Moody’s Downgrades Under Armour’s Ratings Amid Economic Challenges

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Moody’s Cuts Under Armour’s Rating to Ba3

Moody’s Ratings has downgraded Under Armour, Inc.‘s corporate family rating (CFR) from Ba2 to Ba3. This adjustment also includes a reduction of the company’s probability of default rating (PDR) to Ba3-PD from Ba2-PD and a decline in the senior unsecured bond rating to B1 from Ba3. Moreover, Under Armour’s speculative grade liquidity rating (SGL) has been adjusted to SGL-3 from SGL-1. Despite these changes, the company’s outlook remains negative.

Reasons Behind the Downgrade

The downgrade primarily reflects anticipated declines in Under Armour’s earnings over the forthcoming 12 to 18 months. This projection is primarily due to softening consumer discretionary spending coupled with increasing tariff costs. Additional concerns include uncertainties surrounding trade policy and consumer spending, which pose significant challenges to Under Armour’s strategic initiatives aimed at enhancing brand positioning, minimizing promotions, and rejuvenating its product, marketing, and marketplace strategies. Previous forecasts had anticipated a recovery in operating margins and earnings by fiscal 2026.

SGL Rating Adjustment

The shift to SGL-3 is predicated on expectations that Under Armour will maintain an adequate liquidity profile, supported by robust cash reserves and complete access to its $1.1 billion credit facility, despite facing modest negative free cash flow in fiscal 2026. The upcoming debt maturities in 2026 and 2027 also factored into the rating adjustment.

Current Credit Profile

Under Armour’s Ba3 CFR acknowledges the company’s strong brand presence and diversified distribution channels within the athletic apparel and footwear industry. The company’s relatively low level of funded debt continues to offer significant credit support, with leverage projected to remain moderate in the next 12-18 months, despite expected reductions in earnings. However, the credit profile is constrained by weak operational performance and limited brand differentiation. The negative outlook is influenced by potential scenarios where tariffs could lead to earnings and free cash flow being lower than anticipated in fiscal 2026.

Future Prospects

There is potential for an upgrade in Under Armour’s ratings if the company demonstrates improved operational performance and successfully executes its brand health strategies. Conversely, a further downgrade could occur if liquidity weakens, which might result from lower-than-expected free cash flow or failure to refinance debt maturities in a timely manner.