Kevin Plank’s long tenure as Under Armour CEO has been an outlier in that he’s run the company since its inception, through its startup phase and into maturity as a leading athletic apparel and shoe brand.
Most entrepreneurs who launch successful firms lack the skills required to lead an enterprise once it emerges as a major brand, said Karyl B. Leggio, a professor of finance at Loyola University Maryland’s Sellinger School of Business. A rocky few years on Wall Street combined with an underwhelming second quarter after a run of earnings reports that beat analyst expectations, however, may have convinced Plank it was time for a change.
“The markets were getting a little antsy about that,” Leggio said.
Plank announced on Tuesday he will step down as Under Armour CEO in 2020 to become the company’s executive chairman and brand chief, marking a new chapter in the Baltimore sports apparel and footwear empire he founded.
The company announced that Patrik Frisk, who became president and chief operating officer two years ago, will be the Under Armour’s second CEO since it was founded in 1996.
The 56-year-old Frisk will report to Plank and will take a seat on the board.
“Patrik’s proven track record of industry experience, straightforward leadership style and championship of our brand and culture makes him uniquely positioned to smartly capitalize on the opportunities in front of us,” Plank said in a statement.
Investors reacted positively to the news with the company’s stock trading more than 6% higher at the close of trading Tuesday.
Financial services firm Baird reiterated its “outperform” ranking of Under Armour stock and praised Frisk’s ascension to the top job in published comments.
“The move – which will allow Frisk to take full day-to-day reign and Plank greater strategic freedom – represents a logical evolution in the leadership structure that developed over the past 2+ years. We view the move as a dual-vote of confidence by both the Board and Frisk in UAA’s direction, reaffirming our positive stance at the current,” according to Baird’s evaluation.
News of Plank’s departure and Frisk’s pending new role come roughly two weeks before Under Armour’s third quarter earnings call, which is slated for Nov. 4. In the second quarter the company reported revenue increased 1% to nearly $1.2 billion. However, business fell short in North America. That left the apparel and footwear company with a net loss of $17 million.
Even after the leadership shakeup Under Armour faces significant challenges ranging from the decline of brick and mortar retail to the prominence of so-called “athleisure” wear.
Once Fisk is in control of the firm, Leggio said she expects him to try to bolster sales in expanding foreign markets and also boost the company’s share of the “hot” athleisure market. It also makes sense for the new CEO, she said, to make his mark in improving the company’s online presence to strengthen direct-to-consumer sales in response to flagging brick and mortar.
“I’m sure the new CEO will feel the pressure very quickly,” she said.
The back story of how Plank came to create Under Armour has become the stuff of legend.
Laboring in his grandmother’s basement, the 24-year-old Plank, a middling success as a fullback for the University of Maryland football team, in 1996 came up with an athletic T-shirt that wicked moisture and was relatively light.
His friends and sports acquaintances were his first boosters. But in a few short years – aided by a wildly successful marketing campaign (“Protect this house!”), an injection of venture capital and exposure in Oliver Stone’s “Any Given Sunday,” Plank and Under Armour moved their headquarters to Baltimore from the D.C. area. The company began a giddy, meteoric rise, and Plank was its photogenic, cocky leader.
In the early 2000s, Under Armour poached a slew of celebrity athletes from its competitors, vastly expanded its product lines and became a publicly traded company and Wall Street darling with annual double-digit growth. Plank boasted openly about challenging Nike for supremacy in the sports footwear and apparel industry. His company expanded into a global presence.
Plank has been a visible and aggressive booster for Baltimore and Maryland. His entrepreneurial and philanthropic activities have spilled over into horse racing (Sagamore Farm), whisky making (Sagamore Rye), real estate development (Sagamore Development Co.) and hotels (Sagamore Pendry Hotel).
His enthusiasm for those undertakings has been matched by public officials and civic leaders. The University of Maryland, College Park, was the grateful recipient of $25 million for the repurposing of Cole Field House. The city of Baltimore agreed to pony up some $600 million in tax increment financing to develop infrastructure for the $5.5 billion Port Covington redevelopment project, which will be adjacent to Under Armour’s new global headquarters.
But the last few years have been uncertain ones for Plank and for the company he founded. His bold challenges to Nike were forgotten as the company’s profits and stock price dipped. Marketing mishaps, strategic blunders such as an alliance with the now-bankrupt and departed Sports Authority, and competition from athleisure rivals hurt. So, too, did rampant executive turnover and a downturn in the company’s critical North American market.
Plank accepted an invitation to be on an advisory panel of manufacturing heavyweights asked to counsel President Trump, whom Plank hailed as a “real asset” to the country.
In the wake of Trump’s immigration crackdown and tepid denunciations of white supremacists, several of Under Armour’s major athlete endorsers were enraged at Plank’s coziness with Trump. The Under Armour CEO quit the council and has spent the last two years embracing a more progressive public stance.
Under Armour also sought to position itself as a company that focuses on women, lining up ballet superstar Misty Copeland and model Giselle Bundchen as celebrity endorsers and outfitting the U.S. Olympic women’s gymnastics team, among others.
But the company was slow to add women to its board, and last year the Wall Street Journal reported that Under Armour allowed visits to strip clubs to be reimbursed as work-related expenses. Some women and minority employees said they were passed over for promotions in what they called the company’s testosterone-fueled culture. Plank defended his company, but he also vowed to make changes.
In 2018 the company, which last year had about $5 billion in revenue, launched a cost-saving restructuring, trimming 400 jobs from its payroll. Under Armour slowly showed signs of reviving its fortunes.
While Plank is surrendering the CEO job, his decision to stay on as executive chairman and brand chief suggests he has no intention of walking away from the company. He owns about 15 percent of Under Armour’s stock but retains control by virtue of special shares he owns that enlarge his voting power.
So, from that perspective, he is still in charge.