Under Armour investors suffered significant losses as a result of what a shareholder's lawsuit called false and misleading statements about the company's prospects.
The sports apparel maker and some of its officers misrepresented the company's sales and growth in a drive to pursue competitors Nike, Reebok and Adidas, according to allegations in a securities fraud class action lawsuit filed Friday in U.S. District Court for Maryland. It represents investors who bought Under Armour's Class A and Class C common stock between April 21, 2016 and Jan. 30.
Defendants, including founder and CEO Kevin A. Plank and former CFO Lawrence P. "Chip" Molloy, "failed to disclose that Under Armour's revenue and profit margins would not be able to withstand the heavy promotions, high inventory levels and ripple effects of numerous department store closures and bankruptcy of The Sports Authority," the lawsuit said.
Under Armour said in a statement it is aware of the claims and find them without merit.
"Under Armour will vigorously defend the case," the company said in a statement.
Under Armour's stock plummeted 26 percent on Jan. 31 after the company reported weaker than expected sales and profits for the last three months of the year. The company blamed a sluggish holiday season, a shifting retail landscape and merchandise miscalculations for October-to-December sales of $1.3 billion, which, while up 12 percent from a year earlier, fell short of the quarterly gains of 20 percent and more it had reported for nearly seven years.
Under Armour's long streak of eye-popping gains in sales ended abruptly during the all-important holiday season, the company reported Tuesday, sending its stock down 26 percent.
The Baltimore-based athletic apparel brand blamed a sluggish holiday season, a shifting retail landscape and merchandise...
Under Armour's long streak of eye-popping gains in sales ended abruptly during the all-important holiday season, the company reported Tuesday, sending its stock down 26 percent.
The Baltimore-based athletic apparel brand blamed a sluggish holiday season, a shifting retail landscape and merchandise...
The company also cut its sales growth target in half for this year.
Plank sought to reassure investors during a Jan. 31 conference call with analysts, saying he remained confident in the underlying strength of the Under Armour brand as the company makes continued investments in the fastest-growing parts of the business, such as footwear, international sales and sales through Under Armour branded stores and websites.
The lawsuit, which names stockholder and Georgia resident Brian Breece as plaintiff, alleges that Plank "saw the writing on the wall" and starting last April "began shifting the company's capital structure by selling more of his stake to prevent any individual loss, yet maintain control of the company."
Under Armour, facing criticism over comments about President Donald J. Trump by its CEO, issued a statement calling immigration “a source of strength” and saying it opposes the administration’s travel ban, while emphasizing its push to raise American manufacuturing capacity.
"These are not new...
Under Armour, facing criticism over comments about President Donald J. Trump by its CEO, issued a statement calling immigration “a source of strength” and saying it opposes the administration’s travel ban, while emphasizing its push to raise American manufacuturing capacity.
"These are not new...
The lawsuit filing capped a week during which the company faced sharp criticism over Plank's comments about President Donald J. Trump's pro-business philosophy. The CEO, during a lengthy interview Tuesday on CNBC, said Trump "wants to make bold decisions and be decisive" and that having “such a pro-business president is something that’s a real asset to this country.”
Plank and other business executives sit on a manufacturing advisory panel assembled by Trump that is working to develop innovative ways to support American manufacturing.
A social media backlash against Plank's comments included opposition from athlete endorsers including ballerina Misty Copeland, actor Dwayne "the Rock" Johnson and basketball star Stephen Curry, whose signature basketball shoes have helped propel the brand's footwear sales.
Plank's comments drew fire in light of Trump's controversial executive order temporarily banning travelers from seven Muslim-majority countries.
On Friday, Under Armour released a statement calling immigration "a source of strength" and saying it opposes the administration's travel ban.
"These are not new or revised values," Under Armour said Friday. "This is what we believe. Under Armour and Kevin Plank are for job creation and American manufacturing capabilities. We believe building should be focused on much needed education, transportation, technology and urban infrastructure investment."
It was the company's second statement since Plank's CNBC interview. An initial statement said Under Armour hoped to see fair trade, tax reform and an “inclusive immigration policy that welcomes the best and the brightest and those seeking opportunity in the great tradition of our country.”
lorraine.mirabella@baltsun.com
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