- A new report from The Wall Street Journal claims Under Armour borrowed business from future quarters to mask weak demand in 2016.
- Under Armour – which said earlier this month it was being investigated for its accounting practices – reportedly used this tactic to help continue its 26-quarter streak of 20% revenue growth, the WSJ reported.
- The sports apparel company saw its stock fall more than 17% in a single day after the probe was revealed.
- Watch Under Armour trade live on Markets Insider.
The sports apparel company reportedly pushed retailers to accept its products early and diverted inventory bound for its own stores to off-price chains like TJX Companies during the last days of a quarter, the WSJ reported.
The practice allowed Under Armour to record the goods as revenue as opposed to waiting for them to sell at retail locations owned by the company, according to the WSJ. The tactic and others were used to continue a 26-quarter streak of 20% sales growth that ended in late 2016, the report added.
The WSJ also noted that these types of end-of-quarter moves are generally allowed under accounting rules. Further, some of the executives interviewed for the story say the practice is commonplace in the industry.
“It was a pretty common practice to pull forward orders from the month after the quarter to ship within the quarter in order to hit the number or close the gap,” a former sales executive told The Journal, adding that the “problem is once this starts it doesn’t seem to stop.”
Under Armour Founder and CEO Kevin Plank sent an email to employees Friday addressing the WSJ’s report.
“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 wrote in the email, according to a copy obtained by Business Insider. “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.”
The news comes less than two weeks after the company announced its accounting practices are under investigation. According to the WSJ, the company’s results toward the end of 2016 are being reviewed as part of the probe.
Under Armour’s stock plunged more than 17% after the investigation was revealed, handing short-sellers $US130 million in paper gains in a single day.
The stock has struggled since it hit a year-to-date high of more than $US27 per share in late July. The recent rout following the announcement of the accounting probe erased most of the shares’ gains for the year.
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