Stock market showed its not happy that Under Armour is going to have a change in leadership as founder Kevin Plank is returning as its CEO. Athletic apparel company Under Armour stock fell about 12% on Thursday after the retailer announced late Wednesday that CEO Stephanie Linnartz would be stepping down after barely a year on the job and Plank would replace her.
Under Armour stock fell after the announcement that its ex-CEO and founder Kevin Plank is returning as the head of the American sportswear company. Plank will take charge effective April 1.
In a statement, Plank thanked Stephanie for her leadership and appreciated her hard work.
Under Armour downgraded
Following the announcement of Under Armour leadership change, both Williams Trading and Evercore ISI downgraded the company and lowered their price targets. Williams Trading rated it a hold from buy and lowered its price target from $11 to $8. While Evercore downgraded the company to underperform from in line and lowered its price target from $8 to $7.
Under Armour’s changing leadership
Linnartz, a former Marriott International executive who took the helm last February, is the second CEO the company has cycled through in less than two years.
Former Aldo Group CEO Patrik Frisk replaced Plank as Under Armour’s chief executive in January 2020 only to suddenly announce plans to resign a little over two years later, in May 2022.
That December, Under Armour announced plans to hire Linnartz on a bet that her experience building out Marriott’s renowned Bonvoy loyalty program and driving digital revenue for the hotel giant would offset her lack of experience in the retail industry.
Since she started at Under Armour, Linnartz had been focused on rehauling the company’s C-suite, building out its loyalty program, UA Rewards, and pivoting the brand’s assortment to a more athleisure-focused offering that had more stylish options for women.
Under Armour strategy
In its downgrade, Evercore ISI said Plank’s return to the company was a “clear signal” that the strategy wasn’t working and its key performance indicators were continuing to deteriorate in the current quarter.
“We think the most likely scenario Mr. Plank will pursue will include efforts to accelerate a return to N. America revenue growth … which we think will add significant risk to the brand longer-term,” analyst Michael Binetti wrote.
Grappling sales
Sales at Under Armour slowed during the holiday quarter as the company grappled with soft demand in North America and sluggish wholesale orders. However, these dynamics also have affected rivals and are emblematic of larger forces that are pressuring the retail industry.
In the face of persistent inflation, high interest rates and dwindling savings accounts, consumers in North America have been more choosy with their discretionary dollars and have been pulling back on buying new clothes and shoes in favor of spending on dining out and traveling.
Wholesalers holding on to reorder
On the other hand, wholesalers have kept tight order books as of late after they were crushed with high inventories that they accumulated during pandemic-era supply chain snarls. Now that inventory levels have largely normalized throughout the industry, wholesalers have been careful with their orders as they look to maintain those levels while contending with an uncertain demand picture.
Under Armour focus on revenue growth
Analysts from William Blair agreed that Plank will be focused on driving revenue growth at Under Armour, which challenges the firm’s thesis that fiscal 2025 will be a year of cost efficiencies.
“Moreover, with about two-thirds of leadership new to Under Armour in the past year, the departure of Linnartz poses some risk that Under Armour could undergo more changes in key roles, which could push out our hope for rebounding domestic revenue growth in fiscal 2026 given inherent product lead times if key leadership changes,” the note read. “That said, Plank has been heavily involved over the past year as brand chief and executive chair, which bolsters our optimism somewhat that key hires will remain in place.”
Under Armour’s struggles and scandals
Once hyped as the next Nike, Under Armour has struggled to maintain its position in a highly competitive market. As per its third quarter financial report released last month, its revenue decreased 6% year over year to $1.5 billion.
Plank’s first term as CEO was challenging and full of scandal and controversy. In 2021, for the lawsuit Under Armour paid $9 million to settle Securities and Exchange Commission (SEC) charges. The lawsuit by SEC was that Plank misled investors about its revenue growth. Moreover, his close relationship with television anchor Stephanie Ruhle raised questions in court.
Under Armour stock fell almost 17% so far this year.
