Under Armour Could Face Civil-Enforcement Action For Accounting Practices
The SEC delivered a Wells notice, or a letter saying the SEC plans to bring an enforcement action against a company or individual, to Under Armour which now has a chance to defend itself and make their case why an action shouldn't be instituted. The Wall Street Journal reported in November that the SEC and Justice Department were investigating Under Armour’s accounting practices to determine whether the company shifted sales from quarter to quarter to appear healthier.
In response to the Journal article, Under Armour disclosed the probe and said it had been cooperating with the Justice Department and SEC since July 2017. “The company firmly believes that its accounting practices and disclosures were appropriate,” Under Armour said in November.
Shares of Under Armour finished the session up 2.7% at $11.20.
Former Under Armour executives told the Journal in November that they used a practice of borrowing business from future quarters to hide a slowing demand in 2016. Under Armour leaned on retailers to take products early and redirected goods intended for its factory stores to off-price chains to book sales in the final days of a quarter, according to former executives in sales, logistics, merchandising and finance. The executives said Under Armour repeatedly used these and other moves to help extend a 26-quarter streak of 20% sales growth, a feat that came to an end in late 2016. Some of the executives said such end-of-quarter moves are common in the retail industry.
In November 2019, Under Armour said it was confident in its accounting practices, revenue recognition and investor disclosures. It said it operated within standard industry practices and in compliance with generally accepted accounting principles.
PricewaterhouseCoopers has served as Under Armour’s auditor since 2003, records show. The firm hasn’t received a Wells notice in connection with its client, a person familiar with the matter said.
Mr. Plank voluntarily left the CEO role early in the year, but kept the brand chief and executive chairman titles.