Under Armour Inc (NYSE:UAA) is under federal probe by the Justice Department and Securities and Exchange Commission over their bookkeeping and other accounting practices, according to the company’s statement released on Sunday.
The giant sportswear maker started responding in July 2017 to document requests and details pertaining to its accounting processes and relevant disclosures. According to Under Armour’s spokesperson, it been cooperating with the investigators and firmly believes its accounting policies and disclosure are appropriate.
A report released by The Wall Street Journal revealed that the Justice Department is conducting a criminal inquiry and is coordinating with other civil investigators at the Securities and Exchange Commission. So far, SEC hasn’t commented on the ongoing investigation.
Lately, the Baltimore-based corporation has been struggling on its home turf in the face of somewhat stiff competition from Lululemon Athletica inc. (NASDAQ: LULU), Nike Inc (NYSE: NKE), and Adidas (OTCMKTS: ADDYY) in the United States. Its sales revenue in the entire North American region dropped to $3.7 billion in 2018. This 2% decrease, according to analysts, is due to the company’s performance-focused gear that doesn’t resonate with most shoppers.
Besides, Under Armour has faced turbulence with its executive management. The corporation went through three Chief Finance Officers in one year (2016-2017), and currently, it’s still in the midst of management transition.
Kevin Plank, the company’s long-time CFO, and founder, is expected to step down from the top management position on January 1st, handing the reign of this famous sportswear maker to Patrik Frisk, the head of operations. Plank intends to stay on at the company as a brand chief and executive chairperson.
This change, according to Plank, was an integral part of the corporation’s succession plan. It’s also a strategy to battle the brutal competition from Adidas AG and Nike Inc. in the U.S.
Lately, there has been controversy over the company’s organizational culture. Workers reportedly visit entertainment joints such as strip clubs on their corporate cards in an attempt to win over athletes. Under Armour handled the issue, and Plank promised to create a diverse and somewhat inclusive environment at the company.