On May 18, Under Armour announced that CEO Patrik Frisk was stepping down after two years on the job. The Class A shares are currently down 56% year to date, trailing other retail stocks and the S&P 500 index.
Market sentiment turned even more negative on retail stocks after Walmart and Target missed earnings estimates this week, but Under Armour investors now have another uncertainty to think about. Frisk took over the reins on Jan. 1, 2020. He replaced former CEO and founder Kevin Plank, who called Frisk, "the right person to serve as Under Armour's next CEO."
Indeed, Frisk did a good job of turning around a company that was struggling to grow sales and profits through 2019. Last year, Under Armour sales grew 27% to $5.7 billion and reported a healthy operating profit of $527 million.
Plank looks at the transition as another opportunity to get better: "As we transition, we are committed to identifying additional opportunities to drive improved returns for our shareholders and deliver for athletes, partners, and teammates. There is a huge opportunity in front of us."
Despite Under Armour's long-term opportunities, it's understandable why the market is punishing the stock. With retail companies struggling to manage escalating supply chain costs, this is not the best time to be without a CEO. In a statement, Under Armour said it has initiated a "comprehensive internal and external search process to identify a permanent President and CEO."
Meanwhile, the board of directors has named chief operating officer (COO) Colin Browne as interim president and CEO. The COO is usually the one who oversees the supply chain, so this should alleviate concerns that Under Armour will be driving in the dark in this challenging economic environment.