A day after it was revealed that Under Armour is the subject of a federal investigation into its accounting practices, the company lowered its sales expectations for the year.
In its third-quarter earnings report, which comes just two weeks after founder Kevin Plank said he was stepping aside as CEO, the company logged adjusted earnings per share of 23 cents, versus expectations of 18 cents. Profits grew 7.2% to $102.32 million.
Revenues, however, were down 1% to $1.43 billion, modestly above Wall Street’s forecast of $1.41 billion. Wholesale revenues decreased 2% to $892 million, and direct-to-consumer sales dropped 1% to $463 million. Its North America business remains challenged, with revenues slowing 4% to $1 billion, while international sales climbed 5% to $368 million.
As of 8:30 a.m. ET in premarket trading, Under Armour’s shares were down nearly 14% to $18.26.
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On Sunday, the Baltimore-based firm said it was cooperating with the Securities and Exchange Commission and the Department of Justice investigations into the accounting probe. The purpose of the investigations is to determine whether the company manipulated sales figures by shifting them from quarter to quarter to appear healthier, The Wall Street Journal reported.
“The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures,” an Under Armour spokesperson said Sunday, “and the company firmly believes that its accounting practices and disclosures were appropriate.”
Today, Under Armour said it expects full-year earnings per share to reach the high end of the previously given range of 33 cents to 34 cents.
However, the company lowered its sales expectations for the year. It now forecasts growth of 2% compared with the previous range of 3% to 4%. It cited lower-than-planned excess inventory for the off-price channel, ongoing direct-to-consumer challenges and negative impacts from foreign currency changes.
“Building our long-term brand strength remains at the center of everything we do,” Chairman and CEO Kevin Plank said in a statement accompanying the third-quarter report. “Our ongoing transformation across the business continues to make us smarter, faster and more operationally excellent. As we make the turn into 2020, we are confident in our ability to deliver our fourth-quarter targets while proactively supporting higher levels of strategic marketing investments that will further fuel the Under Armour brand.”
Plank will become executive chairman in January, when COO Patrik Frisk takes the CEO reins.
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