The interior of an Under Armor store is shown on November 03, 2021 in Houston, Texas.
Brandon Bell | Getty Images
Wall Street isn't happy about that Under the armor Founder Kevin Plank returns as CEO
Shares of the athletic apparel company fell nearly 12% Thursday after the retailer announced late Wednesday that CEO Stephanie Lennartz would step down after nearly a year on the job and that Blank would replace her on April 1.
Following the announcement, 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 the company to Underperform and lowered its price target from $8 to $7.
Lennartz, ex Marriott International The CEO, who took office last February, is the second CEO the company has moved to in less than two years
Patrik Frisk, former CEO of Aldo Group, replaced Plank as CEO of Under Armor in January 2020, only to abruptly announce plans to resign just over two years later, in May 2022.
In December of that year, Under Armor announced plans to hire Linnartz on the basis that her experience building Marriott's popular Bonvoy loyalty program and increasing the hotel giant's digital revenues would make up for her lack of experience in the retail industry.
Since starting at Under Armour, Linnartz has focused on restructuring the company's executive group, building out its loyalty program, UA Rewards, and steering the brand's assortment to a more sports-and-entertainment-focused offering that includes more stylish options for women.
In downgrading, Evercore ISI said Plank's return to the company was a “clear signal” that the strategy was not working and that its 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 a return to North American revenue growth… which we believe will add significant risk to the brand over the long term,” analyst Michael Benetti wrote.
Sales at Under Armor slowed during the holiday quarter as the company faced weak demand in North America and slowing wholesale orders. However, these dynamics have also affected competitors, and are emblematic of larger forces pressing on the retail industry
Faced with persistent inflation, rising interest rates and dwindling savings accounts, North American consumers have become more selective with their discretionary dollars, pulling back on purchasing new clothes and shoes in favor of spending on dining out and travel.
Wholesalers, on the other hand, have been keeping tight order books lately after being crushed by high inventories they accumulated during pandemic-era supply chain disruptions. Now that inventory levels have largely returned to normal across the industry, wholesalers have been cautious about their orders as they look to maintain those levels while dealing with an uncertain demand picture.
Analysts from William Blair agreed that Plank will focus on driving revenue growth at Under Armour, challenging the company's assumption that fiscal 2025 will be a year of cost efficiency.
“Furthermore, with about two-thirds of new leadership at Under Armor in the past year, Linnartz's departure poses some risk that Under Armor may undergo further changes in key roles, which could push our hope for a rebound in domestic revenue growth into the fiscal.” “2026 due to inherent product lead times if key leadership changes,” the note said. “However, Plank has been heavily involved over the past year as brand president and CEO, somewhat reinforcing our optimism that key personnel will remain in their roles.”
Neil Saunders, retail analyst and managing director of GlobalData, said Linnartz's impending departure is “symbolic of a brand that can't decide what direction it wants to go in.”
“Under Armor has already gone through several rounds of change as it tries to address declining sales and brand issues, but as the latest set of weak quarterly results show, it has yet to find a successful path to rebuilding the business.” he said in an email note
“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 it easier to overlook Under Armor. Addressing these issues is not simple, no matter who occupies the CEO seat.”
