Under Armor is collapsing – and Kevin Plank must take the blame

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I’ve long had a list of the “worst CEO of all time.”

I actually keep it on a piece of paper in the kitchen drawer. I haven’t added in a while because the bar is high to get on the list, and I’m a happy person 99.99% of the time – who wants to spend their time labeling people as the worst?

There is no set formula for landing on my list. But if there is any bond between the ten people who make it up, it is consistently inconsistent in delivering financial numbers, brutal underperformance relative to competitors, and just plain incompetence in the role.

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

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

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

But I’m going to do it hesitantly add an 11th name to the list.

Under Armour’s (UAA) founder and boomerang CEO Kevin Plank.

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

Although I got to interview President Joe Biden this week — which actually took me 21 years of work — I didn’t build a business from the ground up.

But what’s happening at Under Armor is a complete disaster, and Plank must bear the brunt of it.

Although he only recently returned as CEO – after appointing his hand-picked successor a year ago – he has been on the board since day one. He was constantly present at Under Armor and interfered where interference was not necessary. Placing the company in news cycles it shouldn’t be in.

All in all, as a leader you just can’t get it done, from execution to innovation to company culture.

And this week it blew up in his face again in the form of shocking earnings figures and forecasts.

Revenue in the fourth fiscal quarter fell 5% from the previous year. Sales in North America fell by 10%. International sales fell by 7%. Wholesale sales (also known as sales to department stores and other partners) fell by 7%. E-commerce fell by 8%. Clothing sales fell by 1%. Shoe sales fell by 11%. Sales of accessories fell by 7%.

The story continues

A little bit of perspective:

• Walmart (WMT) U.S. e-commerce sales rose 22% last quarter. Sure, Under Armor doesn’t sell ground beef and bicycles, but e-commerce remains a key growth driver for most retailers. Provided your name isn’t Under Armour.

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

“With several CEOs and heads of product marketing in North America over the past five years, the continued turnover of critical leadership has been critical to our inability to remain agile and decisive,” Plank told analysts on his first earnings call since returning as CEO.

Reminder: Plank has been the constant during this internal turmoil for the past five years. The money has always stopped with him, who is still the controlling shareholder.

The company led to low double-digit revenue declines in the new fiscal year, including a surprise decline of 15% to 17% in North America.

Plank says he is resetting the company.

That includes cutting 25% of the company’s stockkeeping units (SKU), cutting costs (the other constant in recent years) and rededicating to innovation. Under Armor promises better days in 18 months.

But Wall Street is right to be skeptical.

“Several of the initial inputs to the turnaround strategy add some comfort (new $500 million buyback, 25% SKU reduction, new cost savings initiatives). However, many elements of the plan appear to depend on the extent to which UAA achieves some level of success in the field of product innovation.” Not seen in years,” Evercore ISI analyst Michael Binetti wrote in a client note.

And this brings me back to Plank.

Under Armor’s stock price has fallen 87% since its 2015 record high. This is now a $6.71 share! The company’s market cap is a paltry $2.90 billion, compared to $42.3 billion for Lululemon and $138 billion for Nike (NKE).

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

Once a consistent grower of more than 20% annual revenue, Under Armor’s sales are in straight decline – with the decline set to accelerate over the next twelve months.

A few opportunities and goals for this analysis:

• The company is in such bad shape that you have to wonder how long major brand sponsors like Steph Curry, The Rock and Jordan Spieth will stick around.

• The company completely missed the super shoe movement.

• The company let Hoka and On completely run a sneaker company 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 deteriorated considerably. Hit up a pair of Lululemon leggings and then a pair of Under Armor leggings.

• The company isn’t even discussing deals for the upcoming Summer Olympics.

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

I want to remove Plank from my list. Still, he has earned his place.

The next eighteen months will probably be the toughest of his career. At some point he will have to consider his legacy, which could mean stabilizing the company and selling it to private equity by the end of the year.

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

Brian Sozzi is editor-in-chief of Yahoo Finance. He is also the host of the “Starting bid” podcast. Follow Sozzi on Twitter/X @BrianSozzi and further LinkedIn. Tips about deals, mergers, activist situations or something else? Email brian.sozzi@yahoofinance.com. Are you a CEO and want to join Yahoo Finance Live? Email Brian Sozzi.

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