Under Armour founder Kevin Plank made an appearance on the retailer’s earnings call this week to highlight the company strategy and give an update on its search for a new CEO. The company expects to name a new leader by the end of the year, Plank said, per a Seeking Alpha transcript.
After Patrik Frisk exited the top spot in June, COO Colin Browne took over in the interim and is now a contender for the permanent spot. While Browne is in consideration for the role, Under Armour leadership also has a “terrific queue of proven leaders” lined up for the position, Plank said.
J.P. Morgan analysts in May said Browne had been largely responsible for executing on Frisk’s strategy, so whether he would be a fit for the new position might depend on what the brand is looking for next. Some observers have suggested Plank is looking for a leader that will drive more growth than Frisk was able to.
For the time being, however, Plank praised Browne for doing an “outstanding job” and noted that the company’s next CEO will need not just fundamentals, but also the ability to bring inspiration to the brand.
“We believe this will drive more robust top-line growth and increased profitability over the long term,” Plank said. “Take care of the brand, optimize the assets we already have … drive love for the [Under Armour] brand and the rest will follow. That's the message for our next CEO.”
Frisk’s time at Under Armour was marked by significant operational improvements, and Browne, for his part, said the company is “not going to walk away” from the changes made under Frisk. He also hinted that expanding the brand’s reach might be in the cards. “When we go and talk to consumers, consumers do want more from Under Armour than just to be wearing it in their sweaty part of their day,” Browne said.
While that sounds like a bid to enter more of the lifestyle athletics realm that Lululemon and other rivals occupy, Under Armour has struggled to get that positioning right in the past and has largely ignored the athleisure trend. Plank expressed interest in regaining some of Under Armour’s previous status, but said the company is also focused on moving beyond its beginnings.
“The parts of our business and strategy that made us successful, we will of course focus on reclaiming, but we're not trying to recreate the success we've had in the past,” Plank said. “We're a better business today with a stronger balance sheet, wiser leadership and have been tested. We have no delusions of ‘getting back’ to any previous chapter in our path. We're both looking and moving forward.”
Under Armour’s sales for the first quarter didn’t move much, though, with revenues flat year over year. Operating and net income both fell considerably, down 71.5% and 87% respectively. Like many others in the industry, the brand lowered its guidance for the year.
“Overall, the large cut to the [fiscal year 2023 earnings per share] outlook is disappointing, but not surprising given similar actions by other consumer companies and retailers given the worsening economic environment, which is leading to higher promotions to move inventory,” Telsey Advisory Group analysts said in emailed comments.
The company is dealing with a difficult operating environment, including an “overabundance of product” that’s about to hit the market thanks to delayed supply chains and high levels of uncertainty due to inflation. Inventory should be in a better position in the second half of the year, according to CFO Dave Bergman, leading to “sequentially increasing revenue growth” over the course of the year.
