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Federal Authorities Investigating Under Armour’s Accounting Practices

Alphabroder says Under Armour continues to be readily available and popular in the promo products channel.

The Wall Street Journal has reported that federal law enforcement authorities are investigating Under Armour, the popular retail athletic wear brand that’s also sold in the promotional products channel.

Reports indicate that the Justice Department and U.S. Securities and Exchange Commission is looking into whether or not the Baltimore-based company moved sales from quarter to quarter in order to give the appearance of greater financial strength than what was reality.

Under Armour has denied any wrongdoing, saying its accounting practices have been legal and sound. The company, press reports indicate, is cooperating with authorities.

Alphabroder (asi/34063), the largest supplier in the promotional products industry, is the primary provider of Under Armour to the ad specialty space. Executives at the Trevose, PA-based firm said that the brand continues to be readily available – and popular with the end-clients that its promo distributor customers serve.

“Our partnership remains strong with Under Armour,” Andrea Routzahn, senior vice president of portfolio & supplier management at alphabroder, told Counselor. “We are seeing healthy year-over-year growth and positive customer reaction to our new Under Armour Fall 2019 launch collection. As more and more retail brands enter our channel, news headlines and ups-and-downs should be viewed with careful consideration of course, but not with overreaction.”

Alphabroder CEO Norm Hullinger emphasized that the supplier is not expecting any interruption to its ability to supply Under Armour product to the promo space. “We’re full speed ahead,” Hullinger told Counselor.

The Wall Street Journal reported that prosecutors from the Justice Department are conducting a criminal inquiry into Under Armour’s accounting practices. Civil investigators from the SEC are teaming up with the prosecutors on the investigation. In a statement, Under Armour said: “The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures, and the company firmly believes that its accounting practices and disclosures were appropriate.”

Kevin Plank, Founder, Under Armour

In October, Kevin Plank, the 47-year-old founder of Under Armour, stepped down as CEO. Patrik Frisk, Under Armour’s chief operating officer, will officially replace him on Jan. 1. Plank plans to remain active with the company as executive chairman of the board and brand chief. Plank appeared on Counselor’s Power 50 list for two years, ranking 13th in 2016 and 31st in 2017. He founded Under Armour in 1996, while he was still in college.

Currently, Under Armour has a market value of about $9.1 billion, though sales increases have slowed after years of rapid growth. On Monday, Under Armour downgraded its financial forecast for the year, saying total 2019 revenue will likely increase about 2%, rather than the previously forecast 3% to 4%. For the third quarter of 2019, Under Armour said total sales were down 1% year-over-year to $1.4 billion. North American sales declined 4% to $1 billion in Q3.