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Under Armour will be paying the sum of $9 million to the U.S. Securities and Exchange Commission (SEC) to settle its case. It was said that the American sports equipment and apparel company agreed to a settlement to resolve the government agency’s findings that it misled investors concerning its profit growth.
What Under Armour did wrong according to SEC
Reuters reported that after a probe, the SEC discovered that the company failed to report to investors that it used a sales strategy to expedite or "pull forward" a total of $408 million in orders from the second half of 2015.
The tactic was said to have been applied as the winter at that time was warm and negatively affected Under Armour’s sales due to its inability to sell its more expensive cold weather apparel collection. As a result, the company missed the revenue target and inflated it to meet analyst’s expectations.
“The order finds that Under Armour failed to disclose that its increasing reliance on pull forwards raised significant uncertainty as to whether the company would meet its revenue guidance in future quarters,” the SEC wrote in its press release to announce it charged the sports, apparel maker. “According to the order, using these undisclosed pull forwards, Under Armour was able to meet analysts' revenue estimates.”
Kurt Gottschall, director of SEC's Denver regional office, added that "When public companies describe how they achieved financial results, they must not misstate any information that is material to investors."
He went on to explain that through the application of pull forwards for some consecutive quarters just to measure up to analysts' revenue targets while suggesting other factors as the reason for Under Armour’s revenue growth, the company painted a different picture of what boosted its financial results. In the process, the firm also “concealed known uncertainties concerning its business."
Under Armour’s statement regarding its settlement with SEC
Under Armour is a sports apparel and sneaker brand known to sponsor NBA star Stephen Curry, American NFL player Tom Brady, and British pro-boxer Anthony Joshua. It just settled its case with the exchange commission but did not admit the charges.
"This settlement relates to the company's disclosures and does not include any allegations from the SEC that sales during these periods did not comply with generally accepted accounting principles," Under Armour stated via its own press release. “The Company neither admitted nor denied the SEC's charges and the settlement resolves all outstanding SEC claims.”
