The interior of an Under Armor store in Houston, Texas, on November 3, 2021.
Brandon Bell | Getty Images
Wall Street is not happy about this Under Armor Founder Kevin Plank will return as CEO.
The athletic apparel company announced late Wednesday that Chief Executive Stephanie Linnartz will resign after less than a year on the job and that Plank will succeed her on April 1. Its shares fell about 12% on Thursday. %.
Following the news, both Williams Trading and Evercore ISI downgraded Under Armor and lowered their target prices. Williams Trading downgraded it to Hold from Buy and lowered its price target to $8 from $11, while Evercore downgraded the company to Underperform from consensus and lowered its price target from $8 Down to $7.
Linnerz, ex. Marriott International Hotel The top executive who took the helm last February was the company’s second chief executive in less than two years.
Former Aldo Group CEO Patrik Frisk succeeded Plank as Under Armor CEO in January 2020, but more than two years later, in May 2022, he suddenly announced plans to resign.
In December of that year, Under Armor announced plans to hire Linnartz, betting that her experience building Marriott’s famed Bonvoy loyalty program and generating digital revenue for the hotel giant would make up for her lack of experience in the retail industry.
Since joining Under Armor, Linnartz has focused on reorganizing the company’s senior leadership, establishing the loyalty program UA Rewards, and shifting the brand’s products toward more athleisure-focused products to provide women with more fashionable choices.
In its downgrade, Evercore ISI said Plank’s return to the company was a “clear signal” that the strategy wasn’t working and that its key performance indicators continued to deteriorate during the quarter.
“We believe the option Mr. Plank is most likely to pursue will include an effort to accelerate a return to North American revenue growth… which we believe would pose significant long-term risks to the brand,” analyst Michael Binetti wrote.
Under Armor’s sales slowed in the holiday quarter due to weak demand in North America and weak wholesale orders. However, these dynamics also affect competitors and are emblematic of larger forces weighing on the retail industry.
Faced with persistent inflation, high interest rates and dwindling savings accounts, North American consumers are becoming more discerning about their discretionary dollars, turning away from buying new clothes and shoes in favor of dining out and traveling.
Wholesalers, on the other hand, have been keeping orders tight recently as they were overwhelmed by high inventories accumulated during supply chain disruptions during the pandemic. Inventory levels have now largely normalized across the industry, with wholesalers being cautious about orders as they look to maintain those levels while dealing with uncertain demand conditions.
Analysts at William Blair agree that Plank will focus on driving revenue growth at Under Armor, challenging the company’s argument that fiscal 2025 will be a year of cost efficiency.
“In addition, approximately two-thirds of last year’s leadership was new to Under Armor, and Linnartz’s departure creates some risk that there may be additional changes in key roles at Under Armor, which could dampen our expectations for domestic fiscal revenue growth. Hopes for a rebound. If key leadership changes, factor in inherent product delivery timeline of 2026,” the note reads. “That being said, Plank has been actively involved as the brand’s CEO and executive chairman over the past year, which in part reinforces our optimism that key employees will remain on board.”
Neil Saunders, a retail analyst and managing director at GlobalData, said Linnartz’s imminent departure “is emblematic of a brand that can’t quite decide which direction it wants to go.”
“Under Armor has gone through several rounds of changes to try to address declining sales and brand issues, but as its latest poor quarterly results show, it has yet to find a successful path to rebuilding the business,” Sanders said in an email. Zhong said.
“All the twists and turns have created a brand that has become increasingly confusing to consumers and wholesale partners,” Sanders continued. “That, in turn, makes it easier for Under Armor to be ignored. Solving these problems will not be easy no matter who is the CEO.”
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