Under Armour (UAA) stock tanked on Monday, after the sportswear company reported third-quarter earnings that were ahead of Wall Street forecasts, but were overshadowed by the disclosure of a federal accounting probe and weak guidance.
Here are the key numbers, according to a Bloomberg consensus forecast:
Adjusted earnings per share: 23 cents vs expectations of 18 cents
Revenue: $1.43 billion vs. expectations of $1.42 billion
Shares of Under Armour — which ended Friday’s trading at $21.14 — plunged by more than 16% to intraday lows around $17.62, amid news of an investigation into its accounting practices by federal authorities.
North America revenue for the sportswear company decreased 4% percent to $1 billion, while the international business increased 5% to $368 million, up 8% and accounting for 26% of total revenue.
However, UA lowered previous revenue guidance to rise by approximately 2%, compared to its previous expectation of 3-4%, citing excess inventory and “challenges” in its direct-to-consumer efforts.
“Our ongoing transformation across the business continues to make us smarter, faster and more operationally excellent,” CEO Kevin Plank said in the release.
“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,” he added.
On Sunday, Under Armour disclosed that it's cooperating with investigations by the Securities and Exchange Commission and the U.S. Department of Justice, confirming an early report by the Wall Street Journal.
“The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures, and the company firmly believes that its accounting practices and disclosures were appropriate,” a spokesperson for Under Armour told Yahoo Finance in a statement.
According to The Wall Street Journal, the probe centers around the sportswear company's moved sales from quarter to quarter to make its results look stronger. Federal investigators were in Baltimore questioning people last week, the report said.
Under Armour has had three CFOs since 2016.
The probe also comes as founder Kevin Plank, 47, prepares to step down from his role as CEO in the new year. Last month, Under Armour announced that its current COO and president Patrik Frisk would take over as CEO, while Plank, who has served as its CEO since 1996, will transition to executive chairman and brand chief effective Jan. 1.
Under Armour, which is undergoing a turnaround, has been trying to jumpstart sluggish domestic sales.
Once a Wall Street darling, Under Armour saw 26 consecutive quarters of 20%-plus revenue growth until it reported a steep drop during its fourth-quarter earnings announcement for 2016 delivered on Jan. 31, 2017.
In that release, Under Armour said its revenues grew only 12%, well-below expectations sending shares plunging. The company also said at the time that its CFO Chip Molloy was leaving for “personal reasons” after about one year on the job.
Julia La Roche is a Correspondent for Yahoo Finance. Follow her on Twitter.
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