The interior of the Under Armor store will be seen on November 3, 2021 in Houston, Texas.
Brandon Bell | Getty Images
Wall Street is not happy about this In armor founder Kevin Plank returns as CEO.
Shares of the sportswear company fell about 12% on Thursday after the retailer announced late Wednesday that CEO Stephanie Linnartz would step down after only a yr on the job and that Plank would replace her on April 1.
Following this announcement, each Williams Trading and Evercore ISI downgraded Under Armor and lowered their price targets. Williams Trading rated it Hold from Buy and cut its price goal from $11 to $8, while Evercore downgraded the corporate to Underperform and lowered its price goal from $8 to $7.
Linnartz, former Marriott International the CEO, who took the helm last February, is the second CEO the corporate has transitioned in lower 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 the identical yr, Under Armor announced plans to rent Linnartz, assuming that her experience in constructing Marriott’s famous Bonvoy loyalty program and generating digital revenue for the hotel giant would make up for her lack of experience within the retail industry.
Since joining Under Armour, Linnartz has focused on revamping the corporate’s leadership, expanding its UA Rewards loyalty program and shifting the brand’s assortment to a more sports-focused offering with more stylish options for ladies.
In downgrading its rating, Evercore ISI said Plank’s return to the corporate was a “clear signal” that the strategy was not working and its key performance indicators continued to deteriorate in the present quarter.
“We believe the most likely scenario that Plank will pursue will involve efforts to accelerate a return to revenue growth in North America… which we believe will increase significant risk to the brand over the long term,” wrote analyst Michael Binetti.
Sales at Under Armor fell through the holiday quarter as the corporate grappled with weak demand in North America and weak wholesale orders. But this dynamic has also affected rivals and is symbolic of larger forces putting pressure on the retail industry.
Faced with persistent inflation, high rates of interest and shrinking savings accounts, North American consumers have turn out to be more choosy with their dollars, foregoing recent clothes and shoes in favor of spending on restaurant meals and travel.
On the opposite hand, wholesalers are maintaining tight order books only after being crushed by the high inventories they’ve built up during pandemic-era supply chain turmoil. Now that inventory levels have largely normalized across the industry, wholesalers are cautiously placing orders, trying to keep up those levels while grappling with an uncertain demand picture.
Analysts at William Blair agreed that Plank will deal with growing Under Armour’s revenue, questioning the corporate’s claim that fiscal 2025 can be a yr of cost efficiency.
“Furthermore, given that approximately two-thirds of Under Armor’s management team was new last year, Linnartz’s departure creates some risk that Under Armor could see more changes in key positions, which could undermine our hope for a rebound in domestic revenue growth in fiscal 2026, taking into account the inherent product lead times in the event of a change in key management,” the memo said. “That said, Plank has been heavily involved over the last year as the brand’s CEO and executive chairman, which somewhat reinforces our optimism that key employees will remain in place.”
Retail analyst and GlobalData managing director Neil Saunders said Linnartz’s imminent departure “is emblematic of a brand that can’t quite decide what direction it wants to take.”
“Under Armor has undergone several rounds of changes to address declining sales and brand issues, but as the latest report of weak quarterly results shows, it has not yet found an effective path to rebuilding the business,” Saunders said in an emailed note.
“All the twists and turns have created a brand that is becoming increasingly confusing for consumers and wholesale partners,” Saunders continued. “This, in turn, made Under Armor easier to overlook. Solving these problems is not easy, regardless of who is in the CEO position.”
