BALTIMORE, MD — Federal investigators are reportedly looking into the numbers coming out of Baltimore-based Under Armour. The athletic-wear company’s accounting practices are said to be under review by the Department of Justice and Securities and Exchange Commission.
Those affiliated with the company were interviewed in Baltimore this week by officials from the justice department conducting a criminal investigation and members of the SEC handling the civil probe, the Wall Street Journal reported. The allegation is that Under Armour moved around its sales numbers from one quarter to another to make it look as though the company was doing better than it was, according to the newspaper.
In its third-quarter earnings call with investors Monday morning, Under Armour Chief Financial Officer David Bergman addressed the issue.
“Before we turn it over the call to the operator for Q&A, I’d like to break from our typical company policy of not discussing any regulatory or litigation matters, and briefly address an article published yesterday regarding an investigation by the SEC and the US Department of Justice,” Bergman said on the Nov. 4 conference call. “We have been fully cooperating with these inquiries for nearly two-and-a-half years. To this effect, we began responding back in July of 2017 to their request for documents and information. We firmly believe that our accounting practices and disclosures were appropriate.”
When an analyst asked him to give more information about the investigation, Bergman said: “We are prohibited from doing so.”
Continued Bergman: “That said, the most important message I think to convey is that we firmly believe that our past accounting practices and disclosures were entirely appropriate, and we’ve been fully cooperating for the past two-and-a-half years on this. So, now, we’re focused on 2020 and beyond. We feel like our foundation is strong, and we’re looking forward to reigniting the Under Armour brand as we continue into the next chapter.”
Overall, Under Armour’s third-quarter revenue was down 1 percent, or $1.4 billion, Bergman reported to investors. One positive area was Connected Fitness, which he said was up 22 percent, to $39 million. Connected Fitness includes MyFitnessPal, Endomondo and MapMyFitness.
Footwear revenue was down 12 percent, in part due to softer demand, according to Under Armour President Patrik Frisk. He mentioned a 20-quarter plan introduced to investors in 2018 that was underway.
In January, Frisk will take over as CEO.
Kevin Plank, who founded Under Armour, announced in late October that he would be stepping down as chief executive officer in 2020 and would remain executive chair of the board as well as brand chief.
“This was my decision,” Plank said Monday, calling it “the culmination of a rigorous approach to succession planning in partnership with our board of directors.” He said Under Armour would “shift from defense to offense.”
In discussing the brand, Plank said: “The very reason we exist is our mission, UNDER ARMOUR MAKES YOU BETTER, a humble passionate obsession that has fueled our company for nearly a quarter of a century.” Under Armour was founded in 1996.
His focus will hinge on three areas “to help reignite our growth,” Plank said: “making great product that is authenticated to the power of sport; magnified by incredible storytelling; and delivered by a team that loves this brand.”
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