Under Armour Cooperating With Federal Investigators Over Accounting Probe
A day after reports were published that Under Armour is at the center of a federal investigation, executives at the company are maintaining that its accounting practices are above board, according to a report from Business Insider. On Sunday, The Wall Street Journal reported that the retailer's accounting practices have been under federal investigation by the U.S. Securities and Exchange Commission and the U.S. Department of Justice since 2017. Specifically, the investigation centers around whether the sportswear maker shifted sales from quarter to quarter to appear healthier.
On its third-quarter earnings call on Monday, Under Armour's Chief Financial Officer, David Bergman, deviated from the numbers to briefly address allegations that the company formerly manipulated sales disclosures.
"We've been fully cooperating with these inquiries for nearly two-and-a-half years," Bergman said on the call, according to Business Insider. "We firmly believe that our account practices and disclosures were appropriate. I underscore that we're staying focused, disciplined and methodical in our practices."
Total Retail's Take: This is just more potentially bad news for Under Armour. The company has been struggling over the past few years in part due to stiff competition from Nike, Adidas and lululemon. Its sales in North America, for example, dropped 2 percent in 2018 to $3.7 billion, as analysts say its performance-focused gear, like sweat-proof shirts, doesn't resonate with shoppers. What's more, Under Armour has also faced turmoil in its executive ranks. The company went through three CFOs between 2016 and 2017, and is currently in the midst of a transition in its management. CEO and founder Kevin Plank plans to step down from the top job on Jan. 1, and will be replaced by COO Patrik Frisk. There has also been public controversy over Under Armour’s work culture. This accounting probe into whether Under Armour intentionally misled investors is just adding fuel to the fire.