US Justice Department prosecutors and the country’s Securities & Exchange Commission are both investigating the accounting practices of sports apparel and footwear giant Under Armour as to whether it shifted sales across different fiscal quarters to make its financial picture look stronger.
According to a report in the Wall Street Journal, the two federal agencies are conducting a criminal inquiry on the company’s books. Under Armour said in a statement it is investigating with the probe.
“The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures,” Under Armour said. “The company firmly believes that its accounting practices and disclosures were appropriate.”
The investigation continues a marked period of turbulence for the once high-flying company that had previously presented a sizable market challenge to category leaders such as Nike and Adidas. Sales have been significantly weaker for Under Armour for the past two years, including a flat period for its third-quarter 2019, representing an abrupt turnaround from a prior run of 26 consecutive fiscal quarters with at least 20 per cent revenue growth.
North American revenue, representing the vast majority of Under Armour’s business, declined 4 per cent in the most recent quarter to $1 billion.
Under Armour also recently made the surprise move to have founder Kevin Plank step down as chief executive and be replaced by Patrik Frisk. The company has seen other executive-level turnover, as well, including three different chief financial officers from 2016-17, a time period that is part of the ongoing federal investigation.