The man who created Under Armour more than two decades ago from his grandmother’s basement will soon be vacating the helm of the sports apparel company. By year-end, Kevin Plank will step down as CEO from the phenomenon he founded, making way for COO Patrik Frisk to take the top spot . Plank has been a key man at Under Armour and is synonymous with the brand he is responsible for building. Investors were choosing UA – or not choosing it – as much for the brand as they were for the leadership that Plank provided. Now that someone else will be steering the ship, investors face a whole new set of risks – or do they?
According to a Morgan Stanley report, a change in a key executive can wreak havoc on a company’s stock and “meaningfully impact shareholder value.” The odds are not in Under Armour’s favor. Companies who suffered a CEO defection underperformed the stock market by 11%, on average, in the 12-month period following the event, according to the report that canvassed 2017 trends. Worse, nearly one-third of these companies lagged the broader stock market by approximately 20% in the same period.
The silver lining for the stock is that it seemingly has nowhere to go but up. As a sports apparel company, Under Armour’s stock hasn’t been a home-run. It’s been underperforming chief rival Nike, and that has got to be eating at Plank. The Under Armour founder ambitiously sought to leave his larger competitor in the dust , even reportedly sending Phil Knight Christmas cards in years past with a message for the Nike co-founder:
“You will know our name.”
Year-to-date, Nike has gained nearly 30% vs. Under Armour’s 10% (prior to today’s rally). Adding insult to injury, Under Armour’s North American sales are falling while Nike is generating revenue hand-over-fist.
So a change at the helm could be the breath of fresh air that investors needed.
Based on the stock’s performance today, investors are optimistic, sending shares 5% higher, which according to sports analyst Darren Rovell inflates Plank’s payday by $35.4 million based on his equity stake.
It’s early to predict the long-term impact on Under Armour’s stock from Plank’s departure. Based on investors’ initial response, however, Under Armour stock could be one that bucks the key-man trend. Instead of taking a hit, Plank, in one fell swoop, may just have just saved UA from further humiliation and given Nike a reason to watch its back.