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Under Pressure at Under Armour, CEO Says His Eye Is on the Ball
Kevin Plank’s multitasking this year has been ‘a big source of discussion,’ an analyst said. ‘Investors are concerned”
By Sara Germano / Wall Street Journal
Updated Dec. 26, 2017
BALTIMORE—Temperatures were near freezing earlier this month when Under Armour Inc.’s UAA 1.03% management convened a town-hall meeting in a parking garage at the company’s headquarters here. With minimal heat and some executives donning winter hats to keep warm, Chief Executive Kevin Plank got straight to the point. “2017 sucked,” he said.
This year, the athletic-gear company posted two consecutive quarters of net losses, including its first-ever quarterly sales decline, laid off nearly 300 employees and lost several top executives. Entering the final week of the year, the stock had dropped about 45%, erasing more than $5 billion in market value. Meanwhile, rival Nike Inc. gained almost 25% and the S&P 500 nearly 20%.
But if it was a tough year to be CEO of a sportswear company, Mr. Plank had another business project that was on a roll: his private investment firm. Plank Industries in 2017 opened a boutique hotel and a whiskey distillery and secured an additional $233 million in funding for a multibillion-dollar real-estate project in Baltimore.
The contrast in fortunes of the two companies controlled by Mr. Plank prompts the question of how well an executive can juggle corporate and personal projects, analysts say.
The founder-CEO’s multitasking this year has been “a big source of discussion. Investors are concerned,” said Jim Duffy, an analyst at investment firm Stifel. “They want to know he isn’t distracted, that it isn’t taking away from appropriately running Under Armour.”
Mr. Plank said there is no link between his involvement in Plank Industries and Under Armour’s troubles. The 45-year-old billionaire said he is focused on turning around Under Armour and spends only a few hours a week on his private investments.
“My job is running Under Armour, period,” he said in an interview earlier this year at his office overlooking the Baltimore harbor, where blueprints for one of his real-estate developments were hanging on a wall.
Plank Industries is run from the same floor as Under Armour’s executive suite. It is “helpful to be nearby for occasional brief check-ins,” Tom Geddes, Plank Industries’ chief executive, said, adding that Mr. Plank is “fully focused on Under Armour” and formally reviews his other projects only quarterly.
Under Armour and Plank Industries’ close office arrangement isn’t disclosed in the apparel company’s regulatory filings, unlike the use of Mr. Plank’s private aircraft and helicopter. An Under Armour spokeswoman said Plank Industries pays office rent that doesn’t hit the disclosure threshold.
In June, Mr. Plank hired an apparel and shoe veteran, Patrik Frisk, to help him run Under Armour. The 54-year-old executive, who has the titles president and chief operating officer, has replaced several senior executives and now is handling many day-to-day duties, according to employees.
Mr. Frisk also has taken on a more-public leadership role, joining Under Armour’s earnings calls and, during this month’s town hall, delivering remarks to employees about the future of the company.
“We are clearheaded and well aware of the issues at hand and the tremendous amount of work ahead of us,” Mr. Frisk said on an earnings call in October.
Mr. Plank, a former University of Maryland football player, founded Under Armour in his grandmother’s basement in 1996; he started selling sweat-wicking compression apparel and the business took off. After its first public stock offering in 2005, Wall Street analysts lauded it as a growth machine, as it posted quarter after quarter of double-digit revenue gains.
Two years after the IPO, Mr. Plank bought Sagamore Farm in rural Maryland, where he began breeding and racing horses. He founded Plank Industries in 2012 to manage his investments and pursue new ventures. The following year, he founded two more businesses, Sagamore Spirit whiskey and real-estate firm Sagamore Development.
With sales accumulating and endorsement bets paying off at Under Armour, Mr. Plank moved his office from a common workspace at Under Armour headquarters into a secluded executive suite. A spokeswoman for Under Armour said the office was relocated to be near executive and communications teams.
In 2016, Mr. Plank unveiled Plank Industries’ biggest project: a $5.5 billion redevelopment of a 235-acre industrial peninsula in Baltimore’s Port Covington neighborhood that would create a mini-city including a new headquarters for Under Armour. He later secured $660 million in financing from the city.
Mr. Plank and Mr. Geddes said the project, like Mr. Plank’s other personal investments, will benefit the Under Armour brand; it isn’t clear how profitable the various other investments are. Of his myriad initiatives, Mr. Plank said, “I like lighting tiny fires and then throwing 100 gallons of gasoline on them.”
By the start of 2017, the fire at Under Armour was ebbing. The company shocked investors in January when it disclosed sales growth had stalled. One week later, Mr. Plank voiced support in an interview for newly inaugurated President Donald Trump, calling him “a real asset”—and sparking a backlash from some customers and two of the brand’s stars, NBA player Stephen Curry and ballerina Misty Copeland.
The fallout from the interview, Mr. Plank said, was his first indication that Under Armour was no longer a growing upstart but a mature corporation. “All of a sudden it was the first time that became, you know, people telling us that you’re not the underdog anymore,” he said.
In October, the company reported its first quarterly sales decline since going public and cut its growth forecasts. Between October and December, Under Armour’s co-founder, its chief marketing officer and the heads of its women’s and youth, footwear and sport-fashion divisions all left or announced plans to leave.
During his office interview, Mr. Plank called attention to a framed photograph on the wall above his desk, a famous 1965 image of prep-school football rivals scrimmaging in the foreground while a fire engulfs a science building in the background.
Mr. Plank pointed to the rows of spectators. “No one is watching the fire,” he said. “They’re all looking at the game on the field.”