The interior of an Under Armor store is shown on November 3, 2021 in Houston, Texas.
Brandon Bell | Getty Images
Wall Street is not satisfied Under Armor Founder Kevin Plank returns as CEO.
Shares of the athletic apparel company fell about 12% on Thursday after the retailer announced late Wednesday that CEO Stephanie Linnartz will step down after just a year on the job and Plank will replace her on April 1.
After the announcement, both Williams Trading and Evercore ISI downgraded Under Armor and cut their price targets. Williams Trading rated it a breakout and cut its price target from $11 to $8, while Evercore downgraded the company to Underperform and cut its price target from $8 to $7.
Linnartz, ex Marriott International executive who took the helm last February, is the second CEO the company has replaced 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.
That December, Under Armor announced plans to hire Linnartz on a bet that her experience developing Marriott’s famous Bonvoy loyalty program and growing digital revenue for the hotel giant would make up for her lack of retail experience.
Since starting at Under Armour, Linnartz had focused on revamping the company’s C-suite, creating the loyalty program, UA Rewards, and shifting the brand’s lineup to a more athletic-focused offering that had 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 that key performance indicators continued to deteriorate in the current quarter.
“We think the most likely scenario for Mr. Plank to follow will involve efforts to accelerate North America revenue growth … which we believe will add significant risk to the brand over the long term,” analyst Michael Binetti wrote.
Sales at Under Armor slowed during the holiday quarter as the company grappled with weak demand in North America and subdued wholesale orders. However, this dynamic has also affected rivals and is emblematic of larger forces weighing on the retail industry.
In the face of persistent inflation, high interest rates and shrinking savings accounts, consumers in North America have been more selective with their discretionary dollars and have shifted from buying new clothes and shoes to spending on food and travel.
Wholesalers, on the other hand, have kept tight order books since recent years after being saddled with high inventories built up during the pandemic-era supply chain fallout. Now that inventory levels have largely normalized across the industry, wholesalers have been cautious with their orders as they try to maintain those levels while facing an uncertain demand picture.
Analysts at William Blair agreed that Plank will focus on growing revenue at Under Armour, which challenges the company’s position that fiscal 2025 will be a year of cost efficiency.
“Furthermore, with roughly two-thirds of leadership new to Under Armor in the past year, Linnartz’s departure carries some risk that Under Armor could undergo more changes in key roles, which could derail our for recovery in domestic revenue growth in fiscal 2026 intrinsic product lead times are given if key leadership changes,” the note read. “That said, Plank has been heavily involved over the past year as head of brand and executive chairman, which somewhat bolsters our optimism that the key hires will remain in place.”
GlobalData retail analyst and managing director Neil Saunders said Linnartz’s impending exit was “symptomatic of a brand that can’t quite decide which direction it wants to go”.
“Under Armor has already gone through several rounds of changes as it tries to deal with declining sales and brand issues, but as its latest string of poor quarterly results shows, it has yet to find a successful path to rebuilding the business,” Saunders said. he said in an emailed note.
“All the twists and turns have created a brand that is increasingly confusing to consumers and wholesale partners,” continued Saunders. “That in turn made Under Armor easier to overlook. Fixing these problems isn’t simple, no matter who takes over as CEO.”