Kevin Plank still remembers the moment it all clicked. On a frigid January afternoon, sitting in his office overlooking Baltimore’s historic Inner Harbor, the founder and CEO of Under Armour recalls the day almost a year ago when he walked into the company’s headquarters and faced an undeniable truth.
“I looked around, and I didn’t like the way the energy felt,” Plank recalled. Bothered by what he deemed as a dip in office momentum, he asked Under Armour’s newly minted president, Patrik Frisk, if he too felt something wasn’t right. But Frisk shrugged off his boss’ concerns.
“I said, ‘You have no idea what it was like [during the early days] when we were jamming and you could just feel that kinetic energy in here,’” Plank recalled.
Patrik said, “‘Hey man, you may have to get your arms around the fact that [Under Armour] may never be like that again.’”
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UNEXPECTED CHALLENGES
In the past few months, Plank, like many athletic-industry leaders, has found himself under a new kind of public microscope. The #MeToo era has taken hold, diversity and inclusion are dominating the conversation, and brands are giving new and much-needed attention to their treatment and advancement of minority talent.
Just three months have elapsed since a scathing report by The Wall Street Journal alleged that Under Armour’s staffers engaged in a yearslong practice of expensing strip club visits and that its managers invited women to company events based on their attractiveness.
Around the same time the WSJ article surfaced, speaking to FN, several former Under Armour employees and insiders recounted incidents in which they or their peers felt disenfranchised by Plank’s and the brand’s leadership. In some cases, sources believed they’d possibly been overlooked for advancement based on their race or gender.
“I always want to understand how people feel, [but] I reject that,” Plank said of the accusations. “I don’t know how to be more clear: I pride myself [on] challenging my children to think first and foremost about being global citizens. I’d like to be a global citizen. I’ve been striving for it my entire life. Diversity of thought is something I welcome more than anything I can imagine. It’s what I want this company to be; it’s the constituency we sell to.”
Chatter concerning minority challenges was likely stoked by the exits of two high-profile African-American female executives just months apart. (Adrienne Lofton, SVP of global brand management, departed in July 2018, and Kerry Chandler, chief human resources officer, exited in October. Last month, the brand announced it had hired Harley-Davidson veteran Tchernavia Rocker as its first chief people and culture officer — to replace the CHRO role. Attica Jaques, previously VP of global brand marketing, became head of global brand management in August.)
But Plank was quick to point out the firm is hardly behind the eight ball on diversity: Nearly half of its workforce comprises women, a third of its leadership is female, and 26 percent of its VPs are women. Its board of directors is also 22 percent female.
However, the road to creating an inclusive company is not easy for an entrepreneurial startup-turned-multibillion-dollar juggernaut.
“The fact is, I was an athlete who started my company with several people I knew throughout my 23 years of life — people who did the same things I did and looked like I did,” Plank said, adding that the firm’s diversity has evolved in tandem with its size. “I don’t know of a company in the world that says, ‘Our [representation] numbers are great.’ I can brag about 49 percent [of our workforce being women], but I want to make sure that we’re driving gender representation at every level of the company. I don’t know if we’re where we want to be, but I know we’re in a pretty good position — we’re not starting from zero.”
GLORY DAYS
It’s been more than two decades since Plank founded a moisture-wicking T-shirt company in his grandmother’s basement. From launch, it took the company only 10 years to break ground in the footwear space and under 15 years to surpass $1 billion in annual sales.
After that, Under Armour’s growth accelerated at lightning speed to hit $4.8 billion in 2016 — shooting past athletic mainstays like New Balance and Asics to land on the heels of industry heavy- weights Nike and Adidas.
At the same time it was capturing enviable shelf space in Dick’s Sporting Goods, Hibbett Sports and Foot Locker, the brand — and its most vocal proponent, Plank — became one of the hottest and most closely watched athletic players.
But in the years that followed, a series of product misses and a sales slowdown on its home turf stalled the firm’s rapid ascension.
Its first-quarter 2017 footwear sales, for example, rose just 2 percent, compared with a gain of more than 60 percent the year before, as the brand started to lose its footing in North America.
Add to the mix a slew of retail bankruptcies — notably those of The Sports Authority and Sport Chalet — and the brand produced several quarters of overall losses.
SPLITTING THE REINS
One of the most prominent first steps Under Armour’s chief took to right his ship came in July 2017 when he passed his president hat to Frisk, a 30-year retail veteran who most recently helmed The Aldo Group. (Frisk was also named Under Armour’s COO in July 2017.)
“I thought about a few different things: What’s the new world? What’s the new economy? What direction are we going in?” Plank explained of his decision to hire Frisk. “The most important thing with bringing on a partner was to ensure that it was someone I can trust and that we can build the world’s most efficient shirts and shoes business.”
Frisk was tasked with re-engineering the company’s go-to-market strategy and operational model, as well as unifying them under a common theme of vision, mission and values.
