Sportswear retailer Under Armour is facing investigations from the U.S. Department of Justice and the Securities and Exchange Commission over its accounting practices. A report in the Wall Street Journal said investigators were proving whether the company shifted sales from quarter to quarter to appear stronger. According to the report, the Justice Department is conducting a criminal investigation and is coordinating with civil investigators at the SEC.
In an earnings call with analysts, Under Armour executives defended the company’s accounting practices and said they were cooperating with investigators.
“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,” a spokesperson for the company said.
The company, on Monday, reported third-quarter net income of 23 cents per share, beating analyst estimates of 18 cents per share, but it cut its estimates for revenue growth for the 2019 fiscal year to 2%, down from its previously forecast 3% to 4% increase.
Shares in Under Armour were down more than 15% following the news. The company’s stock is down nearly 11% over the past 12 months.
“You expect that sometimes a company’s growth will start leveling out… but if they are trying to postpone the inevitable by messing with their accounting practices… That’s bad,” RSR Research analyst Paula Rosenblum said.
Last month, Under Armour announced that the company founder, Kevin Plank, was stepping down as chief executive officer. It also shuffled through three chief financial officers in 2016 and 2017. Plank will be replaced by chief operating officer Patrik Frisk, effective January 1, 2020. Plank will remain with the company as executive chairman and brand chief.
Under Armour has also faced criticism of its corporate culture after reports that employees had been charging visits to strip clubs on corporate credit cards.
Jeff Schear/Getty Images for Under Armour