NEW YORK (BLOOMBERG) - Sportswear retailer Under Armour said US federal officials have been investigating the company's accounting practices for more than two years and that it doesn't think it's done anything wrong.
"The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures, and the company firmly believes that its accounting practices and disclosures were appropriate," Under Armour said in a statement on Sunday (Nov 4). The company is set to report third-quarter earnings on Monday.
Investigators from the Department of Justice and the Securities and Exchange Commission were questioning people at the sports apparel's base in Baltimore as recently as last week, Dow Jones reported, citing people familiar with the matter. The company said it's cooperating with the probe, which Dow said is focused on whether Under Armour inflated sales from quarter to quarter.
The investigation comes at a difficult time for the company, which has been wrestling with increased competition at home and an underperforming share price. In July, it warned full-year revenue would decline in North America - the stock has fallen 23 per cent since that statement. Founder Kevin Plank is stepping aside as chief executive in the new year after more than two decades in charge, and will remain as executive chairman and brand chief.
No one at the DOJ or the SEC immediately responded to requests for comment.
Under Armour went public in 2005 and experienced rapid growth, with sales increasing to US$5 billion in 2017 from US$1.1 billion in 2010. Recently, though, keeping that momentum going has been a struggle.
Under Armour's best year-on-year revenue growth in the past three years came in the first quarter of 2016 when sales climbed 30 per cent. It reported double-digit growth in each quarter of that year, slowing to single-digit rates thereafter. The first decline, a 4 per cent drop from the year-earlier period, was in the third period of 2017.
Analysts are expecting the company to report a 2 per cent decline in third-quarter revenue, according to data compiled by Bloomberg.
