Under Armour founder and chief executive Kevin Plank will step down from the sports apparel company’s top role in January, handing over the reins to its president, Patrik Frisk, at a time when the company is struggling to right its key North American business.
Plank founded Under Armour in 1996 in Baltimore. Its first product, a sweat-wicking shirt for football players he made in his grandmother’s basement, became the cornerstone of what’s now a $5-billion-a-year business. He will stay on as executive chairman and brand chief after the change goes into effect on New Year’s Day.
As brand chief, Plank will work on product innovation and serve as an ambassador of sorts for Under Armour. Frisk, 56, will report to Plank, join Under Armour’s board and take on the day-to-day running of the company, an arrangement that Plank says will let Under Armour “be as fast as it needs to be, as efficient as it needs to be.”
Plank and Frisk detailed their plans in an exclusive joint interview with Fortune. Plank said that he’s been thinking about this move for a long time, and insisted that this isn’t a retirement, but rather an opportunity to focus more on big-picture tasks. “It’s also freedom for me to get out of the weeds,” Plank said.
Part of what Plank wants to do, he said, is return to the mindset he had when he was building Under Armour, of coming up with new products to “blow people’s minds.” He added, “We want to continue to make products for people that they never knew they needed, and once they have them, they don’t know how they could live without them.”
As an example of the latter, he pointed to last year’s HOVR smart shoe, which uses an embedded chip and app to provide runners with real-time data and post-workout statistics. “I don’t think the brand has gotten enough credit yet for just how cool a product we made,” he said.
Plank, 47, controls the company thanks to his 65% share of voting rights (he owns 15% of regular shares), and he is changing roles of his own volition. His tenure has reportedly not been without run-ins with the board. The Wall Street Journal wrote earlier this year that Plank irked directors when he took the advice of a journalist and friend over management’s in two instances: first, when dealing with a tepidly received new sneaker in 2016; and then, in 2017, when deciding whether to express support for President Trump despite controversy over the White House’s immigration policies.(Under Armour said at the time that there were clear delineations between Plank’s private interests and the company’s, and that Plank was accountable to the board on company matters.)
Plank dismissed any notion there was pressure of any kind from directors to make the move now. “To be completely clear, this is strictly my decision—this has been part of my plan,” he told Fortune. Plank held up this changing of the guard as the “gold standard” for succession planning at a founder-led company, especially given how often ego interferes with that process.
The company’s succession plan was arguably telegraphed two years ago when Frisk was tapped to be Under Armour’s president and operations chief. Frisk is a former CEO of Aldo Group, a Canadian shoe store chain, and before that was a 10-plus-year veteran of Timberland parent VF Corp.
Fixing North America
The change at the top comes at a challenging time for Under Armour, which says it is likely to report declining sales in North America—by far its biggest market, generating 69% of revenue—for a third straight year. Sales in the U.S. and Canada peaked in 2016 at about $4 billion after a meteoric rise (they rose $1 billion alone in the preceding two years) but by last year had fallen to $3.5 billion.
This year, North American sales fell 3% in the first half of the year. Last month, the company hired a new president of its North America business.
Under Armour’s shares were up 5.4% to $21.18 in mid-day trading on Tuesday. For the year, they are up 20.2%, though they remain below a 52-week high of $27.72 hit in July.
Under Armour has competed against the Nike juggernaut and Adidas’s striking return to form in North America, as well as comebacks by brands such as Champion and Fila. And newer names like Lululemon Athletica have muscled in on its turf.
Some 60% of Under Armour’s revenue comes from wholesale accounts—that is, sales to other retailers. But Wall Street analysts say it is losing shelf space at some retailers, and NPD Group’s tracking service estimated that Under Armour’s share of the U.S. activewear market had fallen 1.2 percentage points to 5.6% in the 12 months ended in June.
Some on Wall Street fault Under Armour’s insistence on focusing on the high-performance aspects of its gear, even as competitors have also emphasized fashion and casual clothing. (Nike, for example, has a large area inside Nordstrom’s new Manhattan flagship.)
“It’s about making sure we are focused,” Frisk told Fortune. “The brand positioning is very clear for us: we’re a performance company.” Besides, he added, people want both performance and aesthetics in their athletic wear now.
Then there is the ongoing work of undoing the damage caused by Under Armour’s sales in high volumes in off-price discount avenues in recent years. Part of resolving that will involve generating far more sales via its own stores and web site, as brands like Nike are doing. Under Armour is aiming for more than half its business to come from those sources in five years, up from about 35% now. That includes roughly doubling the number of Under Armour stores, to 2,500 locations.
“We believe in retail at the right place and at the right time,” said Frisk.
As for Plank, he said the company is moving past its challenges, transitioning from defense to offense as he puts it. He wants Under Armour to be a “loud brand and a quiet company.”
“We’ve seen some of the exact opposite of that the last couple of years,” he adds. And the change at the top is aimed at addressing that.
CORRECTION: An earlier version of this story did not account for a split in Under Armour shares, and thus misstated the decline in the company’s stock price. The story has been updated.
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