Federal authorities are investigating Under Armour Inc. ’s accounting practices in a probe examining whether the sportswear maker shifted sales from quarter to quarter to appear healthier, according to people familiar with the matter.
As part of the probe, which hasn’t been made public, investigators questioned people in Baltimore, where the company is based, as recently as last week, one of the people said.
Justice Department prosecutors are conducting a criminal inquiry into the matter in coordination with civil investigators at the Securities and Exchange Commission, another person said.
Under Armour said it is cooperating with the Justice Department and SEC investigations. “The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures,” Under Armour said after The Wall Street Journal published this article. “The company firmly believes that its accounting practices and disclosures were appropriate.”
Spokespeople for the Justice Department and SEC declined to comment.
When examining what are known as revenue-recognition practices, authorities generally focus on whether companies record revenue before it is earned or defer the dating of expenses to make earnings appear stronger, among other possible infractions.
The company, which is scheduled to report third-quarter results on Monday, has been restructuring its operations and struggling with weak sales in the last two years. Until then, it had been among the fastest-growing apparel makers, riding 26 straight quarters of at least 20% year-over-year revenue growth.
That streak ended abruptly when Under Armour missed its sales targets in the final quarter of 2016. On Jan. 31, 2017, the company’s shares plunged after it reported sales growth of 12% in the holiday quarter and cut its growth forecasts for the next year. That day, Under Armour also said its then-finance chief was leaving after a year on the job.
At the time, founder, Chairman and CEO Kevin Plank attributed the slowdown to fewer store visits by shoppers, the company’s product assortment and changes in the sportswear industry, including retailer bankruptcies such as Sports Authority Inc. Mr. Plank moved to restructure the operations, cutting jobs and hiring an outsider, Patrik Frisk, as president.
Under Armour had three chief financial officers from 2016 to 2017. Brad Dickerson, who had served as CFO since 2008, left the company in February 2016. Chip Molloy, a former PetSmart Inc. executive, took over but stayed a year on the job. Under Armour at the time cited unspecified personal reasons for his departure.
David Bergman was named acting finance chief in February 2017 after the company reported its quarterly sales miss and Mr. Molloy’s exit. Mr. Bergman, who has worked at Under Armour since 2004 in various finance roles, was named permanent CFO in December 2017.
Messrs. Dickerson, Molloy and Bergman didn’t respond to requests for comment Sunday.
The slowing growth, coupled with some unexpected declines in quarterly profit, fanned concerns about Under Armour’s ability to continue to win market share from Nike Inc. and Adidas AG . The company’s class A shares, which once traded above $40, closed Friday at $21.14.
Last month, the company said Mr. Plank was stepping down as CEO on Jan. 1 after more than 20 years in the role. Mr. Plank plans to stay at the company as executive chairman and brand chief, and Mr. Frisk will take over as CEO and continue reporting to Mr. Plank.
Mr. Plank, a former University of Maryland football player, founded Under Armour in his grandmother’s basement with sweat-wicking compression apparel. Over time, he added new products and struck endorsements with athletes including NBA star Stephen Curry and golfer Jordan Spieth, building the company into a global brand with about $5 billion in annual sales.
In recent years, the company has refocused on performance attire but has continued to struggle in its domestic market. In its second fiscal quarter, Under Armour reported a 3% decline in sales in North America and said it expects them to decline over the full year. Analysts expect total sales of $1.41 billion in the third quarter, compared with $1.44 billion in the same period last year.
Like many companies, Under Armour has faced complaints by current and former employees about its culture, including the expensing of strip-club visits and inappropriate behavior by executives, the Journal has reported. Mr. Plank has spoken openly about Under Armour’s shortcomings, promised to make improvements and replaced some senior executives.
When he announced plans to hand over the CEO title, the 47-year-old billionaire said the decision was part of the company’s long-term succession planning.
—Dave Michaels contributed to this article.
Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com and Khadeeja Safdar at khadeeja.safdar@wsj.com
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