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.
Plank’s Payday Just Went Up
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.
Last modified: September 23, 2020 1:11 PM