Stephanie Linnartz Starts Journey as Under Armour CEO
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Stephanie Linnartz is simplifying the game plan at Under Armour Inc.
But while the new corporate direction — zeroing in on brand, product and North America for the next three years — sounds familiar, the recently appointed president and chief executive officer said more focus was required.
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“When I got here, there was a long, long list of projects and efforts that the company was trying to tackle,” Linnartz said in her first meeting with Wall Street as CEO of Under Armour, which reported fourth-quarter results on Tuesday.
“What we’ve done is we’ve really narrowed down the list of projects and efforts for the next three years so we can be laser focused,” she said.
The strategic plan — dubbed Protect This House 3 — borrows its name from one of Under Armour’s best known rallying cries and promises to layer more premium pieces into the assortment and highlight the “best” end of the brand’s good, better, best offering.
Just like there are three areas getting special attention, there are three keys to delivering a win — focus, breaking down silos across the business with execution and fostering accountability.
“I am holding myself, my executive team, the entire team accountable for business results,” Linnartz said. “And it’s all about results at the end of the day.
“I very much recognize the time for action is now,” she said. “We need to deliver. And that’s what I’m holding myself and the team accountable to. So it’s not always the most glamorous part, but it is the tactical things that have you pull off a strategy at the end of the day. Focus, execution and accountability.”
For someone who spent 25 years at Marriott, Linnartz seems comfortable with the down-at-half-time rallying speech. Clearly, she has picked up the Under Armour mantle quickly and is pressing forward on the brand’s advantages and cognizant of the challenges.
“The potential for this brand is even bigger than I imagined when I walked through the door at the end of February,” she said. “I am realistic about our challenges and I am confident that we have the right core components and are developing the right plans to reignite growth in the company and to create value for shareholders. That said, like any athlete, we must measure ourselves against our competition and potential.”
And that is part of the problem as the active market is led by the giant Nike Inc., which has revenues of more than $50 billion and a market capitalization of $192 billion, to Under Armour’s revenues of $5.9 billion and market cap of $3.4 billion.
Still, Under Armour is a player in the $300 billion global active market with men’s, women’s, apparel, footwear and the right kind of connections, having signed up Golden State Warriors point guard Stephen Curry as president of the Curry Brand in March.
Linnartz picks up where Patrik Frisk — the last CEO — left off when he abruptly left the company in June.
Kevin Plank, who founded the company in 1996, took it public in 2005 and now serves as executive chairman and brand chief, acknowledged some stops and starts along the way.
“It’s been at times an inconsistent journey, one we acknowledge has not created the shareholder value that we see this brand capable of,” Plank told analysts.
But he said Linnartz’s “deep brand and consumer expertise and her fresh perspective on the business have laid the groundwork for challenging some of the ways we work and reenergizing the leadership team across UA as we lay out the growth strategy in our next chapter.”
That chapter will take some time to get started.
Under Armour’s fourth-quarter net income received an $87 million boost from a tax valuation allowance and tallied $170.5 million, or 38 cents a share — up from losses of $59.6 million, or 13 cents, a year earlier.
But the progress was more gradual on an adjusted basis, with earnings per share coming in at 18 cents, 3 cents ahead of the 15 cents analysts projected on average, according to FactSet.
Revenues for the three months ended March 31 rose 7.5 percent to $1.4 billion from $1.3 billion in the prior-year period.
This year, Under Armour is expecting its revenues to be flat to up slightly with diluted earnings per share of 47 cents to 51 cents — down from 58 cents this past year.
Investors wanted a little more and welcomed Linnartz’s first quarterly report by sending shares down 5.5 percent to $7.39 on Wall Street.
Tom Nikic, an analyst at Wedbush, said, “They’re operating in a tough/competitive environment, and Ms. Linnartz is a bit of an unknown quantity. While the Protect This House 3 plan makes sense, some of the core tenets have been in place for a long time — e.g. footwear/women’s/sportstyle opportunities, premiumizing the North American market, etc. — so it remains to be seen if she will have a shooting touch as deft as spokesperson Steph Curry.
“With the stock trading at a major discount to athleticwear peers, we still think long-term risk/reward is positively skewed if they can execute,” Nikic said. “But in the near-term, we think investors will remain in ‘wait and see’ mode and the stock likely trades sideways for a while.”
Likewise, BMO analyst Simeon Siegel said the company’s stock was under valued but that “the burden of proof lies with management execution.”
And William Blair analyst Sharon Zackfia said, “While we are disappointed in the company’s initial outlook for fiscal 2024 and worry about the brand impact of a higher promotional cadence and mix shift to off-price, we are also inclined to give new leadership the benefit of the doubt in the near term to set strategic priorities to position Under Armour for sustainable growth in the United States.”
Sounds like Linnartz has some time to show some momentum — but not very much.
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