Federal authorities are investigating
Under Armor Inc.
Accounting practices in a study examining whether a sportswear manufacturer has shifted sales from quarter to quarter to look healthier to people familiar with the matter.
As part of a probe that was not made public, investigators questioned people. in Baltimore, where the company is based, as recently as last week, one of the people said.
Justice Department prosecutors are conducting a criminal investigation into the matter in coordination with civilian investigators at the Securities and Exchange Commission, said another person.
Under armor said he was cooperating with the SEC Department of Justice. "The company began responding in July 201
Ministry of Justice and SEC spokesmen declined comment.
When examining what are known as revenue recognition practices, authorities usually focus on whether companies record revenue before it is earned or deferring cost dates to make profits stronger, among other possible contraventions.
The company, which should report its third quarter results on Monday, restructured its operations and struggled with weak sales over the past two years. By then, it was among the fastest growing apparel manufacturers, taking 26 straight quarters with the fewest 20% annual revenue growth.
This series ended abruptly when Under Armor missed its sales targets in the last quarter of 2016. On January 31, 2017, the company's stock plummeted after reporting 12% sales growth during the holiday quarter and lowering its forecast for growth for next year. On that day, Under Armor also stated that its then head of funding was leaving after a year of work.
At that time the founder, chairman and CEO
attributed the slowdown to fewer shopper visits, the company's product range and changes in the sportswear industry, including the bankruptcies of retailers such as Sports Authority Inc. Mr Planck moves to restructure operations, cutting jobs and hiring an outsider,
Under the armor were three chief financial officers from 2016 to 2017.
who has been CFO since 2008, left the company in February 2016.
Former CEO of PetSmart Inc., took over but remained one year on the job. At the time, the gun indicated unspecified personal reasons for leaving it.
was named acting finance manager in February 2017 after the company announced its missed quarterly sales and the release of Mr Molloy. Mr. Bergman, who has worked at Under Armor since 2004 in various financial roles, was appointed Permanent Chief Financial Officer in December 2017.
Masters. Dickerson, Molloy and Bergman did not respond to requests for comment Sunday.
The slower growth, coupled with some unexpected declines in quarterly earnings, has raised concerns about Under Armor's ability to continue to gain market share from
, Class A shares of the company, which once traded above $ 40, closed at $ 21.14 on Friday.
Last month, the company announced that Mr. Planck stepped down as CEO on January 1, after more than 20 years in the role. Mr. Planck plans to remain with the company as CEO and Head of Brand, and Mr. Frisco will take over as CEO and continue to report to Mr. Planck.
Mr. Planck, a former University of Maryland football player, founded Under Armor in his grandmother's basement with sweat-clad clothing. Over time, he added new products and hit endorsements with athletes, including an NBA star
building the company into a global brand with about $ 5 billion in annual sales.
In recent years, the company has refocused on performance apparel, but continues to struggle in its domestic market. During its second fiscal quarter, Under Armor reported a 3% drop in North American sales and said it expects them to decline year-round. Analysts expect total sales of $ 1.41 billion in the third quarter, compared to $ 1.44 billion for the same period last year.
Like many companies, Under Armor has faced complaints from current and former employees about its culture, including spending club visits and inappropriate executives' behavior, The Journal reported. Mr Planck spoke openly about Armor's shortcomings, promised to make improvements and replace some senior executives.
When announcing plans to hand over the title to CEO, the 47-year-old billionaire said the decision was part of the company's long-term succession planning.
—Dave Michaels contributed to this article.
Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com and Khadeeja Safdar at email@example.com
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