Summary
- Founder and CEO Kevin Plank is stepping aside. Plank founded Under Armour - it's his baby.
- But revenue growth has fallen off the cliff the last couple years as consumer interest has waned.
- A brand that once felt front and center now feels like an also-ran as the company struggles to right the ship.
- Though Plank is still around as board chairman, the promotion of COO Patrik Frisk to the CEO slot sent shares up ~6% on the news.
- The company's focus on creating high-quality products that improve athletic performance still faces challenges, but Frisk may help accelerate the turnaround and give shareholders market-beating returns.
Thesis
Under Armour (UAA) may be on the path to becoming a popular brand and good investment again. Founder and CEO Kevin Plank will step down as CEO effective January 1. COO Patrik Frisk will replace Plank as Plank becomes chairman of the board and brand chief.
While Plank deserves credit for building the company out of a basement in the 1990s, the company struggled to sustain its hyper revenue growth as costs became an issue. Since 2018, the company has focused on improving its balance sheet in light of the revenue growth stagnation. The company has narrowed its focus and devoted itself to creating great products that improve athletic performance.
The elevation of Frisk to the CEO position may be what finally propels the company forward, resulting in a turnaround that delivers the improved performance investors are hoping for.
Recent Turnaround Efforts and Frisk's Vision
After being a growth story darling for several years, Under Armour has seen the bottom fall out since 2017. Once-recurring 20%+ levels of revenue growth are gone, and the company has been working on cost controls to improve profitability.
(Source)
Prior to 2017, it seemed Under Armour could do no wrong. Plank had positioned himself as the underdog at war with traditional powers Nike (NKE) and Adidas (OTCQX:ADDYY). He has been relentless in his pursuit of toppling both competitors. In the early years of Under Armour, Plank would send a Christmas card to Nike founder Phil Knight every year, telling him to watch out for Under Armour. He has criticized Adidas. In 2015, as Adidas struggled with footwear sales, Plank called Adidas Under Armour’s “dumbest competitor.” A lot has changed since then. Both Nike and Adidas have flourished, while Under Armour finds itself in turnaround mode.
