Under Armour Shares Plunge

Under Armour’s accounting practices are under investigation in the United States, heaping pressure on the struggling company as it seeks to reverse years of lackluster sales. The sportswear maker acknowledged in a statement Sunday that it faces probes from the US Department of Justice and the US Securities and Exchange Commission.

“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,” said a spokesperson for Under Armour.

Justice Department prosecutors are conducting a criminal inquiry into the matter in coordination with civil investigators at the SEC, the Journal reported. Spokespeople for the Justice Department and SEC declined to comment. Public companies aren’t required to disclose every regulatory or law-enforcement investigation. The decision about what to tell shareholders turns on the magnitude of the problem and how likely it is to become a legal liability.

Shares in Under Armour dropped 15% in early trading on Monday to around $16 a share. The company was worth more than $50 per share in late 2015. Under Armor’s third-quarter earnings report Monday also weighed on the stock. It sales in North America slid 4% during the period. The company trimmed its guidance for the remainder of the year, citing weakness in selling directly to consumers through its own stores and website.

The WSJ was first to report on the investigations into the company’s accounting practices. According to the Journal, the Department of Justice is conducting a criminal inquiry into whether Under Armour shifted sales from quarter to quarter to make the company appear healthier. The US Department of Justice declined to comment.

Under Armour announced last month that founder Kevin Plank is stepping down as CEO. He will be replaced by chief operating officer Patrik Frisk on January 1, 2020. Plank will become executive chairman and brand chief. The management shuffle comes after the company suffered from weaker sales and lost ground to rivals including Nike and Adidas. Smaller brands such as Fila and Puma are also thriving.

Todd “Bubba” Horwitz