These management changes are definitely the right thing for UA, but they play into our call that you don’t want to own this stock when then the company is hunkering down, retrenching, reorganizing its business, and investing capital to facilitate the next leg of growth.
In another 18-24 months, having a ‘Chief Supply Chain Officer’ and ‘Chief Performance Officer’ might prove to be the best move since they launched Compression Apparel. In his usual ‘take no prisoners’ approach to the business, Kevin Plank very quickly addressed UA’s fulfillment problem.
As for Wayne Marino, let’s not forget that he is a CFO by trade. After doing such a solid job seeing UA through the IPO process, he essentially built the finance organization that exists today. But unfortunately, in a strong sign of the Peter Principle at work, he was elevated to a role (COO) where he was simply ‘average’ as opposed to ‘great.’ He is sticking around for six months for transition purposes. Clearly, this is not a ‘clear your desk and security will escort you out’ situation.
We continue to think that there are few businesses in US retail that have the kind of Blue Sky growth that UA has ahead of it. But before we see things like Footwear, International, Retail and Women’s succeed, we’re going to need either more time, capital, and more likely – both.
For the long-term holders who own this name because they think it will triple in another 5-years, then check the box and move on – everything is fine and on-track. But the upside/downside risk here for anyone with a shorter duration clearly favors the downside.
Brian P. McGough