Shares of Under Armour (UA, UAA) are trading lower on Thursday after the company announced a shakeup in leadership: founder Kevin Plank will step into CEO Stephanie Linnartz's role come April. In response, an analyst from Williams Trading has downgraded the stock from Buy to Hold, lowering the price target from $11 to $8 per share.
Williams Trading Senior Equity Analyst Sam Poser, who is behind the downgrade, joins Yahoo Finance to discuss his call and contextualize the
Poser signals Plank's focus should be on strengthening the brand and not forcing top-line growth. He adds that Linnartz, the present CEO, had little time to effect her own changes: Linnartz's strategy "looked like it was working. I don't think it was given a chance. I can have a lot of guesses as to what I think happened, but unfortunately, for the timing of this, they're going into the quiet period next week, so we won't hear from Kevin until the beginning of May, which I think leaves everybody — that's why I downgraded it, not because it's necessarily bad, but based on what we know from the past...it sort of left us in a Never-never Land just trying to get more information, and it's hard to think they were pleased with what was going on if this change was made. Like I wrote in my note, it's a wait-and-see kind of thing.
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Editor's note: This article was written by Nicholas Jacobino
Video Transcript
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JULIE HYMAN: Time now for Call of the Day. Under Armour shares are sliding after the company's founder and former CEO Kevin Plank said he's returning to the c-suite. Stephanie Linnartz is stepping down after less than a year in the role. The change as our next guest downgrading the stock to hold from buy. Let's bring in Sam Poser, Williams Trading senior equity analyst.
Hey, Sam. It's great to see you. So this was a surprise I think we can all safely say to most observers maybe even to those inside of the company. Why is it not being seen as a positive in the market that Plank is coming back?
SAM POSER: I think we all have memories of how Kevin ran the business really between, I think, like 2015 and 2019. It was prior to COVID. It was when "Sports Chalet" and "Sports Authority" went out of business. And rather than pulling back, he wanted to keep driving top line sales and opened up distribution with product that was supposed to go to "Sports Authority" and "Sports Chalet" into Kohl's.
And then that product tripped on the product that was at Dick's and Hibbett and a few other retailers. And then the same items started being sold at different price points and so on. So it was a lot of trying to drive top line at the expense of brand. And so we're not really sure what happened and why she's leaving. Because as I wrote in my note, I think that she was setting the table for some very good stuff over the long term.
JOSH LIPTON: Yes, you're kind of going where I meant to-- I was going to lead you, Sam, which is she was there relatively short period of time. But do you think while she was there, she had the right plan, the right strategy in place, Sam?
SAM POSER: I do. I mean it looked like it was working. I just don't think it was given a chance.
So I can have a lot of guesses as to what I think happened, but unfortunately for the timing of this they're going into their quiet period next week. So we're not going to hear from Kevin until the beginning of May, which I think leaves everybody-- that's why I downgraded not really because it's necessarily bad, but it's based on what we know from the past and what we know that's going on right now.
It sort of leaves-- it sort of left us in a never-never land just trying to get more information. And it's hard to think that they were pleased with what was going on if this change was made. So it's just, it's a wait-- as I wrote in my note, it's a wait and see kind of thing.
JULIE HYMAN: Do you think that this-- I mean, you wrote in your note as well that this was described as a mutual decision. A, do you believe that? And B, do you think that this was a move-- I mean this would not be the first situation in which we've seen a founder, ex-CEO step back in, maybe not be as patient with one of his predecessors. I mean, Plank has already done this before.
SAM POSER: Yeah.
JULIE HYMAN: What do you think--
SAM POSER: Look, I wrote what I wanted to write. What I can say is that the-- and I mean, that's what I've tried to figure out exactly what happened. But what I can say is it was very-- it was sort of complicated because Kevin was the head of product who reported to Stephanie as the CEO.
But then she reported to Kevin as the executive chairman. So it's sort of like a weird-- it's just it was a difficult way to run it when you know she was responsible for one thing, but then she had to report to Kevin on another. And that was a head scratcher almost to begin with.
JOSH LIPTON: And so Sam, so the baton now though, has been handed off, right? Kevin Plank back in charge. What do you think, Sam-- you know this company very well, this brand very well. What should be Plank's priorities?
SAM POSER: Strengthening the brand and not trying to force top line growth. Because whenever you try to force top line growth, most of the time, bad things happen. You put too much-- you think you can sell more than you actually can. This is too much supply gets in the marketplace and the mark down start.
I think they have to continue to evolve the product and they're making progress. And then cede the marketplace until they can create demand and people saying give me that product. And again, the table looked like it was being set for that.
JOSH LIPTON: Sam, always good to see you. Thanks so much for joining the show and helping us try and sort this one out.
SAM POSER: Thanks very much. Have a great one.
