Under Armour Inc. is facing heightened public scrutiny following news of a federal probe into its accounting practices. And now its CEO is speaking out in the company’s defense.
In a memo addressed to employees on Friday, Kevin Plank — who also serves as chairman and founder of the sportswear giant — responded to an explosive Wall Street Journal report, which detailed allegations that Under Armour “pushed early shipments” and “dumped goods at off-price chains” in an effort to boost revenue growth.
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“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 letter obtained by FN. “We’ve certainly never claimed to be perfect, but our team has earned and deserves more respect than this reporting currently affords us.”
Late Thursday evening, the WSJ article reported that former executives, who worked in the sales, logistics, merchandising and finance departments at the Baltimore-based firm, said they had clambered to meet “aggressive sales targets” and subsequently “borrowed business from future quarters” to hide slowing demand for its athletic apparel three years ago.
“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 [and] logistics,” read an official company statement sent to FN, “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.”
The note added, “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.”
Early this month, Under Armour confirmed that it was the subject of a two-and-a-half-year-long federal investigation surrounding its accounting procedures. The Department of Justice as well as the Securities and Exchange Commission have been looking into whether the company manipulated sales numbers by shifting them from quarter to quarter to appear healthier.
“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 wrote in today’s letter. “We respect the government’s process and will continue to cooperate with thoughtful and proper resolve.”
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