“For Kevin to trust me to [make] some of the change and for us to collaborate through it and stand side by side — or back to back — ensured that the organization could drive through some of the things we’ve done,” Frisk said. “A lot of people have had to evolve how they do things — which has [yielded] great learnings. But now that we’re into it, we’re starting to see results.”
While market watchers have been on the fence about several aspects of UA’s transformation during the past two years — namely product direction and its substantial international exposure amid trade tensions — Plank’s move to hire Frisk continues to be widely lauded.
“The work that Patrik Frisk has done to improve the overall efficiency of the business was a much-needed process upgrade: improving the supply chain, reducing factory partners, reducing SKU counts — those changes will be beneficial over time and something that the company was sorely lacking,” explained Canaccord Genuity analyst Camilo Lyon. “He was the right person to drive that improvement, but efficiency gains only get you so far. … Ultimately, the consumer wants fresh innovation, and we do not believe Under Armour has the team in place to deliver against those demands.”
A recent point of contention for some analysts, as well as shareholders, has been the company’s announcement during its December investor day that it would place a renewed focus on the performance category in the next five years. The firm’s stock tumbled following the meeting, while Lyon and other market watchers criticized the brand’s emphasis on a category they believed was hardly on fire.
But sitting next to each other on this January afternoon in Plank’s office, UA’s president and CEO reiterated, in tandem, their confidence in the firm’s five-year growth strategy.
“Yes, you can argue that [a weakness in the performance category is] happening short-term,” Frisk said. “But we believe long-term that’s going to be our biggest strength. Being really good at something is [very] important. People need to realize that being in the athletic performance space doesn’t mean you’re not going to look good — you have to look good. Style is just table stakes.”
Plank agreed.“ It takes a long time to be great in this industry, and anyone can do a release and say, ‘Here’s a shoe, and here’s a thousand units,’” the CEO said, homing in on the brand’s footwear business. “But when you’re doing it at scale and making 35 million-plus pairs of shoes a year — that’s doing it great. [At the same time], what we’ve [also] been able to do is focus ourselves to stop doing so much and get more narrow and a lot deeper.”
EYE ON THE FUTURE
The timing couldn’t be better for Plank’s newfound partnership. In recent years, rumors of a challenging management structure and murmurs of a talent retention problem plagued the brand well before the headline-grabbing November WSJ article.
Several waves of executive departures — chief merchandising officer Henry Stafford and chief digital officer Robin Thurston, for example, exited the brand at the same time in 2016, immediately sending UA shares down — had caught the attention of analysts, who had started to question the company’s culture and Plank’s leadership style.
“Every company has a culture, and I think Under Armour brought in a lot of people from other companies who were accustomed to another environment and who fairly quickly realized that they didn’t fit in,” explained Susquehanna Financial Group LLLP analyst Sam Poser. “There are always growing pains, but the question has become whether Under Armour’s growth has been more painful than its peers’.”
Addressing whether the brand has an issue with employee retention, Plank readily recounted data around its turnover: “Of our executive team, a third have been here five years or less. A third have been here between five and 10 years, and a third have been here for about 10-plus years. I think that’s healthy in any industry.”
Still, the executive isn’t unwilling to acknowledge that his vigorous ambition and the frenetic growth pace he sought in the early years may have placed strain on key stakeholders — although he stopped short of expressing regret.
“[My leadership style] has evolved,” Plank said. “I’m a leader with a point of view, without question, but the strength of our business can’t be simply reliant on a good idea from one [person]. … I’m not by nature a patient individual, and that’s what it took to get Under Armour built. But I recognize that in this next chapter, I can’t say, ‘I have a great idea, and I want this out in six months.’ ”
In the same vein, Plank is processing feedback around how he and other managers may have — perhaps inadvertently — left some minority employees with an impression that their views aren’t as valuable as others’ in the firm.
“My mom is a strong woman, so it’s difficult to listen to that, but I’m happy to,” he said. “As a CEO, I own everything, and I take the criticism of anyone who’s ever felt disenfranchised. But I want everyone to know that we’re a company that will fight for you. We’re a company for the little guy.”
To that end, Plank believes he’s found a workable solution. “When we win — winning solves most problems,” he said. “But winning at all costs is not how we’re going to build this brand. Let’s build this the right way. Let’s be smart about it. Let’s make [our processes] repeatable and sustainable because I don’t want people to have to give their last breath to the brand. I want them to be able to go home and enjoy their families and have great breaks.”
Perhaps it was during that encounter with Frisk a year ago — when UA’s new president encouraged the founder to limit his preoccupation with the past — that helped Plank embrace his new reality.
“I came to understand a brilliant thing: The way I used to have fun in my teens is different than the way I had fun in my 20s, which is different than the way I had fun in my 30s, which is different than the way I’m having fun in my 40s,” Plank said. “That’s what I [now recognize] about Under Armour — that I don’t need to try to replace 2004 or grandma’s basement or the way we used to do it. Nobody wants to hear how we changed the business by introducing compression. It was our entry-price ticket that got us in the door. Now we’re here — what are we going to do about it?”
