An Under Armour store front is seen on November 04, 2019 in Sunrise, Florida.
Joe Raedle | Getty Images
Under Armour CEO Kevin Plank responded Friday to a report that said the company borrowed business from future quarters to hide slowing demand in 2016, saying it called into question the company’s integrity but it remains “unshaken.”
“Given recent events that have entered the realm of public opinion without full context, it is disappointing to have our integrity and reputation called into question,” Plank said in a memo sent to employees, which was obtained by CNBC.
Plank’s comments came after The Wall Street Journal reported Thursday that Under Armour in 2016 leaned on retailers to take goods early. Sportswear intended for factory stores would be sent to off-price chains in order to book sales in the final days of a quarter, according to the publication.
Some of the executives told the Journal that such moves were common in the retail industry.
“Amid a paradox of being constrained by an ongoing, two and a half year investigation and wanting to address media allegations raised by anonymous sources – our integrity is unshaken,” continued Plank, who will be stepping down as CEO on Jan. 1. “We’ve certainly never claimed to be perfect, but our team has earned and deserves more respect than this reporting currently affords us.”
The Department of Justice and Securities and Exchange Commission have been investigating the Baltimore-based company over its accounting practices. The two probes were confirmed by Under Armour in early November, but the company has said that it has been cooperating with investigators since July 2017.
A person familiar with the matter told the Journal that federal investigators are examining emails that show that Under Armour’s founder and CEO Kevin Plank knew about the efforts. Plank is stepping down as chief executive Jan. 1, but will remain with the company as executive chairman. President and Chief Operating Officer Patrik Frisk will succeed him as CEO.
“With respect to inquiries into Under Armour’s business practices by the Securities and Exchange Commission and the Department of Justice, we firmly believe that our disclosures and our accounting practices have been entirely appropriate,” Plank said in his memo. “We respect the government’s process and will continue to cooperate with thoughtful and proper resolve.”
Under Armour said in a separate statement that the ongoing investigation constrains the company from addressing every allegation in the media. Under Armour’s management and board of directors stand by its financial reporting, the company said.
The statement said, in part, “In this respect, our process for recognizing revenue and recording returns and other allowances has not changed and has always been in compliance with generally accepted accounting principles.”
Under Armour shares were up almost 3% in morning trading Friday. The stock has fallen less than 1% since the start of the year. It has a market value of $8.0 billion.
Here’s the full memo from Under Armour CEO Kevin Plank:
Next week, we’ll enter our 15th year as a publicly traded company – a period marked with incredible effort, heart and passion from thousands of teammates that have worked tirelessly to create one of the world’s largest athletic performance brands. Since the beginning, we’ve operated with two core tenets: integrity and improvement. Both are vital for sustainable growth, positive reputation and longevity. Under Armour would not exist without these qualities.
As a brand centered on making athletes better, sportsmanship is inherent in everything we do. Win or lose, we play with honor, fairness and respect for the game. Our team works and drives hard toward any goal we set out to accomplish. We are playing the long game, building an eternal brand.
Given recent events that have entered the realm of public opinion without full context, it is disappointing to have our integrity and reputation called into question. Amid a paradox of being constrained by an ongoing, two and a half year investigation and wanting to address media allegations raised by anonymous sources – our integrity is unshaken. We’ve certainly never claimed to be perfect, but our team has earned and deserves more respect than this reporting currently affords us.
With respect to inquiries into Under Armour’s business practices by the Securities and Exchange Commission and the Department of Justice, we firmly believe that our disclosures and our accounting practices have been entirely appropriate. We respect the government’s process and will continue to cooperate with thoughtful and proper resolve.
Most importantly, I want to thank this team for all that you do – each and every day. Let’s all lock arms on our continuing march to building the best sports performance brand on the planet.
Here’s the full statement from Under Armour:
We are aware of recent media coverage concerning Under Armour’s business practices. As we have stated previously, we firmly believe that our disclosures and our accounting practices have been entirely appropriate. Our management and board of directors have reviewed this matter extensively over the past two and a half years and stand by the Company’s financial reporting. Because the investigation is ongoing, we are constrained in our response and cannot address every allegation raised in the media or by anonymous sources cited in the news.
When Under Armour speaks, we always communicate our best understanding as to the market and the Company’s prospects. For many years, quarterly shifts in wholesale revenue related to timing of shipments based on financial goals; customer requests; year-to-year seasonal variance; different fiscal calendar alignments; product availability; logistics; and numerous other dynamics have been, and continue to be, part of the normal course of business practices in the apparel, footwear and retail sector. In this respect, our process for recognizing revenue and recording returns and other allowances has not changed and has always been in compliance with generally accepted accounting principles. Indeed, as reported by certain media outlets, analysts and accounting experts agree that such end-of-quarter practices are generally permitted under accounting rules.
Under Armour has become one of the world’s largest athletic performance brands through industry-defining innovation, ambitious and driven leadership, and a culture that holds itself to the highest standards of integrity including operating within standard industry business practices and always in compliance with generally accepted accounting principles.
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