When Under Armour released its latest quarterly report Thursday morning, the news seemed, well, bad.
People are buying fewer shoes, revenue is down, and instead of turning a profit, the Baltimore-based apparel company lost $300 million.
Investors were thrilled. Under Armour’s stock price surged more than 15% in pre-market trading, topping $7.
The company is navigating a challenging year — a C-suite shake-up, layoffs and a $434 million payment to settle a 2017 investor lawsuit — but Under Armour’s latest quarterly report showed it may be weathering the storm better than expected.
Both Nike and Adidas have recently reported declines in revenues, too. What excited Under Armour investors about Thursday’s earnings report is that the company beat expectations.
Speaking to investors, founder and CEO Kevin Plank said the company is getting back to basics, and that its recent repositioning plan is working.
“There’s not a lot of high-fives yet,” Plank said. “But there’s definitely a sense of what’s coming and we’re very proud of that.”
Plank returned to the company as CEO earlier this year, replacing Stephanie Linnartz. The former president of the hotel chain Marriott International led Under Armour for little more than a year — a relatively short time for a CEO — before stepping down.
As part of Plank’s return, Under Armour has been resetting its culture and its strategy. The plan, he said, is to reduce its array of products, improve their quality and market them better.
Plank repeatedly referred to Under Armour as a “sports house,” a riff on the term “fashion house.” The top fashion houses are European companies with rich histories and premium brands that dominate the fashion world, Plank said, and there is a similar phenomenon in the world of athletic apparel.
Without naming his competitors, Plank said there are a handful of sports houses — and Under Armour is one of them.
Going forward, when Under Armour releases a new product, Plank said “it needs to be special.”
“It can’t just be another T-shirt or another shoe,” he said. “It needs to be a true piece of performance product that actually helps make you better.”
This also means a renewed focus on base-layer compression products, which were among Under Armour’s earliest and most successful products.
“It’s really just going back to the foundations of the business,” Plank said.
Plank, a former University of Maryland football player, founded Under Armour in 1996. He led the company for more than two decades before Under Armour announced in 2019 that he’d be stepping down from the role of CEO.
Shortly after Plank’s return to CEO, Under Armour settled a class-action lawsuit for $434 million, the company said in June. The lawsuit, originally filed in 2017, alleged that the company and Plank had misled shareholders about the Under Armour’s financial health.
During its last quarterly report, the company disclosed it was preparing to lay off an unspecified number of employees after a drop in sales in North America. Plank did not say how many employees lost their jobs on Thursday’s call. He called the layoffs “painful, but complete.”
The restructuring was part of a broader plan to reduce unnecessary complexity at Under Armour, Plank said, and better define success. He called it “growth by constraint.”
The company is expected to move into its newly constructed headquarters at Baltimore Peninsula later this year, which Plank called an “incredible edifice.” That complex is a key piece of a South Baltimore redevelopment project that Plank’s investment firm, Sagamore Ventures, has been working on for about a decade.
“I don’t know if that’s exactly where shareholders would have liked us to spend money, but this thing is built,” Plank said. “We think is [it’s] going to be a massive asset for the business.”
Meanwhile, Under Armour continues to shake up its executive level.
Eric Liedtke, a 26-year veteran of Adidas, is expected to join the company as its executive vice president of brand strategy. The move comes as Under Armour buys UNLESS Collective, a plant-based apparel company based in Portland, Oregon, founded by Liedtke. Under Armour did not disclose a sales price.
Plank talked up Liedtke during Thursday’s call, saying he will fill a “critical missing piece of our puzzle through the marketing lens.”
As Plank answered questions from investors, the stock market opened, and the share price of Under Amour kept climbing. Under Armour’s stock price is still far below its peak a decade ago, when it topped $50, but by mid-morning Thursday it surged 20% to $7.76 — its highest level since March.
“There is much to do, but we are undeniably back on offense,” Plank said.
