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

Under Armour will pay $9 million to settle federal regulatorsā€™ charges that it misled investors about its sales growth in 2015 and 2016 to meet analystsā€™ revenue targets.

For six consecutive quarters beginning in the third quarter of 2015, the sports apparel company ā€œpulled forwardā€ 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 SECā€™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.

ā€œWhen public companies describe how they achieved financial results, they must not misstate any information that is material to investors,ā€ said Kurt Gottschall, director of the SECā€™s Denver regional office, in Mondayā€™s announcement. ā€œUnder 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 Armourā€™s internal revenue and revenue growth forecasts for the third and fourth quarters of 2015 began to indicate shortfalls from analystsā€™ 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 Armourā€™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.

ā€œConcerned about the possible negative impact on the companyā€™s stock price that could result from missing these estimates, Under Armour sought to accelerate, or ā€˜pull forward,ā€™ existing orders,ā€ to close the gap between its forecasts and analysts estimates, the SEC order said. ā€œUnder 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,ā€ sometimes offering discounts or extended payment terms.

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