Business / #ForbesBusiness

November 4, 2019,   9:58 AM

Under Armour Faces Scrutiny Of Accounting Practices By Federal Authorities

Ezequiel Minaya


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Under Armour denied wrongdoing Sunday amid a report in the Wall Street Journal claiming that federal investigators have launched a criminal probe into the athletic apparel company to determine if it had improperly recorded sales to strengthen earnings.

“Under Armour is cooperating with the U.S. Securities and Exchange Commission and the U.S. Department of Justice investigations,” a company spokesperson confirmed late Sunday. Under Armour “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,” he said. Under Armour didn’t offer any further details.

The Wall Street Journal, citing unnamed sources, was the first to report on Sunday that the Justice Department was spearheading a criminal probe into Under Armour’s accounting while coordinating with civil investigators of the SEC. A spokesman for the regulatory agency declined comment. A call seeking confirmation from the Justice Department was not immediately returned.

The newspaper speculated that investigators were examining revenue-recognition procedures to pinpoint if the recording of sales and expenses were shifted between quarters to bolster results.

The Baltimore-based Under Armour, once the darling of the sports apparel sector, posted its first sales decline as a public company in 2017 as once robust revenue growth slowed. Sales have climbed a lackluster 1.39% on average over the company’s last three reported quarters. Under Armour is slated to report earnings early Monday for the quarter ended in September.

Under Armour’s finance chief, David Bergman, was named to the post in December of 2017 amid a wider shakeup of executives. Bergman was named interim CFO earlier in February of that year following the departure of Lawrence “Chip” Molloy, who had filled the post only a little over a year. Attempts to contact Bergman and Molloy on Sunday weren’t immediately successful.

Under Armour CEO and founder Kevin Plank is slated to step down as company head at the end of the year and be replaced by Chief Operating Officer Patrik Frisk. Even as Under Armour faced slowing sales, critics accused Plank of filling the top ranks of the company with friends and allowing inappropriate behavior toward women under his tenure. In November 2018, Plank and Frisk promised the company would address its workplace culture in an internal statement to employees in response to a Wall Street Journal story describing the “challenging environment” at Under Armour, according to the letter.

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