Sports-apparel maker, Under Armour, is the subject of federal investigations by the Department of Justice and the Securities and Exchange Commission (SEC) over its accounting practices, according to the Wall Street Journal.
The regulators are probing and examining Under Armour’s accounting practices to determine if the sportswear maker shifted sales from one quarter to another in an effort to appear healthier. The allegation centers on whether executives knowingly tried to mislead investors about the financial condition of the company. The WSJ reports that the Justice Department prosecutors are conducting a criminal inquiry into the matter in coordination with a parallel civil examination led by the SEC.
At the end of October, Under Armour founder and then-CEO announced his retirement. There were various plausible reasons offered by the company why Plank—who famously founded the sportswear company in his grandmother’s basement, while still in college, and was regarded as a business icon—handed over the reins to his successor. In light of the recent investigations, it now makes more sense why Plank stepped aside. There most likely will be serious repercussions related to the dual investigations.
“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 in response to the WSJ coverage. “The company firmly believes that its accounting practices and disclosures were appropriate.” Under Armour went through three chief financial officers in about one year’s time period.
According to CNBC, Under Armour’s outlet stores and North American website have been under pressure due to lower sales volume. The company reported flat sales in its third-quarter results. The company has been restructuring and struggling with weak sales for the past two years. Previously, Under Armour was heralded as one of the fastest-growing apparel makers.