After a three-year investigation, the U.S. Securities and Exchange Commission has indicated Under Armour CFO David Bergman could be facing an enforcement action over the sneaker company’s accounting practices.
Under Armour disclosed Monday that the company, Bergman, and founder and Executive Chairman Kevin Plank had received Wells Notices indicating SEC staff intend to recommend an enforcement action alleging they illegally manipulated company sales.
The notices relate to Under Armour’s disclosures for the third quarter of 2015 through the fourth quarter of 2016 “regarding the use of ‘pull-forward’ sales in connection with revenue during those quarters,” the company said in a regulatory filing.
The SEC is focusing on whether Under Armour used pull-forward sales to meet sales objectives,” the filing said.
“The company and the executives maintain that their actions were appropriate and intend to pursue the Wells Notice process, which will include the opportunity to respond to the SEC staff’s position, and also expect to engage in a dialogue with the SEC staff to work toward a resolution of this matter,” Under Armour said.
About 80% of companies served with a Wells Notice face charges, according to a WSJ analysis of government data.
When a company “pulls forward,” it shifts sales between financial quarters in order to meet sales goals. Under Armour’s streak of posting 26-straight quarters of sales growth of more than 20% came to a sudden end at the end of 2016.
The company had confirmed in November 2019 that it was the subject of investigations by the U.S. Department of Justice and the SEC and that it had begun responding in July 2017 to requests for documents and information.
“Under Armour has struggled on its home turf as of late in the face of stiff competition from Nike, Adidas, and Lululemon” and “has also faced executive turmoil,” according to CNBC.
Plank stepped down as CEO in January 2020 and was replaced by Chief Operating Officer Patrik Frisk. Bergman, who joined Under Armour in 2004 from Ernst & Young, has served as CFO since February 2017.