Under Armour falls most since July as US probes accounting

Bloomberg

Under Armour Inc shares plunged after the company disclosed that federal officials have been probing its accounting practices for more than two years, bringing a fresh headache to investors just as the sports brand prepares for a CEO transition.
The athleticwear company also lowered its full-year revenue forecast, but it raised some other projections after posting solid third-quarter results. The shares fell as much as 17%, the most since July 30, to $17.65 in New York trading.
Spurred by a report in the Wall Street Journal, the company said that it’s cooperating with investigations by the US Securities and Exchange Commission and the US Department of Justice and 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 the statement.
Executives declined to comment further during the earnings conference call.
Investigators from the Justice Department and SEC were questioning people at the sports apparel maker’s base in Baltimore as recently as, the Journal reported, citing people familiar with the matter.
The probe is focussed on whether Under Armour inflated sales from quarter to quarter, the newspaper said.
The stock decline represents a buying opportunity as the accounting probe shouldn’t affect investors, according to Stifel analyst Jim Duffy.
“While the accounting probe may continue to weigh, we see 2017 practices under a prior CFO as history (albeit unfortunate history) that doesn’t impact potential value for shares” for the next year, Duffy said in a note. Former Chief Financial Officer Chip Molloy left the company in early 2017.
The investigation comes at a difficult time for the company, which has been wrestling with increased competition at home and an underperforming share price.
It rattled investors in July by warning that full-year revenue would decline in North America.
Founder Kevin Plank, currently chief executive officer, turned the company from a football-focussed startup into a global powerhouse that makes men’s and women’s apparel in dozens of categories — and even spacesuits.
But sputtering growth prompted it to embark on a multiyear restructuring plan aimed at regaining its edge.
A new CEO, tapped last month from within Under Armour’s ranks, is meant to help get the company back on a growth trajectory.
Patrik Frisk, Under Armour’s president since 2017, will take the reins on January 1.
Plank, 47, is stepping aside after more than two decades in charge, though he’ll remain on as executive chairman. No one at the Justice Department (SEC) immediately responded to requests for comment.