Under Armour founder Kevin Plank (Kris Connor/Getty Images)
Back in 2012, the future looked rosy to Under Armour CEO Kevin Plank. The sportswear apparel brand he had founded in the 1990s was going up against giant Nike. World-renowned athletes like Olympic skier Lindsey Vonn, New England Patriots quarterback Tom Brady and Olympian swimming star Michael Phelps had signed on to be sponsored by Plank’s company in a battle among sportswear titans. “We are the athletic brand of this generation and the next,” Plank declared during a January 2012 earnings call.
For the next few years, it looked like Plank’s comments held weight. The company signed on stars like the Golden State Warriors’ Steph Curry and ballet dancer Misty Copeland. Its stock price hit an all-time high in September 2015 of $104.10 per share.
But after years of 20%-plus annual revenue increases, growth slowed dramatically in 2017 and has continued to inch along in the low single digits. The company reported a loss in April 2017 and has struggled since. The share price fell 44% in the three years through Monday of this week.
So the news on Tuesday that founder Kevin Plank will be stepping down as CEO after more than two decades in the role was perhaps not surprising. He will stay on as chairman and chief brand officer, so he’s not separating himself from the Baltimore-based company. And he can still call the shots. “Given [that Plank] has 65%-70% of the stock’s voting rights, he’s still very much in control of the company’s strategy,” said Rick Patel, retail analyst at investment banking firm Needham & Company. Plus Plank still owns 16% of the stock; Forbes pegs his net worth at $1.9 billion.
Plank has tried to turn the company around, working with his team to restructure Under Armour and spending over $300 million on various changes since 2017. But the efforts have not yet helped. In 2017, revenue grew just 3% to $5 billion, followed by a 4% gain in 2018—despite the company’s efforts to grow outside of the U.S. In the past two years, Under Armour reduced its workforce by 680 positions, which included open roles, according to the company.
Plank first had the idea for his sweat-wicking T-shirt on the football field at the University of Maryland in the 1990s. Extra weight meant worse performance, Plank told Forbes in 2012, so he took the fabric found in women’s undergarments and turned it into a unique textile that he developed in the basement of his late grandmother’s house. In 1996 he founded Under Armour, took it public in 2005 and oversaw its sales expansion from $20 million in 2001 to $5.2 billion in 2018.
Plank’s town hall speeches fired up his employees. “People were willing to run through walls for the company and what it stood for—and really believing in doing and creating really cool and innovative products,” said a former executive who did not wish to be named. Plank signed off annual reports with “Humble & Hungry,” and his earnings calls rallied investors.
Amid efforts to expand outside of core athletic wear, Under Armour had spent at least $710 million by the end of 2015 acquiring a variety of companies such as health app MyFitnessPal. With the stock trading at $96.59 a share in September 2015, Plank was worth $3.9 billion. But the burdens of being a multibillion-dollar company in an ever changing industry began to take a toll. Starting in 2016, Under Armour began to lose market share to competitors like Nike and Adidas. One reason: It failed to emphasize athleisure products, a key growth driver for its competitors.
In January 2016, Morgan Stanley lowered its price target for the company from $103 per share to $62, Forbes reported at the time. The investment bank said a slowdown in growth had been in place since at least the spring of 2015, court documents from a shareholder lawsuit filed in September 2018 show. In an earnings call in April 2016, Plank tried to assure investors and analysts that the company was going to continue growing. “This year we expect every quarter to top $1 billion in revenues, based on our updated outlook of $5 billion, an important milestone for our brand,” he said. That wasn’t to be. Under Armour reported $4.8 billion in sales in 2016; that same year both the chief merchandising officer and the chief digital officer left the company.
Executives continued to flee. On January 31, 2017, the company announced that its chief financial officer, Chip Molloy, would resign after a 13 month stint due to “personal reasons.” The shares plummeted 23% that day. A few months later, Under Armour reported its first ever net loss as a public company for the first quarter of 2017. That summer, the company announced a $130 million restructuring plan and in August reduced its workforce by 2% (280 positions, including open roles) and then by 3% (400 positions, including open roles) in 2018.
