The interior of an Under Armor store is seen on November 3, 2021 in Houston, Texas.
Brandon Bell | Getty Images
Wall Street is not happy about this Under Armour Founder Kevin Plank returns as CEO.
Shares of the sportswear company plunged about 12% on Thursday after the retailer announced late Wednesday that CEO Stephanie Linnartz would step down after nearly a year on the job and Plank would replace her on April 1.
Following the announcement, both Williams Trading and Evercore ISI downgraded Under Armor and lowered their price targets. Williams Trading rated the company a Hold instead of a Buy and lowered its price target to $8 from $11, while Evercore downgraded the company to Underperform from Inline and lowered its price target to $8 reduced to $7.
Linnartz, a former Marriott International The chief executive, who took the helm last February, is the second CEO the company has gone through in less than two years.
Former Aldo Group CEO Patrik Frisk replaced Plank as CEO of Under Armor in January 2020, only to suddenly announce plans to step down just over two years later in May 2022.
In December of this year, Under Armor announced plans to hire Linnartz, betting that her experience building Marriott’s renowned Bonvoy loyalty program and driving digital revenue for the hotel giant would make up for her lack of experience in the retail industry.
Since joining Under Armour, Linnartz has focused on restructuring the company’s leadership, expanding the UA Rewards loyalty program and shifting the brand’s lineup to a more athleisure-focused offering with more stylish options for women.
In its downgrade, Evercore ISI said Plank’s return to the company was a “clear signal” that the strategy was not working and key performance indicators continued to deteriorate in the current quarter.
“We believe the most likely scenario that Mr. Plank will pursue will be to accelerate the return to sales growth in North America… which we believe will pose significant risk to the brand longer term,” analyst Michael Binetti wrote.
Sales at Under Armor fell in the holiday quarter as the company struggled with weak demand in North America and sluggish wholesale orders. However, this dynamic also impacts competition and is emblematic of larger forces putting pressure on the retail industry.
Faced with persistent inflation, high interest rates and dwindling savings accounts, consumers in North America have become more selective with their available money, cutting back on purchases of new clothing and shoes in favor of spending on dining out and travel.
On the other hand, wholesalers have had tight order books recently after being crushed by high inventories they accumulated during pandemic-era supply chain problems. With inventory levels now largely normalized across the industry, wholesalers are taking a cautious approach to ordering as they try to maintain those inventories while dealing with uncertain demand.
Analysts at William Blair agreed that Plank will focus on driving sales growth at Under Armour, challenging the company’s thesis that fiscal 2025 will be a year of cost efficiency.
“In addition, the departure of Linnartz creates some risk that there could be further changes in key positions at Under Armour, which could undermine our hopes for a rebound in domestic sales growth in the fiscal year, given that approximately two-thirds of the leadership was new last year “We were at Under Armor in 2026 given the inherent product lead times as leadership changes,” the note said. “Nevertheless, Plank was heavily involved as brand boss and CEO last year, which somewhat reinforces our optimism that key employees will remain in office.”
Retail analyst and GlobalData managing director Neil Saunders said Linnartz’s impending departure was “emblematic of a brand that can’t quite decide which direction it wants to go.”
“Under Armor has already undergone several rounds of change to address declining sales and brand issues, but as recent poor quarterly results demonstrate, the company has not yet found a successful path to rebuilding the business,” Saunders said in an email News.
“All the twists and turns have created a brand that has become increasingly confusing for consumers and wholesale partners,” Saunders continued. “This in turn has made Under Armor easier to miss. Solving these problems is not easy, no matter who holds the CEO position.”
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2024-03-14 19:26:25
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