Accounting Standards

SEC charges Under Armour $9m over disclosure failures

The group has agreed to settle the action for $9m

The Securities and Exchange Commission (SEC) has charged Under Armour, the sports apparel manufacturer, with misleading investors by failing to disclose future revenue uncertainties.

Under Armour has agreed to settle the action for $9m, following the findings that it violated the anti-fraud provisions of section 17(a)(2) and (3) of the Securities Act of 1933.

According to the SEC’s order, the clothing brand “pulled forward” a total of $408m in existing orders placed for future quarters so as to meet analysts’ revenue estimates in Q3 of 2015.

An example of this was the firm’s “higher-priced cold weather apparel”, which was used to offset the group’s shortfallings in its North American internal sales projections.

In turn, Under Armour “misleadingly” attributed its revenue growth for six consecutive quarters to various factors “without disclosing to investors material information about the impacts of its pull forward practices”.

The order found that the group also failed to disclose that pulling orders forward results in uncertainty as to whether it would meet its revenue guidance for future quarters.

Kurt Gottschall, director at the SEC’s Denver office, said: “When public companies describe how they achieved financial results, they must not misstate any information that is material to investors.

“By using pull forwards for several consecutive quarters to meet analysts’ revenue targets while attributing its revenue growth to other factors, Under Armour created a misleading picture of the drivers of its financial results and concealed known uncertainties concerning its business.”

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