Under Armor is collapsing – and Kevin Plank must take responsibility

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I have had a list of “worst CEOs of all time” for a long time.

I actually keep it on a piece of paper in the kitchen drawer. I haven’t made any additions in a while, because the bar is high to make the list, and I’m 99.99% of the time a happy person – who wants to spend their time calling people worse?

There is no set formula for landing on my list. But if there’s one thing that binds the 10 people in it together, it’s consistently inconsistency in providing financial numbers, brutal underperformance compared to competitors, and simply incompetence in the role.

Some people don’t seem like nice people to me either. I like.

Number 1 on my list – which will never change as long as I’m on this planet – is former Sears CEO Eddie Lampert. A trip down memory lane for you. One of the worst jobs in history sent Sears into the ground from his posh mansion. Most investors didn’t even know what it looked like!

I’m not going to give you the other nine names.

But I will unwillingly add an 11th name to the list.

Kevin Plank, founder and CEO of Under Armor (UAA).

I say unwillingly because I have a lot of respect for Plank as a founder. Going from selling T-shirts straight out of your trunk to building a global retail brand is commendable.

Hell, even though I had the opportunity to interview President Joe Biden this week – which took me 21 years of effort – I didn’t build a business from the ground up.

But what’s happening at Under Armor is a disaster, and Plank has to bear the brunt.

Although he only recently returned as CEO – after appointing his hand-picked successor a year into his role – he has been on the board since day one. He’s been a constant presence at Under Armour, stepping in where it’s not needed. Putting the company in news cycles it shouldn’t be in.

Overall, I’m just not getting it right as a leader, from execution to innovation to company culture.

And this week, it blew up in his face once again in the form of a shocking earnings and outlook release.

Fiscal fourth-quarter sales fell 5% from a year earlier. Sales in North America plunged 10%. International sales were down 7%. Wholesale sales (i.e. sales to department stores and other partners) fell 7%. E-commerce fell 8%. Clothing sales down 1%. Shoe sales down 11%. Accessories sales down 7%.

The story continues

A little perspective:

• Walmart’s (WMT) U.S. e-commerce sales grew 22% in the most recent quarter. Sure, Under Armor doesn’t sell ground beef or bikes, but e-commerce continues to be a major growth driver for most retailers. As long as your name isn’t Under Armour.

• Lululemon’s (LULU) sales in the most recent quarter increased 16%. Sales in its Americas division increased by 9%.

“With several CEOs and product marketers in North America over the past five years, the continued turnover of critical leaders has been at the heart of our inability to remain agile and decisive,” Plank told analysts at his first conference phone call since his return as CEO.

Reminder: Plank has been the constant over the past half-decade during this internal turmoil. The responsibility always lies with him, who is always the majority shareholder.

The company saw double-digit sales declines in its new fiscal year, including a surprising 15-17% drop in North America.

Plank says he’s resetting the company.

This involves reducing the company’s stock keeping units (SKUs) by 25%, further reducing costs (the other constant of recent years) and rededicating itself to innovation. Under Armor promises better days in 18 months.

But Wall Street is rightly skeptical.

“Several of the initial elements of the turnaround strategy add some comfort (new $500 million buyback, 25% SKU reduction, new cost reduction initiatives). However, many elements of the plan appear to depend on UAA succeeding in product innovation that we haven’t seen in years,” Evercore ISI analyst Michael Binetti wrote in a note. customer.

And that brings me back to Plank.

Under Armor’s stock price has plunged 87% since its record high in 2015. It’s a $6.71 stock now! The company’s market capitalization stands at a whopping $2.90 billion, compared to Lululemon’s $42.3 billion and Nike (NKE)’s $138 billion.

Deckers Outdoor (DECK) – once known only for its Uggs boots – saw its market capitalization rise to $22.7 billion due to feverish demand for Hoka running shoes.

Once steadily growing by more than 20% in annual revenue, Under Armor’s sales are downright declining — and that decline is poised to accelerate over the next 12 months.

Some odds and ends to this analysis:

• The company is in such a sorry state that one has to wonder how much longer the brand’s major sponsors like Steph Curry, The Rock and Jordan Spieth will stick around.

• The company totally missed the super-shoe movement.

• The company totally let Hoka and On run a sneaker business that never really gained traction – due to a lack of design and technical factors.

• Adidas is becoming popular again and could have a big fall while Under Armor slumps.

• The quality has dropped. Go hit a pair of Lululemon leggings, then a pair of Under Armor leggings.

• The company isn’t even in the conversation in terms of deals for the upcoming Summer Olympics.

• Malls are filling up with new Under Armor competitors such as TYR.

I want to remove Plank from my list. Yet he earned his place.

The next 18 months will likely be some of the most trying of his career. At some point he will have to think about his legacy, which could involve stabilizing the company by the end of the year and selling it to private equity funds.

Looking for an example of a good CEO? Check out the latest Introductory Deals podcast with former Cisco (CSCO) CEO John Chambers below.

Brian Sozzi is the editor-in-chief of Yahoo Finance. He is also the host of the show “Opening offer” Podcast. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Advice on deals, mergers, activist situations or anything else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to participate in Yahoo Finance Live? Email Brian Sozzi.

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