Under Armour, the athletic apparel company, experienced a significant drop in shares following the announcement of Kevin Plank’s return as CEO. The news of Plank replacing CEO Stephanie Linnartz on April 1st led to a 12% decline in the company’s stock value. This development disappointed Wall Street and prompted downgrades and lowered price targets from Williams Trading and Evercore ISI.
Stephanie Linnartz, a former Marriott International executive, took over as Under Armour’s CEO last February but stepped down after only a year in the role. She was the second CEO the company went through in less than two years, with Patrik Frisk replacing Kevin Plank in January 2020 and then resigning in May 2022. Under Armour had hoped that Linnartz’s experience in building Marriott’s Bonvoy loyalty program and driving digital revenue would compensate for her lack of experience in the retail industry.
During her tenure, Linnartz focused on rehauling Under Armour’s C-suite, building the loyalty program UA Rewards, and shifting the brand’s assortment to offer more athleisure options for women. However, Evercore ISI downgraded the company, stating that Plank’s return indicated that these strategies were not working, and their key performance indicators continued to deteriorate in the current quarter.
Under Armour faced challenges during the holiday quarter, with slow sales due to soft demand in North America and sluggish wholesale orders. These difficulties reflect larger forces impacting the retail industry, including persistent inflation, high interest rates, and consumers being more selective with discretionary spending.
Wholesalers have also been cautious with their orders after experiencing high inventories during supply chain disruptions caused by the pandemic. Now that inventory levels have normalized, wholesalers are carefully managing their orders to maintain stability and navigate uncertain demand.
Analysts from William Blair believe that Plank’s focus will be on driving revenue growth at Under Armour, which challenges the firm’s projection of cost efficiencies in fiscal 2025. However, there is concern that Linnartz’s departure could lead to more changes in key roles, potentially delaying the rebound of domestic revenue growth. Despite this, Plank’s involvement as brand chief and executive chair over the past year provides some optimism that key hires will remain in place.
Retail analyst Neil Saunders, managing director of GlobalData, sees Linnartz’s departure as indicative of Under Armour’s struggle to find a successful path to rebuilding its business. The brand has undergone multiple rounds of change to address declining sales and brand issues, but it has not yet found a solution. The twists and turns have made the brand confusing for consumers and wholesale partners, leading to Under Armour being overlooked. Remedying these problems will not be easy, regardless of who occupies the CEO seat.
In conclusion, Under Armour’s announcement of Kevin Plank’s return as CEO resulted in a 12% drop in shares, disappointing Wall Street. The company’s struggles with declining sales, brand confusion, and leadership changes have impacted its performance. As Plank takes the helm once again, the focus will be on driving revenue growth and finding a successful path to rebuild the business. However, challenges such as soft demand and cautious wholesalers remain, making the road to recovery a challenging one for Under Armour.
