Kevin Plank, who steered Under Armour from a basement startup selling sweat-wicking T-shirts in 1996 to a $5.2 billion global brand represented by Michael Phelps and Tom Brady, will step down as the Baltimore athletic apparel maker’s CEO at the end of the year.
Patrik Frisk, 56, currently Under Armour’s president and chief operating officer, will take over Jan. 1 as CEO, the company’s board announced Tuesday.
While Plank, 47, ends his run as one of corporate America’s longest-serving CEOs after 23 years — the average tenure is five years — he will remain executive chairman and assume a new role as “brand chief.” A Baltimore billionaire who has branched into real estate and whiskey distilling, Plank continues to own a controlling stake in Under Armour.
Frisk, who has been with Under Armour since 2017, will join Plank on Under Armour’s board of directors.
“We’re able to elevate Kevin into a more strategic role to free him up to do what he does best, thinking about the next greatest product, the next greatest marketing initiative," said Frisk, describing Plank’s new focus.
Plank said that even as he steps aside as CEO, his priority will remain Under Armour, a brand he called his “passion, my heart and my soul."
“This is my day job,” he said. “This is my full-time [job] and none of that will change. ... I think I’ll be working differently, but I won’t be working any less. Under Armour remains my priority.”
As the once fast-growing company has experienced doldrums in sales, profitability and its stock price in recent years, Under Armour and Plank have been criticized by some analysts for adhering to a founder-led executive structure.
The stock market seemed to welcome the news with Under Armour shares rising more than 6% to close Tuesday at $21.38 each on a day when the wider market was down slightly.
Plank’s leadership has been atypical, said Karryl Leggio, a finance professor at Loyola University Maryland’s Sellinger School of Business. Most founders of small startups are no longer in charge after a company evolves into something much bigger, she said.
“What it takes to found a company and get it started is so different from what it takes to grow to a company of this scale,” she said. “It’s amazing he’s been CEO for this long.”
Pressure for change, in light of stock losses and a struggling retail environment, likely led to the decision, she said. The timing also could have been linked to potentially disappointing results during the current fiscal quarter or to appease investors ahead of the crucial holiday retail season, she said. Under Armour is set to announce quarterly financial results Nov. 4.
“Retail in general is struggling, and Under Armour has had up and down quarters,” she said. “But if you bring in someone who has been with the firm and understands Under Armour’s culture and has tremendous experience with other brands ... and you get some new ideas on how to spur growth, it makes sense."
Under Armour was joined by rival Nike in a top management shuffle Tuesday, as the Portland, Oregon,-based sneaker giant also announced a new role for its CEO. Nike’s Mark Parker will become executive chairman after 13 years at the helm and be replaced in January by board member John Donahoe.
Plank said Frisk’s succession to Under Armour CEO has been in the works for the past couple of years.
The timing is right, he said, as the company switches from “defense to offense," now three years into a turnaround plan designed to boost business and reverse the slide in sales. The turnaround strategy has focused on the brand’s athletic performance roots and innovation in its products.
“It’s a terrific moment in time for us, [with] someone I’ve had the pleasure of working next to, and to really see what we can do operationally as we move the company to the next level,” Plank said. That means becoming the world’s top athletic brand in the next five to 10 years, he said.
Analysts offered mixed reactions to the transition, with some applauding it as a logical succession plan that will bring continuity.
“Mr. Frisk has demonstrated skill as an operator, and will further control the long-term strategy and culture, while visionary founder Mr. Plank will continue to have influence on the strategic direction of the brand,” said Jim Duffy, an analyst with Stifel, in a research note Tuesday morning.
Stifel continues to see “opportunity for the company,” Duffy said, and he expects both sales and earnings will accelerate next year.
But others pointed to deeper problems.
“Amid a number of recent executive changes, we see the business getting worse, before it can get better,” said Camilla Yanushevsky, an analyst with CFRA, in a report after Tuesday’s announcement that kept a “sell” rating on Under Armour stock.
Most troublesome, she said, has been lagging demand in the North American market, the region Frisk has focused on reviving and where Under Armour gets about 70% of its business. Sales in the region slipped 3% in the most recent quarter.
"We foresee continued challenges for [Under Armour], given our caution on U.S. consumer spending,” due to trade tensions and growing competition in footwear from brands such as Nike, Lululemon and Columbia Sportswear, she said.
A report issued by Susquehanna Financial Group last week also raised concerns about Under Armour’s ability to boost U.S. sales without having to expand further into off-price sales channels, hurting profit margins.
Under Armour “continues to lose shelf space at sporting goods and family footwear retailers, based on our proprietary check,” analyst Sam Poser wrote in that report suggesting its "shoe business appears to have lost its footing.”
Such issues were nowhere on the horizon decades ago when Plank came up with the idea for a sweat-wicking T-shirt while playing football at the University of Maryland and decided to let his teammates test the shirts. He originally wanted to name the brand Body Armor or Heart, but those names were taken. His oldest brother inadvertently suggested the current name, mixing it up with the proposed Body Armor.
With co-founder Kip Fulks, Plank relocated the Washington startup to Baltimore two years after its founding in 1998. The sports apparel brand caught on as the company signed high-profile athletes as endorsers, built its online presence, grew internationally and expanded into footwear, women’s apparel and sports such as running and basketball.
But years of soaring sales and profit growth came to a halt toward the end of 2016, and in 2017, the company reported its first quarterly loss since going public in 2005. The company has faced stiff competition from bigger rivals such as Nike, changing consumer tastes and a challenging retail environment in which stores like Sports Authority that once sold its products have closed or gone out of business.
Some outsiders have worried Plank lost his focus as he invested in whiskey, horse racing, real estate and other projects. (Baltimore Sun Media is a tenant of the real estate partnership Plank established to redevelop Port Covington in Baltimore as a new neighborhood with offices, residences and retail. The Sun leases its printing plant, also home to its news and business operations, there long term.)
Under Armour also has faced criticism in recent years for fostering a male-dominated culture that failed to stand up to scrutiny in the #MeToo era, including reimbursing employees for entertaining at strip clubs, a practice it ended last year.
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As a veteran retail executive arriving as president in July 2017, Frisk was seen as a good fit to help Plank lead a company with growing pains. Experts said his arrival would allow Plank to focus on his broader vision for the company.
Before joining Under Armour, Frisk was CEO of The ALDO Group, a Canadian footwear company, and before that had spent years at VF Corp., where he’d been an executive with such brands as Timberland and The North Face.
Under Armour will continue moving toward completing its turnaround, Frisk said, with an eye toward its target customer, which the company calls the “focused performers,” who want stylish athletic apparel that also gives them an edge in workouts and sports.
In a letter sent Tuesday morning to Under Armour’s 14,000 employees, including 2,831 in Maryland, Plank said he has spent much of a nearly quarter-century being “obsessed” with improving athletes’ performance with Under Armour gear. He stressed that the transition is not retirement, merely a leadership evolution.
“For the past two and a half years having worked next to — as well as sweated with Patrik — in and out of the gym, board room, executive meetings, quarterly business and line reviews, domestic and international travel, I have seen first-hand how he has sincerely earned the trust and respect of our teammates, customers and shareholders,” the letter said.
Leggio said she believes Frisk will need to show improved results soon and a strike a balance between sticking to existing plans and introducing fresh ideas.
“You don’t want an abrupt about-face for a company doing well," she said, "and it is doing well, although it could do better.”