S&P Global puts Under Armour's ratings on downgrade watch

By Matt Tracy

WASHINGTON (Reuters) -Credit rating agency S&P Global on Tuesday placed sportswear company Under Armour's (UAA) ratings on watch for potential downgrades.

In a Tuesday report accompanying its outlook change, S&P cited Under Armour's (UAA) continued restructuring challenges and persistent sales declines, including a 16% drop in footwear sales and 1% dip in apparel sales in the latest quarter.

Under Armour's (UAA) gross margin also took a hit during the second quarter, which S&P analysts attributed mainly to U.S. tariff policy as well "ongoing regional geopolitical conflicts."

The company's margins declined 275 basis points (bps) in the second quarter, and it said it expects margins to decline an additional 310 bps to 330 bps in its third quarter.

"This is a larger drop than we expected earlier in the year," S&P's analysts wrote.

The analysts further pointed to higher-than-expected expenses facing the company as part of its 2025 restructuring plan, which include a recently approved $95 million addition. This brings the company's total estimated restructuring expenses to $255 million through fiscal year 2026, versus $160 million when the company announced its restructuring plan last summer.

S&P maintained Under Armour's (UAA) ratings of BB-, which is on the upper end of speculative-grade, noting it will "resolve" the negative ratings watch placement "as soon as practical within the next 90 days" depending in part on holiday sales and profits.

(Reporting by Matt Tracy in Washington, D.C.)