McCarthy’s Under Armour Exit Worries Analysts

Analysts expressed surprise and concern Thursday at the resignation of Gene McCarthy as SVP of footwear at Under Armour Inc.

Investors did not appear excited either, sending the firm’s shares down 3.8 percent to $45.86 in trading by the end of trading on Thursday.

Jim Duffy, analyst at Stifel Nicolaus, said the executive’s departure “comes as another surprise given his short tenure and the importance of his role in building the infrastructure for the footwear [business].”

He noted that McCarthy had replaced Raphael Peck as SVP of footwear in 2009, and that the company has seen several other high-profile departures since 2010, including Suzanne Karkus as SVP of apparel, Wayne Marino as COO and most recently Janet Fox as SVP of sourcing.

McCarthy will not be replaced, according to Under Armour. Instead, COO Kip Fulks will assume responsibility for the footwear division while continuing to oversee operations for the firm. 

A company spokesperson told Footwear News, “Kip has been overseeing all the product areas — footwear, apparel and accessories — for two years. All of Gene’s [team] will now directly report to Kip. Kip will be leading a very strong footwear team with in-depth industry experience.”

Analysts, however, were divided on the implications for the firm’s footwear strategy going forward. Under McCarthy’s watch, Under Armour’s fledgling shoe business posted revenue of $127.2 million in 2010, and in 2011 grew 43 percent to $181.7 million, or 12 percent of total revenue.

Duffy noted that McCarthy’s previous plan for the shoe category to become a major contributor to company growth in 2013 now appears to be slightly derailed: “Footwear won’t step up as a major driver until 2014 at the earliest,” he said.

The analyst also expressed “concerns about [Fulk’s] lack of footwear leadership expertise and his capacity to handle both the footwear leadership role and role of COO without oversight.”

UBS analyst Michael Binetti was also worried about the pace of turnover at the firm, and the implications for the business.

“Under Armour rebooted with McCarthy’s hire in 2009. Since then, its footwear program has shown steady progress, but we don’t believe the pace of the relaunch under McCarthy has met the company’s internal targets,” he said.

Camilo Lyon, analyst at Canaccord Genuity, disagreed: “McCarthy was not a product or design specialist. Given his experience at Timberland, Reebok and Nike, his key attributes were leadership and perspective. He accomplished his goals in fixing a broken structure as he did at Timberland. Importantly, the creative and product development team is intact.”

Lyon added that Fulks’ long tenure at Under Armour, coupled with his exposure to all product groups, should help maintain continuity in footwear.

In a statement Thursday, McCarthy said, “I am proud of what we have accomplished in building a strong foundation and establishing a solid position in the very competitive athletic footwear industry. As I hand over the reins and explore this next phase of my life, I remain grateful to Kevin [Plank, Under Armour CEO,] and all my teammates for making this a truly great run.”

For his part, Fulks credited McCarthy with building “a strong footwear team that continues to deliver game-changing product such as the Charge RC and Highlight Cleat. I am excited to help elevate our innovation in the footwear space and further develop the team and the organization.”
McCarthy officially departs the Baltimore sportswear firm, effective Feb. 22, after three-and-a-half years there. Under Armour will announce its fourth-quarter and full-year earnings next Thursday, before the market opens.

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