Feds Investigating Under Armour’s Accounting Practices

The Justice Department and the Securities and Exchange Commission (SEC) have both launched federal investigations into Under Armour over its accounting practices. The Justice Department has begun a criminal investigation and is said to be coordinating with civil investigators at the SEC on their investigation. Sources familiar with the matter say that investigators questioned people in Baltimore, where the company is headquartered, as recently as last week.

The sportswear maker has been accused of shifting sales from quarter to quarter to make it appear that the company’s finances are in better shape than they actually are. This is sometimes accomplished by recording revenue before it is earned or deferring the dating of expenses to make earnings appear stronger. Justice Department prosecutors and the investigators at the SEC are also asking probing questions about other possible infractions.

Under Armour has released a statement saying that the company is cooperating with both investigations. The company revealed in the statement that it began responding to requests for documents and information related to its accounting practices and related disclosures in July 2017. It also said that it believes its accounting practices and disclosures were appropriate.

Several years ago, Under Armour was among the fastest-growing apparel makers, recording 26 straight quarters of year-over-year revenue growth of at least 20 percent. Then the company missed its sales targets in the final quarter of 2016 and cut its growth forecasts for the next year. The company has since struggled with weak sales and management transitions.

CEO and founder Kevin Plank plans to step down from the top job on Jan. 1 after more than 20 years in the role. Current COO Patrik Frisk will take over as CEO. Plank plans to stay on at the company as executive chairman and brand chief. When he announced the plan, Plank said the decision was part of the company’s long-term succession planning.