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Study enough corporate turnarounds and one thing becomes abundantly clear: Those businesses successful at finding the promised land again have new CEOs that hit the reset button on a failing culture.
The wrong culture usually ends up dinging the company’s stock price and balance sheet, whether it be pushing out inferior products or a major public scandal.
So what is a new CEO to do to right the sinking ship?
They assess the culture with fresh eyes, then insert new leaders in key roles who bring in different ways of doing things and a truly collaborative mindset. This new group rebuilds its rank and file and sets a North Star for the revitalized workforce.
If done correctly, once flailing companies begin to improve in a year, then accelerate from there (assuming the economy isn't tanking, the world isn't ending, rivals don't announce a killer new gadget, etc.).
Take Abercrombie & Fitch (ANF)’s CEO Fran Horowitz, who took over the company in 2017 after the company nosedived under a bizarro CEO in Mike Jeffries. She transformed the brand from snobby to inclusive, and the retailer once again became the hottest destination in the mall.
Today, the company is smashing earnings left and right, the stock price is up 342% in two years, and there could be a couple of big financial goals hit soon.
How did Horowitz pull off one of the most underappreciated turnarounds in retail history? She smashed the reset button down on Abercrombie's once-derelict corporate culture, as she told me in Yahoo Finance's “Lead This Way.”
I was witnessing the start of a cultural change under now outgoing Under Armour (UAA) CEO Stephanie Linnartz, who I originally got to know when she was a top leader at hotel giant Marriott (MAR).
Linnartz took the helm of Under Armour in early 2023. Her to-do list was plentiful: improve sales and profit, rebuild an underperforming management team, and remake a culture that had frat house vibes (more on that in a second).
To get the job done, Linnartz had been aggressively on the road the past year, meeting teams and listening to what needed to be fixed. In recent months, her plan to turn Under Armour around was becoming increasingly clear.
Linnartz added key talent to the roles of chief commercial officer, chief communications officer (one-time comms person to former PayPal CEO Dan Schulman), chief product officer, chief design officer (celebrated fashion designer John Varvatos), chief supply chain officer, president of Americas, president of EMEA, and chief marketing officer.
Her “Protect This House 3” strategy focused on improving product design, expanding in the lucrative athleisure market, and returning to growth in the US. Linnartz even channeled her Marriott Bonvoy experience by debuting a UA Rewards program.
Amid all the rebuilding, I spent a few hours with Linnartz at Under Armour's Baltimore headquarters a few weeks ago.
We had a wide-ranging chat as we walked through the enormous corporate gym, basketball court, and offices.
We talked about her vision for Under Armour and why it will win the battle with Lululemon (LULU), and she showed me some great styles coming down the pike.
She reflected on her hard work at her family's modest hotel business growing up and expressed excitement about the new headquarters Under Armour would be moving into nearby. The space will signify a new chapter for Under Armour, Linnartz told me.
Above all else, Linnartz struck the note I was looking for on culture — leaving me hopeful that Under Armour by 2026 wouldn't be a $2 stock (it's around $8 today).
"First and most important thing I deeply believe in is servant leadership. As the CEO, my job is to serve the team and the teammates. And when I have that attitude, then I can be welcomed by the team and I can enable the team," Linnartz said.
Coming up on her one year mark, she has settled into the CEO role, and investors were beginning to buy in. UA’s stock rose 12% in the past six months, despite ever-increasing challenges in the footwear market in the US and overseas.
I left Baltimore thinking: "It's hard not to root for a Stephanie Linnartz."
Now, because a rich 51-year-old guy wants his toy back, Linnartz is headed out the door on April 1 — which came as a surprise to her, based on my reporting and conversations with Wall Street sources.
Late Wednesday, Under Armour founder Kevin Plank — who has 65% voting control due to his stock ownership — planted himself back as CEO after stepping down in 2019.
His friend, longtime board member, and well-known financier Mohamed El-Erian will replace his role on the board as chairman.
Stifel analyst Jim Duffy said in a client note he was "surprised" by the decision, given Linnartz's "unique skillset" and signs of progress on the turnaround. Others on the Street told me Plank just can't get out of his own way.
To say Plank is the cultural opposite of Linnartz is an understatement.
Plank deserves full credit for working hard to bring Under Armour to life — the guy was selling T-shirts out of his car in the late 1990s. He is unquestionably an American success story, and to that, I tip my black UA baseball hat.
But he is also totally the wrong person to be leading Under Armour into the next decade, in large part because of his checkered resume for driving cultural excellence inside the company.
He also missed several key consumer trends, coming late to the sneakers and athleisure parties, essentially handing the market to Lululemon while strengthening Nike (NKE). He grew the company too quickly to the detriment of driving healthy, consistent returns.
The numbers from Under Armour in the past decade haven't looked good amid the revolving leadership door and with Plank staying as a constant presence (he kept his office next to Linnartz, for example).
The share price of Under Armour is off by 85% since its 2015 record. The company's market cap stands at a paltry $3.45 billion, versus $59 billion for Lululemon and $153 billion for Nike, according to Yahoo Finance comparison data.
Deckers Outdoor (DECK) — once known only for Uggs boots — has seen its market cap swell to $24 billion on the back of feverish demand for Hoka running shoes.
Once a consistent 20% plus annual revenue grower, Under Armour's sales growth has languished in the low-single digits in five of its last seven fiscal years.
Plank aimed to spin a different story in a blog post on Under Armour's LinkedIn page, one of a reformed human who would be a reformed CEO.
"During my time away from the President & CEO role, which spanned more than four years, I have learned many lessons — professionally and personally. This period of self-reflection and learning has been invaluable, shaping my understanding of our business and reinforcing our mission, vision, and values. The experience of not being a CEO has taught me more about what it truly means to be a CEO," Plank wrote.
Maybe Plank has changed as a person. But a person can't run from their past, even if they are wearing ultra-lightweight Steph Curry low tops.
To have any chance at success, Plank can’t play the bull in a china shop, a driver of the bro culture version of himself. Rather, he’ll have to channel the highly regarded leader he just pushed out, who was beginning to get the job done.
Hopefully, he learned a lot about authentic leadership from sitting next to Linnartz.
Under Armour declined to make Kevin Plank available for an interview.
Plank does have supporters, such as longtime sponsored athlete and skiing great, Lindsey Vonn. Here's what Vonn said about him at the Yahoo Finance Invest conference in November 2023.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
