ugg scuffette ii Under Armour reshuffles top management after recent struggles
Struggling through its most difficult year since going public, Under Armour has lost several top executives and reshuffled management in recent months.
Such turnover is to be expected, some say, part of a restructuring designed to make the company leaner and stronger after years of rapid growth came to a sudden halt this year. Others see the recent moves as a sign of instability as the Baltimore athletic apparel brand struggles with growing pains and massive shifts in the retail market.
In June, as its troubles mounted, Under Armour hired a new president and chief operating officer who reports to Kevin Plank, the company’s founder and longtime chairman and CEO.
Management shakeups often come with new leadership, whether or not a company has stumbled, experts say. But Under Armour has stumbled. The company reported losses in two quarters this year and its first sale decline since it went public in 2005. Its stock value has plunged.
The Baltimore based athletic apparel company named a former Yahoo executive as its new head of digital product development as it announced the departure of the co founders of MyFitnessPal,.”They’ve obviously hit a rough patch here,” said Jason Moser, an analyst with the Motley Fool’s Million Dollar Portfolio.
Under Armour, which tripled its revenue and doubled its employees over five years before the slowdown began toward the end of 2016, has said it is hitting the reset button during a transition period.
Besides a restructuring announced in August, which included cutting 280 jobs, the company also is moving from a structure focused on specific products, such as shoes, to one organized into 11 categories, such as basketball, golf, training, women, running and outdoors.
Some recent management changes have to do with that ongoing transition. Others have to do with realigning employment and job functions with a slower pace of growth.
“This year, we’ve made several strategic decisions about our structure, systems and processes,” said Kerry Chandler, Under Armour’s chief human resource officer, in an email. “As we prepare for our next chapter of growth, we are tapping great talent internally and externally to bring a tighter, smarter focus throughout our organization.”
The new president, Patrik Frisk, started in July, just before the company announced its restructuring. Frisk is an apparel industry veteran with nearly 30 years’ experience directing brands such as The North Face and Timberland and more recently CEO of global footwear company The Aldo Group. At Under Armour, he is overseeing areas such as supply chain, sales, marketing and products, freeing up Plank to focus on the brand’s vision.
In October, a week before it reported its first quarterly sale decline, Under Armour announced that Kip Fulks, who co founded the company with Plank, is taking a sabbatical. Fulks has bounced through a number of positions in the company, including acting chief marketing officer, chief product officer and, most recently, strategic adviser.
On Nov. 1, Andy Donkin, the chief marketing officer and former Amazon executive hired in August 2016, and Pam Catlett, a former Nike executive who joined the company as senior vice president and general manager of the women’s and youth categories in January 2016, left the company.
Peter Ruppe, a former Nike executive who had led footwear since January 2015, also recently left and was replaced late last month by Ryan Drew, previously general manager of the basketball division.
Last week, Under Armour said former Yahoo executive Michael La Guardia will become senior vice president of digital product, while Mike Lee and Albert Lee, co founders of MyFitnessPal, which Under Armour acquired in 2015, will leave in January.
To Motley Fool’s Moser, the turnover shows the company is taking steps to fix problems.
That includes not only industrywide woes, but self inflicted damage, he said, such as taking on excessive debt to acquire several fitness app companies over a two year period. The apparel maker also allowed inventory to build up to get products to consumers more quickly, he said, leading to deep discounting that hurt profit margins.
The executive shifts, Moser said, may be an acknowledgment that Under Armour needs to take the business in a different direction and bring in people more aligned with a new vision.
Still, that is not enough for him to reverse his “hold” recommendation on the stock. First, he is looking for longer term stability in current leadership, particularly with Frisk and David Bergman, a 13 year Under Armour veteran who has served as interim chief financial officer and was named to the job permanently last week.
“We expect to see them in the same positions next year, doing what they are doing still a year from now and even further out,” Moser said. sports specialty stores. Competition among sports apparel makers has heated up. The right management team should be able to take the business to the next level to better compete with much larger rival Nike, he said.
“Frisk, with his expertise in the industry, is an important part of the puzzle,” he said. “We want to see that Plank is able to assemble a team of diverse opinions that can challenge his thinking and encourage him to make the best decisions.”
Other take a dimmer view of the departures. In a recent post, Laura Hoy, a top rated contributor to InvestorPlace, said they help explain why the company’s stock has plummeted.
“That many managers jumping ship at a time when the company is clearly struggling is worrying from an investor’s standpoint,” Hoy said. “Not only does it suggest that they don’t see [Under Armour] heading in a profitable direction, but it also calls into question the stability and direction of the company’s overall strategic plans
“With so many departures so close together, it is worth waiting to see whether or not the new team will be able to come together and give investors a reason to believe” in the stock.
Some research suggests that too much change in top management can hurt a company’s performance. A study by human resources professors at the University of Kansas School of Business in 2014 examined top management team turnover. In general, the research found, as turnover goes up, performance goes down.