Investing.com -- Moody’s Ratings has downgraded the ratings of Under Armour (NYSE: UA ), Inc., including its corporate family rating (CFR) to Ba3 from Ba2. The downgrade also affects the company’s probability of default rating (PDR), which has been lowered from Ba2-PD to Ba3-PD, and the senior unsecured notes rating, now B1 from Ba3. Additionally, the speculative grade liquidity rating (SGL) of Under Armour has been downgraded to SGL-3 from SGL-1. The outlook for the company remains negative.

The downgrade of Under Armour’s CFR to Ba3 is due to expectations of decreased earnings over the next 12-18 months, driven by weakened consumer discretionary spending and increased tariff costs. These factors, along with uncertainty around trade policy and consumer spending, are expected to make it more challenging for Under Armour to implement its turnaround strategy, which includes brand elevation, reduced promotions, and revamping of its product, marketing, and marketplace. Previously, a recovery in operating margin and earnings was anticipated for fiscal 2026.

The downgrade to SGL-3 is based on the expectation that Under Armour will maintain adequate liquidity, despite modestly negative free cash flow in fiscal 2026, supported by solid cash balances and full access to its $1.1 billion revolver. The company’s debt maturities for 2026 and 2027 also influenced this rating.

The Ba3 CFR reflects Under Armour’s strong brand and diversified distribution in the athletic apparel and footwear market. The company’s relatively low level of funded debt provides key credit support, and leverage is expected to remain moderate over the next 12-18 months, despite lower earnings. However, the credit profile is limited by weak operating performance and limited brand differentiation. The negative outlook is due to uncertainties around tariffs potentially resulting in lower than anticipated earnings and free cash flow in fiscal year 2026.

Under Armour’s ratings could be upgraded if the company demonstrates improved operating performance and successful execution of its brand health strategies. However, a downgrade could occur if liquidity weakens for any reason, including lower than expected free cash flow or failure to refinance debt maturities in a timely manner.

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