Kevin Plank has decided he needs to add some bench strength to get Under Armour back on track.
The hard-driving and hands-on Plank, the brand’s founder, chairman and chief executive officer, on Tuesday named Patrik Frisk president and chief operating officer, effective July 10. Frisk will report to Plank, who had previously held the president’s role as well.
The addition of Frisk and a major realignment of other top managers comes as the Baltimore-based company continues to struggle to regain its growth trajectory. After a long run of expansion and improving profitability, Under Armour hit a speed bump last year as the challenging retail environment — and increasing competition — took their toll.
With sales of nearly $5 billion, Under Armour now ranks as the world’s third-largest athleticwear brand — but it’s a distant third, with revenues some $30 billion behind Nike and $15 billion behind Adidas, which is having a resurgence.
Under Armour’s shares barely budged on the news of the management shake-up, dipping 2 cents to close at $19.90. They rose about 1 percent in after-hours trading to close at $21.77.
Analysts generally applauded the addition of Frisk, saying it will free up Plank to focus more on strategy.
In a research note, Matthew McClintock of Barclays, said Under Armour “is taking the appropriate longer-term steps to attain sustainable growth and market share gains: We believe Mr. Frisk will not only provide a fresh perspective, but also substantial global experience from his time spent as ceo of The Aldo Group and through his numerous positions at VF Corp.”
He added that while he believes the company “remains in early stages in restructuring and investing in the business — and therefore volatility remains high — we believe today’s announcement provides a brighter outlook for 2018 and beyond. The new organizational structure should create a more solid operational base, while also allowing Mr. Plank to focus on strategy. Mr. Plank’s direct reports are now approximately reduced to six from 10.”
Christian Buss of Credit Suisse, also said he was “generally impressed” with the addition of Frisk and the other shifts in executives, which clearly delineate the lines of control within the company. He also pointed to Frisk’s experience building a “profitable, margin-accretive retail and e-commerce at VF Corp.,” where the company expanded its direct-to-consumer penetration from 15 percent to 28 percent of sales, while increasing its operating margins from 12 percent in 2011 to 14.9 percent in 2015. Although Under Armour has also increased its direct-to-consumer sales to 32 percent in 2016 to 22 percent in 2010, Buss said it has been “without a demonstrable margin lift.”
Buss also pointed to Frisk’s “expertise in the footwear space,” an area of business in which Under Armour has struggled to carve a niche. Buss said this is a sector that he sees as “the most important for reacceleration of revenue growth and stabilization of the margin profile of the business.”
But while there are a lot of positives to the reorganization news, Buss said he remains cautious “that our underlying concerns about the growth potential of the domestic business are not yet resolved, and these announcements are unlikely to lead to tangible changes to pressured revenue and earnings momentum in 2017.”
According to a filing Tuesday with the Securities and Exchange Commission, Frisk, 54, will receive a base salary of $1 million and will be eligible to participate in the company’s annual cash incentive plan with a target award level equal to 100 percent of his base salary. He will also receive a time-based restricted stock unit award with a fair value of $10 million, vesting in equal annual installments over a five-year period. In addition, he will receive a performance-based restricted stock unit award with vesting conditioned on the company’s achievement of future performance targets and his continued. The performance-based restricted stock units will have a grant date fair value of $5 million.
In addition to Frisk’s appointment, Under Armour made a number of other management changes. These include naming Paul Fipps chief technology officer with responsibility for the engineering that supports the company’s web and mobile applications, its information technology and real estate. He will also oversee the company’s Connected Fitness business and Michael Lee, chief digital officer and head of Connected Fitness, will now report to him. Fipps, formerly chief information officer and executive vice president of global operations, will report to Plank.
Colin Browne has been named chief supply chain officer, responsible for all global sourcing and logistics. He was formerly president of global sourcing. Kevin Eskridge was named chief product officer, a role that will see him overseeing the company’s product, merchandising, design and innovation functions. He has been with the company since 2009, most recently as senior vice president of global merchandising.
Under the new management structure, Charlie Maurath, chief revenue officer; Andy Donkin, chief marketing officer; Kevin Haley, president of strategy; Eskridge, and Browne will all report to Frisk.
Continuing to report to Plank are Kip Fulks, strategic adviser; Kerry Chandler, chief human resources officer; John Stanton, senior vice president, general counsel and corporate secretary, and David Bergman, the acting chief financial officer.
This realignment, the company said, is intended to “better leverage its digital business, support its move toward category management, and drive greater operational efficiency across the organization.”
“Today’s leadership appointments and the streamlining of our organizational structure are transformative steps focused on a sharper, consumer-led approach and go-to-market strategy through our category management lens,” Plank added. “With the stated goals of accelerating our innovation agenda, optimizing our product assortment and creating a merchandising center of excellence, this underscores our work toward evolving from a great brand with good operations — to a great brand with great operations.”
Frisk has nearly 30 years of experience in apparel, footwear and retail, and served most recently as ceo of the Aldo Group. Before that, he was with VF Corp. for 10 years as coalition president of Outdoor Americas with responsibility for The North Face, Timberland, JanSport, Lucy and Smartwool. He had also served as president of Timberland. Before joining VF, he ran his own retail business in Scandinavia and held senior positions with Peak Performance and W.L. Gore & Associates.
“Patrik’s global experience in brand building, including a proven and disciplined record of driving growth, while enhancing profitability and efficiency, will be instrumental as we work to transform our business model to deliver long-term value for our consumers, customers and shareholders,” Plank said in announcing the appointment. “The opportunity to leverage our strengths — innovative product, brand strength, premium sports marketing assets and unparalleled consumer connections — within an increasingly more digital ecosystem has never been greater.”
The realignment is further evidence of how much pressure Under Armour has been under. In April, the company posted its first-ever loss of $2.3 million, or 1 cent a share, in the first quarter, on revenue of $1.12 billion, down from a profit of $19.2 million, or 4 cents a share, on sales of $1.05 billion, a year earlier.
That followed a fourth quarter when the company only managed a sales gain of 11.7 percent, its weakest showing since the Great Recession. Under Armour said at the time that it expected to hold to that sales pace this year, with net revenues projecting to grow 11 to 12 percent to around $5.4 billion.
But despite the recent hiccups, due in part to the liquidation of Sports Authority, one of its largest customers, Under Armour continues to expand on many fronts.
In its retail portfolio, it has opened flashy Brand Houses in major markets such as Baltimore, Chicago and New York SoHo, and has committed to taking over the former FAO Schwarz space on Fifth Avenue and 59th Street in New York. There, the company will create a 53,000-square-foot store that Plank boasts will be “the most breathtaking and exciting consumer experience ever conceived at retail” when it opens in 2018 or after.
Expanding apparel is also a big priority for the company. In addition to a successful entry into Kohl’s with a collection of active apparel and footwear for men, women and children, it is also flexing its muscle in the higher-priced apparel arena. Last September, the company unveiled Under Armour Sportswear, or UAS, a collection designed by Tim Coppens that marries the brand’s expertise in performance with fashion-forward designs and silhouettes. Additionally, a new apparel collection, Unstoppable Lifestyle, is due out later this year and will mark the brand’s first full fashion line.