The SEC is investigating Under Armor
Under Armor is under investigation by federal authorities over the sportswear company’s accounting practices, reports the Wall Street Journal.
The newspaper says source familiar with the investigation claims the U.S. Department of Justice and the Securities and Exchange Commission are conducting a joint criminal inquiry into the company. The agencies have not publicly confirmed they are investigating Under Armor.
Under Armor told the Wall Street Journal they started responding to federal authorities in July 2017. “The company firmly believes that its accounting practices and disclosures were appropriate,” Under Armor said to the newspaper.
A source told the Wall Street Journal that the DOJ and the SEC are investigating whether Under Armor manipulated its sales numbers, making the company look more profitable during some quarters than it really was.
Under Armor sponsors star athletes like Steph Curry, Tom Brady and Cam Newton to help boost the brand. However, the sportswear company has not been able to keep up with competitors Nike and Adidas, reports Business Insider. In 2017, the company’s stock fell more than 40 percent, resulting in its first quarterly loss. In 2018, some UCLA athletes stopped wearing Under Armor’s shoes, alleging that the bottoms were falling apart. Under Armor had a $280 million deal with UCLA, according to Business Insider.
To make matters worse, Under Armor reported having $1.3 billion worth of unsold inventory in 2018. A study also found teens aren’t buying Under Armor, leading to doubts about the company’s future success.
Whether the investigation leads to any infractions is unknown. As the Baltimore Sun points out, most SEC investigations take two to three years. A former SEC employee told the newspaper that half of investigations have no action afterward.
But the damage may already be done. Under Armor’s stock fell 19 percent on November 4, with shares closing at $17.14 each. One analyst told the Baltimore Sun that Under Armor not going public with the investigation sooner is “disconcerting.”
Another analyst was more upbeat, telling the newspaper that Under Armor’s potential for revenue and improvements in profit margins could point to a more positive future for the company.
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