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Why the Under Armour brand is in crisis

Under Armour (UAA) is a brand in crisis. The athletic apparel company reported better-than-expected earnings on Monday, but its stock plunged in the wake of news about a federal accounting probe.

What’s more, Under Armour had three different CFOs in the years 2016 and 2017 alone — and last month, news emerged that CEO Kevin Plank would step down on Jan. 1.

“So the Under Armour brand image has really taken a hit over the last couple of years. They’ve been really unable to pick up on the trend of athlesiure that has been led by brands like Lululemon (LULU) and frankly Nike (NKE) and Adidas (ADDYY),” Sol Marketing CEO Deb Gabor told Yahoo Finance’s YFi AM on Monday. “The brand has largely fallen out of favor with teen boys, who are the arbiters of what’s cool in the athletic world.”

It also doesn’t help that the brand’s image has been tarnished because it’s being sold in discount outlets like TJMaxx (TJX) and other discount stores, she noted. According to Gabor, “Things like that go towards devaluing the brand. So the brand itself is out of favor.”

(COURTESY: Getty Images)

Gabor noted that Under Armour’s brand was also hit last year over its now-ended practice of allowing employees to charge strip-club visits on corporate cards. And on Monday, she noted, news emerged that the Justice Department and Securities and Exchange Commission were probing Under Armour over how it recorded its revenue.

In the new year, Patrik Frisk will become Under Armour’s new CEO. But the question remains if Frisk can bring the right change to turn things around and how he’s going to do it.

“If he is going to bring change to the brand, it needs to be systemic. It needs to be throughout the entire organization,” Gabor said. “From a brand perspective they need to really understand who is their core customer, how can they be meaningful to them.”

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