Founder’s Return as CEO Shakes Up Troubled Under Armour – Is This the End or a New Beginning?

Baltimore, Maryland – Under Armour, the global sports and performance apparel brand, has seen significant changes in leadership and strategy over the years. Founded in the late 1990s, the company experienced rapid growth until around 2017 when a series of missteps led to a decline in margins and growth. Last month, the company announced the return of its founder, former CEO, and controlling shareholder, marking the fifth CEO change in five years.

Investors are hopeful that the founder’s return will bring about a positive turnaround for the company. However, some skeptics argue that the founder’s previous involvement in failed strategies raises concerns about the effectiveness of the new plan. Despite trading at a relatively neutral valuation, with an EV/EBIT multiple of 12x for FY25E EBIT, uncertainties linger over the company’s future performance.

Initially known for its focus on sports performance apparel and innovative use of synthetic fibers, Under Armour has struggled in recent years with challenges such as over-dependence on promotions and discounts, high overhead costs, constant restructuring, and questionable acquisitions. These issues have contributed to a decline in gross margins and overall performance.

The company’s latest restructuring plan, outlined by the founder in the 4Q24 call, aims to reduce promotionality, elevate the brand, focus on core sports and male athletes, and simplify product offerings. While the strategy appears logical to some, others question the founder’s track record as Chairman and his approval of previous unsuccessful plans.

Despite a relatively conservative valuation and the potential for growth post-restructuring, sentiments towards Under Armour remain mixed. Management’s guidance for an $80 million operating loss in 1Q25 adds to the uncertainty surrounding the company’s future performance. This raises concerns for both bearish and bullish investors, highlighting the ambiguity of Under Armour’s current position in the market.