Under Armour under federal investigation over accounting practices
Under Armour, the US sportswear brand, has been under federal investigation by the US Securities and Exchange Commission, as well as from the Department of Justice, for over two years, for potential accounting breaches.
The company is reportedly being investigated for inflating its sales from quarter to quarter, according to The Wall Street Journal, with the first requests for additional accounting information from the authorities coming in July 2017.
News of the investigation caused a 16 per cent drop in Under Armour’s shares on the New York Stock Exchange, with the company scheduled to post its 2019 third-quarter earnings tomorrow.
The WSJ cited people familiar with the matter saying that a criminal investigation is being conducted by the DoJ, in conjunction with a civil investigation at the SEC.
Investigators have been talking to employees at the Under Armour headquarters in Baltimore, with some questioning taking place as recently as last week.
Under Armour said: “The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures, and the company firmly believes that its accounting practices and disclosures were appropriate.”
The brand, which went public in 2005, has experienced a major slowing-down in its growth over the last few years, with its first ever decline in terms of year-over-year growth coming in the third quarter of 2017. During 2018, its North American sales dropped 2 per cent, to $3.7 billion.
Analysts are predicting Under Armour to record a 2 per cent decline in third-quarter revenue when the latest figures are announced.
Under Armour will also soon have a new chief executive, with Patrik Frisk, the company’s 56-year-old president, who has been in that role since 2017, set to take office on 1 January.
Kevin Plank, the company’s founder and current chief executive, who has headed up the firm since its foundation in 1996, will step into the role of executive chairman and brand chief.
Between 2016 and 2017, Under Armour went through a period of turmoil at senior management level, changing its chief financial officer three times.