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Under Armour says its accounting practices are under federal investigation Under Armour shares tank 16 percent following news of federal investigation
(about 3 hours later)
Under Armour shares tumbled in pre-market trading Monday after the sportswear giant confirmed its accounting practices were under federal investigation. Under Armour shares tumbled Monday morning after the sportswear giant confirmed its accounting practices were under federal investigation.
Shares were off about 15 percent early Monday on word of the two-year investigation and after the Baltimore-based company slashed its full-year outlook despite better-than-expected third-quarter results. Shares were off about 16 percent early Monday on word of the two-year investigation and after the Baltimore-based company slashed its full-year outlook despite better-than-expected third-quarter results.
A spokesperson said Sunday that Under Armour has been cooperating with the Securities and Exchange Commission and the Justice Department since the inquiry began in July 2017, and “firmly believes that its accounting practices and disclosures were appropriate.”A spokesperson said Sunday that Under Armour has been cooperating with the Securities and Exchange Commission and the Justice Department since the inquiry began in July 2017, and “firmly believes that its accounting practices and disclosures were appropriate.”
A spokesman for the SEC declined to comment, while the Justice Department did not immediately respond to an email seeking comment. A SEC spokesman declined to comment, while the Justice Department did not immediately respond to an email seeking comment.
Under Armour’s terrible year just got worseUnder Armour’s terrible year just got worse
News of the investigation was first reported Sunday by the Wall Street Journal, which said that authorities are examining “whether the sportswear maker shifted sales from quarter to quarter to appear healthier.” News of the criminal and civil investigations was first reported Sunday by the Wall Street Journal, which said that authorities are examining “whether the sportswear maker shifted sales from quarter to quarter to appear healthier.”
The development also comes less than two weeks after Under Armour announced that its founder, Kevin Plank, would step down as chief executive on Jan. 1, after 23 years at the company. He will be replaced by Patrik Frisk, the chief operating officer. Executives said little about the probe on an earnings call with analysts Monday morning, saying they were “prohibited” from sharing additional details. They also declined to comment on why it had taken Under Armour more than two years to disclose the investigations, but reiterated that the company was “fully cooperating” with federal authorities.
Under Armour, a longtime darling of sportswear, got its start in 1996, when Plank began selling athletic apparel from his grandmother’s basement. Sales increased quickly and annual revenue growth routinely topped 20 percent as the company established a niche selling its moisture-wicking uniforms and athletic shoes to big-name sports teams. The development also comes less than two weeks after Under Armour announced that its founder, Kevin Plank, would step down as chief executive on Jan. 1, after 23 years at the company, and become executive chairman and brand chief. He will be replaced by Patrik Frisk, the chief operating officer.
Under Armour, a longtime darling of sportswear, got its start in 1996, when Plank began selling athletic apparel from his grandmother’s basement. Sales increased quickly and annual revenue growth routinely topped 20 percent as the company established a niche selling its moisture-wicking uniforms and athletic shoes to big-name sports teams. It also struck sponsorship deals with some of the country’s most prominent athletes, including Tom Brady, Michael Phelps, Misty Copeland and Stephen Curry.
But in recent years, it has struggled to stay relevant. Quarterly sales began slipping in 2017, amid mounting competition from rivals such as Nike and Adidas. Under Armour posted a $48 million loss that year.But in recent years, it has struggled to stay relevant. Quarterly sales began slipping in 2017, amid mounting competition from rivals such as Nike and Adidas. Under Armour posted a $48 million loss that year.
Under Armour taps its chief operating officer to succeed Kevin Plank as CEOUnder Armour taps its chief operating officer to succeed Kevin Plank as CEO
“This is an abrupt about-turn for a company that, until recently, was on a mission to challenge the might of Nike,” Neil Saunders, managing director of the analytical firm GlobalData Retail, said at the time. “Under Armour has become just another brand in a sea of brands.”“This is an abrupt about-turn for a company that, until recently, was on a mission to challenge the might of Nike,” Neil Saunders, managing director of the analytical firm GlobalData Retail, said at the time. “Under Armour has become just another brand in a sea of brands.”
That slump continued in the first half of the year, with North American sales declining 3 percent. That slump has continued, with North American sales declining 4 percent in the most recent quarter. Shoe sales slipped 12 percent during that period, while licensing revenues fell nearly 6 percent. Despite billions in annual sales, analysts say Under Armour has had trouble keeping its customers coming back. It has also struggled with slumping sales at outlet stores and off-price retailers such as TJ Maxx.
Analysts said the latest disclosures amount to more uncertainty for a company that’s already struggling to find its footing.
“Under Armour was a rocket ship for many, many years,” said Paula Rosenblum, managing partner of retail advisory company RSR Research. “But its growth has been leveling off, and this just adds another layer of bad news for a company that doesn’t want to face the music.”
On Monday, Under Armour reported that quarterly profits rose 7 percent to $102 million, or 23 cents a share, from $75 million, or 17 cents a share, a year earlier. Sales fell 1 percent, to $1.4 billion.On Monday, Under Armour reported that quarterly profits rose 7 percent to $102 million, or 23 cents a share, from $75 million, or 17 cents a share, a year earlier. Sales fell 1 percent, to $1.4 billion.
It also downgraded its full-year revenue outlook and is now looking for 2 percent growth versus a previously expected range of 3 to 4 percent. It also downgraded its full-year revenue outlook and is now looking for 2 percent growth versus a previously expected range of 3 to 4 percent. Shares of Under Armour fell more than 16 percent to $17.67 on Monday morning, down from record highs of about $51 four years ago.