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Under Armour To Settle Financial Misconduct Lawsuit For $434 Million

Under Armour sign at its headquarters in San Francisco

Under Armour has agreed to pay $434 million to settle a years long lawsuit over claims co-founder Kevin Plank misled investors about the company’s financial health.

The federal probe started in 2017.

It investigated whether the sportswear giant manipulated sales figures to conceal declining demand. 

Under Armour had enjoyed 26 consecutive quarters of at least 20 percent year-over-year revenue growth.

However, the streak ended in late 2016 when the company missed its sales targets.

On Friday, June 21, Under Armour announced the settlement is not an admission of wrongdoing. 

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If approved by the US District Court for the District of Maryland, the settlement would resolve all shareholder claims.

According to a filing with the Securities and Exchange Commission (SEC), Under Armour has agreed to keep the CEO and chair roles separate for at least three years as part of the settlement.

Mehri Shadman: “We firmly believe that our sales practices, accounting practices, and disclosures were appropriate, and deny any wrongdoing in this case”

Plank, who founded Under Armour in 1996, served as CEO until 2019 when he stepped down.

He remained executive chairman and brand chief. 

In March, the company announced Mohamed El-Erian would become chairman when Plank returned as CEO. 

Plank resumed the top role in April.

He succeeded Stephanie Linnartz, who had joined Under Armour in 2023 and served as CEO for about a year.

Chief Legal Officer Mehri Shadman said: “We firmly believe that our sales practices, accounting practices, and disclosures were appropriate, and deny any wrongdoing in this case.”

The lawsuit accused Plank of knowingly or recklessly concealing material facts about consumer demand for Under Armour products and the company's financial and operating results. 

Former executives told The Wall Street Journal in 2019 the company had been shifting sales between quarters to mask slowing demand in 2016.

The Baltimore-based company allegedly pressured retailers to take products early. 

It redirected goods intended for factory stores to off-price chains to book sales at the end of a quarter. 

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These tactics were used to maintain the appearance of consistent sales growth.

In 2021, Under Armour paid $9 million to settle regulatory claims.

It was accused of failing to disclose the practice of pulling forward orders from future quarters.

Mark Solomon, a Robbins Geller partner and counsel to the lead plaintiff, said: “This is an important win for investors and a strong message to the directors and officers of public companies.

Under Armour plans to fund the settlement through cash and/or its $1.1 billion revolving credit facility. 

As of March 31, the company had $859 million in cash and cash equivalents.

The company expects to end fiscal 2025 with about $500 million in cash and no borrowings under its revolving credit facility following the payment.

The settlement comes about a month after Plank warned that sales would drop more than 10 percent this fiscal year.

He added the company would undergo another round of layoffs as part of a restructuring plan.

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