Under Armour under criminal investigation for accounting practices
Under Armour is subject to a criminal investigation by the Justice Department and Securities and Exchange Commission (SEC) over its accounting practices.
The high-tech fashion retailer confirmed on Sunday that it was cooperating with both federal and criminal investigators, who have requested documents “relating primarily to its accounting practices and related disclosures”.
Under Armour went on to deny any wrongdoing after a report in the Wall Street Journal alleged that a criminal probe has been launched to determine whether the athleisure giant had improperly recorded sales to strengthen its earnings.
It is understood that the investigation will focus on revenue-recognition procedures, seeking to find out whether the recording of sales and expenses were shifted from quarter to quarter.
According to the retailer it “began responding in July 2017 to requests for documents”.
Months before this, Under Armour’s staggering period of growth, seeing revenue rise more than 20 per cent for 26 consecutive quarters, came to an abrupt halt.
The company warned investors it would miss expectations and that its chief financial officer would depart after just a year in his position for “personal reasons”.
Following this stark U-turn in performance, Under Armour posted net losses of $46 million for the last two fiscal years.
News of the investigation comes after its founder and chief executive Kevin Plank announced his imminent departure, set to step down at the end of the year after critics accused him of filling the company’s top positions with his friends.