Under Armour to face potential SEC charges over shady accounting practices

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Under Armour

There wasn’t a whole lot of interesting news on the Markets as we started off the week. However, one interesting tidbit that you might have missed involves one of the top apparel brands in the country. Under Armour (NYSE: UAA) has been under scrutiny for a while in regards to its accounting practices. Just recently, the Securities and Exchange Commission (SEC) warned that it could be pressing charges against the company’s founder in the near future.

More specifically, the SEC said it’s considering filing civil-enforcement actions against the company’s founder, Kevin Plank, as well as Under Armour’s CFO, David Bergman. The notices in question have to do with the company’s past accounting disclosures. In particular, the years of 2015 and 2016, where the company had “pulled forward” sales during that time in order to artificially alter revenue figures.

Although the SEC did announce its intention to take on these legal actions, the agency did say that it’s willing to give a chance to the recipients to argue in their defense. As far back as November of last year, federal authorities had been investigating Under Armour’s accounting practices. The goal was to see if the company had shifted sales from one quarter to the next in order to make its revenue figures appear healthier.

In an article published by the Wall Street Journal on Monday, Under Armour executives had reportedly been under immense pressure to meet the company’s aggressive sales targets. They also went on to confirm that the company did indeed muck about with its accounting back in 2016.

Back in 2015 and 2016, Under Armour appeared to be doing extremely well for itself, at least on the surface. The company had seen 26 consecutive quarters of 20% revenue growth. However, it appears now that Under Armour was simply doing its best to cover up a now obvious decline in sales. The company first started missing sales targets during the last quarter of 2016, with the stock tumbling significantly going into the following year.

PricewaterhouseCoopers, Under Armour’s long-time auditor, has declined to comment on this matter. While the apparel brand has insisted that it’s past accounting practices were perfectly justifiable, it’s becoming harder for the company to declare its innocence.

Shares of Under Armour didn’t really move much in response to the news. However, the stock has been on a steady decline for the past few years. At one point, shares were trading around $50. Now, they are close to the $10 range, making Under Armour a disastrous long-term investment for shareholders hoping that things would get better for the company.

Under Armour Company Profile

Under Armour develops, markets, and distributes athletic apparel, footwear, and accessories in North America and other territories. Consumers of its apparel include professional and amateur athletes, sponsored college and professional teams, and people with active lifestyles. The company sells merchandise through wholesale and direct-to-consumer channels, including e-commerce and nearly 400 total factory house and brand house stores. Under Armour also operates digital fitness apps with more than 200 million users. The Baltimore-based company was founded in 1996. – Warrior Trading News

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