Under Armour pays $9 million to end charges it misled investors about sales growth to meet analysts’ revenue targets

Under Armour will pay $9 million to settle federal regulators’ charges that it misled investors about its sales growth in 2015 and 2016 to meet analysts’ revenue targets.

For six consecutive quarters beginning in the third quarter of 2015, the sports apparel company “pulled forward” a total of $408 million in existing product orders that customers, such as retailers, had requested be shipped in future quarters, the U.S. Securities and Exchange Commission said. Under Armour had confirmed in November 2019 that its accounting methods were being investigated by both the SEC and the U.S. Department of Justice. The SEC says Under Armour attributed its revenue growth during those quarters to factors such as growth in training, running, golf and basketball. The SEC’s order found that Under Armour violated anti-fraud provisions in the Securities Act of 1933 as well as some reporting provisions of the federal securities law.

“When public companies describe how they achieved financial results, they must not misstate any information that is material to investors,” said Kurt Gottschall, director of the SEC’s Denver regional office, in Monday’s announcement. “Under Armour created a misleading picture of the drivers of its financial results and concealed known uncertainties concerning its business.” By the second half of 2015, Under Armour’s internal revenue and revenue growth forecasts for the third and fourth quarters of 2015 began to indicate shortfalls from analysts’ revenue estimates, the SEC said. The order found, for example, that the company was not meeting internal sales projections for North America, and warm winter weather was hurting sales of Under Armour’s higher-priced cold weather apparel. The brand also would have seen its streak of better than 20% revenue growth end in the fourth quarter of 2015 and the third quarter of 2016, the SEC said.

“Concerned about the possible negative impact on the company’s stock price that could result from missing these estimates, Under Armour sought to accelerate, or ‘pull forward,’ existing orders,” to close the gap between its forecasts and analysts estimates, the SEC order said. “Under Armour typically asked customers to accept shipment of certain products in the current quarter that they had already ordered for delivery in the next quarter,” sometimes offering discounts or extended payment terms.

JEFFREY NEWMAN REPRESENTS WHISTLEBLOWERS NATIONWIDE INCLUDING IN THE SEC WHISTLEBLOWER PROGRAM AS WELL AS FALSE CLAIMS ACT CASES. HE CAN BE REACHED AT 617-823-3217 OR AT JNEWMAN@NEWMANSHAPIRO.COM