue declined 7% to $737.2 million, and shares dropped about 12% in premarket trading.
Updated outlook and quarterly performance
As reported by Reuters, Under Armour on Thursday said it now expects a roughly $45 million impact from the Middle East conflict, up from its earlier forecast of $35 million.The athletic apparel company now expects annual gross margin to rise by 170 to 220 basis points, below its previous target for a 220 to 270 basis-point improvement. The revised outlook comes as businesses face higher transportation and supply-chain expenses after the surge in oil prices triggered by the Iran war.
For the quarter ended September 30, revenue fell about 7% from a year earlier to $1.24 billion, but still came in slightly above analysts' average estimate of $1.23 billion, according to LSEG data. Under Armour also posted break-even adjusted earnings for the quarter, compared with analyst expectations for a loss of 1 cent a share.
Regional pressure and margin support plans
North America, the company's largest revenue-contributing segment, posted a roughly 7% decline in net revenue to $737.2 million in the quarter. The weaker regional performance adds to the pressure from conflict-related cost increases that are weighing on the company's broader outlook.Under Armour said higher prices and refunds tied to IEEPA tariff expenses are expected to help support margins in fiscal 2027. Even so, the sharper projected hit from the Middle East conflict unsettled investors, and the company's shares were down about 12% in premarket trading.
Our earlier article on the WTO’s assessment of the Middle East war’s trade fallout explained that repeated conflicts and tariff shocks are pushing companies to reroute shipping and redesign supply chains in ways that could outlast the fighting. We noted the WTO’s expectation of a sharp contraction in Middle East exports and imports, and highlighted that businesses are increasingly accepting higher costs in exchange for more resilient, diversified logistics networks.
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