With Stock Down, Under Armor CEO Leaves

In the retail industry, a “50% off” clearance sale is how brands routinely release unsold inventory from the past year.

On Wall Street, however, a 50% discount on a company’s stock is often the trigger for dramatic management changes and turnaround plans.

In the case of Under Armour, whose shares have been halved in the past six months, both outcomes are now in play after the Baltimore-based sportswear company announced that CEO Patrik Frisk is stepping down after only two years at the head of the job. .

“As we make the transition, we are committed to identifying new opportunities to generate greater returns for our shareholders and to deliver to athletes, partners and teammates,” Under Armor Founder and Executive Chairman Kevin Plank said in a statement. a statement, which also noted that the battered company was “evolving” and had a “tremendous opportunity” ahead of it.

Transition to Transition

As the search for a successor begins and current COO Colin Browne sets to assume the role of interim CEO on June 1, the sweeping, multi-pronged transformation previously announced will continue. The efforts are aimed at mitigating supply chain disruptions from China, expanding the company’s direct-to-consumer and e-commerce channel, and reversing the slump in footwear sales which fell 4% in the last quarter and are dwarfed by the company’s apparel revenues.

“It’s critical to look beyond the short-term pressures and focus on the long-term end price,” Frisk said during the company’s May 6 conference call, where he discussed said confident that the turnaround was underway and that profitable revenue growth was its “No. 1 priority”.

“Freight prices, supply chain challenges and COVID-19 are not as powerful as the global passion for the sport,” Frisk commented after the company’s results faced a sell-off. by 25%.

The impending C-suite transition also follows the company’s previously announced transition to a new fiscal format, which, effective April 1, saw it launch into the first quarter of fiscal 2023 instead. only in the second quarter of 2022.

Two difficult years

Admittedly, Frisk’s 28-month tenure as COVID-era helmer at Under Armor (UA) was not under ideal circumstances, as he took the helm just two months before pandemic lockdowns changed the world as we know it while ushering in a period of supply chain disruption that persists today.

While some UA rivals, such as Adidas, experienced comparable market declines over this two-year period, players such as Nike and Lululemon fared better and were able to capture market share at some point. where demand for casual wear, or so-called “athleisure”, footwear and clothing has surged.

While the last six months have clearly been tough for UA investors, the company’s underperformance is a long-standing issue that predates Frisk’s initial arrival at the brand in 2017.

In fact, a five-year comparison of Nike and UA shows the industry leader gaining more than 100% at a time when the 25-year-old upstart saw its stock plunge 45%.

UA’s pain, Reebok’s gain

As the turmoil and leadership transition at UA unfolds, competition in the space continues to shift and intensify, with new players and bargain sellers such as StockX disrupting the industry alongside recent efforts to expansion into golf and tennis from Lululemon.

There’s also the burgeoning re-emergence of brands like Reebok, which recently changed hands and is looking to forge its own comeback via new footwear, apparel and celebrity offerings aimed at restoring the sneaker maker to its 1980s heyday.

Add to that Nike’s desire to grow its direct sales business at the expense of its wholesale business and retailers like Foot Locker, and the race to equip athletes of all ages, sizes and geographies becomes even more complicated.

While there is clearly a “huge opportunity” in this segment of the industry, there is also a huge challenge awaiting the person who ultimately seeks to take the place of UA’s outgoing CEO.

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