The interior of an Under Armor store is seen on November 3, 2021 in Houston, Texas.
Brandon Bell | Getty Images
Wall Street isn't happy about that Under armor's 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 would step down after just a year in the role and that 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 it a hold from buy and lowered its price target from $11 to $8, while Evercore downgraded it from in-line and lowered its price target from $8 to $7.
Linnartz, a former Marriott International The executive who took the helm of Under Armor last February is the company's second CEO in less than two years.
Patrik Frisk, former CEO of Aldo Group, replaced Plank as CEO of Under Armor in January 2020, but suddenly announced plans to step down just over two years later in May 2022.
In December, Under Armor announced its 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 retail experience.
Since joining Under Armour, Linnartz had focused on revamping the company's C-suite, building out its loyalty program, UA Rewards, and pivoting the brand's lineup to a more athleisure-focused offering with more stylish options for women.
In downgrading its rating, 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 believe the most likely scenario that Mr. Plank will pursue will include efforts to accelerate the return to sales growth in North America… which we believe will pose significant risk to the brand over the longer term,” wrote analyst Michael Binetti.
Sales at Under Armor slowed during the holidays as the company struggled with weak demand in North America and sluggish wholesale orders. But this dynamic has also affected the brand's peers and is symbolic 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 choosy with their discretionary dollars and have become more reluctant to buy new clothes and shoes so they can spend them on dining out and traveling.
On the other hand, wholesalers have been holding tight order books lately after being crushed by the high inventories they built up during the pandemic-era supply chain. With inventory levels largely normalized across the industry, wholesalers have been cautious about their orders as they try to maintain these levels and contend with an uncertain demand picture.
Analysts at William Blair agreed that Plank will focus on driving revenue growth at Under Armour, calling into question the company's claim that fiscal 2025 will be a year of cost efficiency.
“Additionally, with approximately two-thirds of leadership new to Under Armor in the past year, Linnartz's departure poses a risk that Under Armor could undergo more changes in key roles, which could undermine our hopes for a recovery in domestic sales growth in the budget could disappear. 2026, given inherent product lead times as key leadership changes,” the note said. “That said, Plank has been heavily involved over the past year as brand chief and executive chairman, which goes some way to reinforcing our optimism that key employees will remain in place.”
Retail analyst and GlobalData director Neil Saunders said Linnartz's impending departure is “emblematic for a brand that can't quite decide which direction it wants to go.”
“Under Armor has gone through several rounds of change in an effort to address declining sales and brand issues, but as its latest set of poor quarterly results shows, it has not yet found a successful path to rebuilding the business ” says Saunders. said in an email message.
“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 overlook. Solving these problems is not easy, regardless of who occupies the CEO seat.”