Right after the first round of layoffs, Plank addressed senior executives, according to a former employee who had knowledge of the meeting. Morale was low not only due to the layoffs. Earlier that year, Plank had announced his support for President Trump’s policies during an interview on CNBC, which upset some employees. (He later issued a statement clarifying his comments). Plank had also been focusing on personal projects: His family’s investment company, Plank Industries, was developing 235 acres in Baltimore as part of a $5.5 billion project known as Port Covington. He also had opened a whiskey distillery and an upscale hotel in Baltimore in early 2017. During that 2017 meeting, Plank admitted that he had spread himself too thin. But he assured everyone that he was 100% focused on Under Armour. After the briefing, an executive went up to Plank and thanked him for his leadership, according to the former employee.
But troubles ensued. Three shareholders filed a lawsuit in 2017, alleging Plank and other executives had misled shareholders about the company’s financial standing. (The cases were consolidated into a class action lawsuit the same year. The lawsuit was dismissed in July 2019, but the plaintiffs’ appeal is pending.) Then the Wall Street Journal published an exposé in November 2018 with allegations of sexism and unprofessionalism at the company, including instances of executives expensing trips to strip clubs. In a statement to the Wall Street Journal, Plank said: “Our teammates deserve to work in a respectful and empowering environment. We believe that there is systemic inequality in the global workplace and we will embrace this moment to accelerate the ongoing meaningful cultural transformation that is already under way at Under Armour. We can and will do better.”
Over a period of several months in late 2018 and early 2019, Forbes spoke to a dozen former employees, most of whom were women and minorities, who described the work environment at the 15,000-employee company as a boy’s club. “There were the workouts, the poker games, the drinking. The executives had the expectations for you to stay late and maybe go out with them,” said a former female employee, who spoke on the condition that she not be named. Under Armour declined to comment.
Perhaps in response to allegations of sexist behavior, in January this year Under Armour announced it tapped former Harley Davidson human resources chief Tchernavia Rocker to lead its human and culture strategy as its Chief People and Culture Officer. Rocker is currently the only C-level woman executive at the company. In September, Under Armour hired Stephanie Pugliese, who was the president and chief executive of workwear retailer Duluth Trading Company, to be the president of its North America operations. “Vice Presidents and above at Under Armour are considered executives, and the number of female teammates at the level is 26%,” the company told Forbes. The number of women in leadership at Under Armour has always been low, and remains so even though 49% of the company’s workforce is women. It did not have a woman on its board of directors until 2012. Currently, the ten-person executive board has two women.
“They’re all one bald man,” a longtime veteran said, criticizing the gender makeup of the executive level at Under Armour. “[The company] would bring in a strong woman and we’d be like ‘Thank God’,” another former employee said. “You’d be in a meeting and you’d be one of two girls out of a group of 12.” “UA continues to focus on diversity in the leadership roles and has senior women leaders in functions throughout the company including Product, Design, Supply Chain, Legal, HR, Communications, Marketing, Digital, and Retail,” a spokesperson for the company told Forbes.
Last year, Under Armour revenues grew 4% to $5.2 billion, mostly thanks to its expanding presence in Asia and Latin America. But the restructuring came at a cost; Under Armour reported a net loss of $46 million for the year. Without the restructuring costs, the company would have reported a profit of $122 million. So far in 2019, the results have been mixed. Under Armour finished the first quarter with net income of $22 million, but lost $17 million in the second quarter. Wall Street analysts predict that for 2019, Under Armour will post revenue of $5.39 billion. The investment bank Macquarie expects the brand to report $122 million in adjusted profit for the year.
Despite the company’s financial troubles, investors applauded the news that Plank is stepping down as CEO and Under Armour president Patrik Frisk taking the reins come January 1, 2020. The stock price rose nearly 7% on Tuesday, then fell just over 2% on Wednesday.
“I am confident that we are just getting started," Plank said in a statement about the transition.
“It was a long time coming. That said, [Plank] is executive chairman and will be Chief Brand Officer. He isn’t going anywhere,” said Brian McGough, the retail sector head at Hedgeye Risk Management, a market research firm based in Connecticut. “But in the end, it’s good news and a huge step in the right direction.”
