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If you study corporate turnarounds enough, one thing becomes abundantly clear. The bottom line is that companies that successfully find the Promised Land again have new CEOs who hit the reset button on failed cultures.
The wrong culture can push out inferior products or cause major scandals that ultimately hurt a company’s stock price and balance sheet.
So what should the new CEO do to right the sinking ship?
They assess the culture with fresh eyes and place new leaders in key roles who bring a different way of doing things and a truly collaborative mindset. This new group will reshape its ranks and establish a north star for a revitalized workforce.
If you do it right, a company that’s been underperforming will start improving within a year and then accelerate from there (the economy isn’t in a downturn, the world isn’t ending, rivals are making breakthroughs, etc.). (This assumes that no new gadgets have been announced.)
Take Fran Horowitz, CEO of Abercrombie & Fitch (ANF), for example. He took over the company in 2017 after it went bankrupt under an eccentric CEO named Mike Jeffries. She transformed the brand from snobbish to inclusive, and the retailer once again became the mall’s most popular destination.
Now, the company is seeing strong earnings growth left and right, with its stock up 342% in two years, and it could be hitting some big financial goals soon.
How did Horowitz pull off one of the most underappreciated turnarounds in retail history? As she told me on Yahoo Finance’s “Lead This Way,” she led Abercrombie’s once defunct They hit the reset button on their corporate culture.
I was witnessing a cultural shift beginning under now-retired Under Armor (UAA) CEO Stephanie Linnertz. I first met her when she was a top leader at hotel giant Marriott (MAR).
Linnertz joined Under Armor’s management team in early 2023. Her to-do list was long. Her job is to improve sales and profits, rebuild an underperforming management team, and recreate a culture with a frat house feel (more on this later).
To get the job done, Linnertz has been actively traveling over the last year, meeting with teams and listening to what needs to be fixed. In recent months, her plans to turn Under Armor around have become increasingly clear.
Linnertz is chief commercial officer, chief communications officer (former communications officer for PayPal CEO Dan Schulman), chief product officer, chief design officer (known fashion designer John Varvatos), and chief executive officer. We have added important personnel to roles such as supply chain manager and president. President of the Americas, President of EMEA, Chief Marketing Officer.
Her “Protect This House 3” strategy focused on improving product design, expanding in the lucrative athleisure market, and returning to growth in the United States. Linnertz shared her experience at Marriott Bonvoy by debuting her UA Rewards program.
Amidst all the rebuilding, I spent a few hours with Linnertz at Under Armor’s Baltimore headquarters a few weeks ago.
We had wide-ranging conversations as we walked through huge corporate gyms, basketball courts, and offices.
We discussed her vision for Under Armor and why it’s winning the battle against Lululemon (LULU), and she showed us some great style coming down the pike.
She reflected on growing up working hard in her family’s modest hotel business and expressed excitement about Under Armor’s new headquarters moving nearby. The space represents a new chapter for Under Armor, Linnertz said.
Best of all, Linnertz did a great job of articulating the opinions I was looking for regarding culture. That leaves me with hope that Under Armor won’t be a $2 stock by 2026 (current stock price is around $8).
“First and most importantly, I believe in servant leadership with all my heart. My job as a CEO is to serve my team and my teammates. is welcomed by the team and can give strength to the team,” Linnertz said.
Nearing her first year in the job, she was settling into the CEO role and investors were starting to buy in. UA stock has risen 12% in the past six months despite increasing challenges in the U.S. and international footwear markets.
I left Baltimore thinking, “It’s hard not to root for Stephanie Linnertz.”
Now, Linnertz is set to move out on April 1, as the wealthy 51-year-old man wants his toys back — according to my interview and Wall Street sources. According to the conversation, this came as a surprise to her.
Late Wednesday, Under Armor founder Kevin Plank, who controls 65% of the company’s voting power through stock ownership, returned as CEO after stepping down in 2019.
His friend, long-time board member and well-known investor Mohamed El-Erian will replace him as chairman of the board.
Stifel analyst Jim Duffy said in a note to clients that he was “surprised” by the decision, given Linnertz’s “unique skill set” and signs of progress in the turnaround. Others on the street told me that Plank can’t get out of his own way.
To say that Planck is the cultural opposite of Linnarts is an understatement.
Mr. Plank deserves full credit for his efforts in reviving Under Armor. He was selling his T-shirts from his car in the late 1990s. He is definitely an American success story and I tip my UA black baseball cap to that.
But he’s also completely the wrong person to lead Under Armor into the next decade. The main reason for this is his storied resume of promoting cultural excellence within the company.
He also missed out on some important consumer trends by being late to the sneaker and athleisure party, effectively ceding the market to Lululemon while strengthening Nike (NKE). He grew his company too quickly to be able to generate healthy, consistent profits.
Under Armor’s numbers over the past decade have been good, in part because Mr. Plank has maintained a constant presence as leadership doors have rotated (for example, he has an office next door to Mr. Linnertz). It wasn’t something.
Under Armor stock is down 85% from its 2015 record. The company has a meager market capitalization of $3.45 billion, compared to Lululemon’s $59 billion and Nike’s $153 billion, according to comparative data from Yahoo Finance.
Deckers Outdoor (DECK), once known only for its Uggs boots, has ballooned to a $24 billion market cap on the back of frenetic demand for its Hoka running shoes.
Under Armor’s sales growth, which once consistently posted annual sales growth of more than 20%, has languished in the low single digits in five of the past seven fiscal years.
In a blog post on Under Armor’s LinkedIn page, Plank aimed to weave a different narrative as one of the reformed people who would become a reformed CEO.
“During my more than four years away from the role of president and CEO, I learned many lessons both professionally and personally. This period of reflection and learning was invaluable and will continue to improve our business “Mission, Vision, and Values. My experience of not being CEO taught me more about what it really means to be CEO.” Mr. Plank wrote.
Planck may have changed as a person. But one can’t run away from the past, even if he’s wearing super lightweight Stephen Curry low tops.
To have any chance of success, Plank can’t play the bull in a china shop. He is the driver of his own peer culture version. Rather, he would have to guide the highly regarded leader he had just ousted and who was beginning to finish his job.
Hopefully he learned a lot about true leadership sitting next to Linnertz.
Under Armor declined to make Kevin Plank available for an interview.
Plank has supporters including longtime sponsor and athlete and skiing great Lindsey Vonn. Here’s what Bonn had to say about him at the Yahoo Finance Invest conference in November 2023.
Brian Sozzi I’m the executive editor of Yahoo Finance. Follow Sozzi on Twitter/X @BrianSozzi And even more linkedin. Have a tip about a deal, merger, activist situation, or more? Email brian.sozzi@yahoofinance.com.
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