Wall Street is not glad Kevin Plank is returning as Under Armour CEO

The inside of an Under Armour store is seen on November 03, 2021 in Houston, Texas.

Brandon Bell | Getty Images

Wall Street is just not pleased that Under Armour founder Kevin Plank is returning as its CEO. 

Shares of the athletic apparel company plunged about 12% on Thursday after the retailer announced late Wednesday that CEO Stephanie Linnartz could be stepping down after barely a 12 months on the job and Plank would replace her on April 1. 

Following the announcement, each Williams Trading and Evercore ISI downgraded Under Armour and lowered their price targets. Williams Trading rated it a hold from buy and lowered its price goal from $11 to $8, while Evercore downgraded the corporate to underperform from in line and lowered its price goal from $8 to $7. 

Linnartz, a former Marriott International executive who took the helm last February, is the second CEO the corporate has cycled through in lower than two years. 

Former Aldo Group CEO Patrik Frisk replaced Plank as Under Armour’s chief executive in January 2020 only to suddenly announce plans to resign just a little over two years later, in May 2022. 

That December, Under Armour announced plans to rent Linnartz on a bet that her experience constructing out Marriott’s renowned Bonvoy loyalty program and driving digital revenue for the hotel giant would offset her lack of experience within the retail industry. 

Since she began at Under Armour, Linnartz had been focused on rehauling the corporate’s C-suite, constructing out its loyalty program, UA Rewards, and pivoting the brand’s assortment to a more athleisure-focused offering that had more stylish options for girls. 

In its downgrade, Evercore ISI said Plank’s return to the corporate was a “clear signal” that the strategy wasn’t working and its key performance indicators were continuing to deteriorate in the present quarter. 

“We expect the more than likely scenario Mr. Plank will pursue will include efforts to speed up a return to N. America revenue growth … which we expect will add significant risk to the brand longer-term,” analyst Michael Binetti wrote. 

Sales at Under Armour slowed throughout the holiday quarter as the corporate grappled with soft demand in North America and sluggish wholesale orders. Nevertheless, these dynamics even have affected rivals and are emblematic of larger forces which are pressuring the retail industry. 

Within the face of persistent inflation, high rates of interest and dwindling savings accounts, consumers in North America have been more choosy with their discretionary dollars and have been pulling back on buying recent clothes and shoes in favor of spending on dining out and traveling.

Alternatively, wholesalers have kept tight order books as of late after they were crushed with high inventories that they collected during pandemic-era supply chain snarls. Now that inventory levels have largely normalized throughout the industry, wholesalers have been careful with their orders as they appear to keep up those levels while contending with an uncertain demand picture. 

Analysts from William Blair agreed that Plank shall be focused on driving revenue growth at Under Armour, which challenges the firm’s thesis that fiscal 2025 shall be a 12 months of cost efficiencies. 

“Furthermore, with about two-thirds of leadership recent to Under Armour previously 12 months, the departure of Linnartz poses some risk that Under Armour could undergo more changes in key roles, which could push out our hope for rebounding domestic revenue growth in fiscal 2026 given inherent product lead times if key leadership changes,” the note read. “That said, Plank has been heavily involved over the past 12 months as brand chief and executive chair, which bolsters our optimism somewhat that key hires will remain in place.” 

Retail analyst and GlobalData managing director Neil Saunders said Linnartz’s imminent departure is “emblematic of a brand that may’t quite resolve which direction it desires to go in.” 

“Under Armour has already been through several rounds of change because it tries to deal with declining sales and issues with the brand but, as the newest set of poor quarterly results show, it has not yet found a successful path to rebuilding the business,” Saunders said in an emailed note. 

“All the twists and turns have created a brand that has change into increasingly confusing to consumers and to wholesale partners,” Saunders continued. “This in turn, has made Under Armour easier to overlook. Remedying these problems usually are not easy, irrespective of who occupies the CEO seat.”