Under Armour plummets after an accounting investigation (sneakers are the real issue)
Protect this house... from a federal investigation. While Under Armour was busy wicking sweat, the WSJ discovered that SEC investigators are questioning people at its Baltimore office about its accounting practices. The question is whether UA shifted around numbers to strategically make sales appear stronger than they really are.
- 2.5: That's how many years the investigation has been going on, according to the report.
- 0: That's how much info Under Armour has told the public about this ongoing investigation. If execs don't think it's material to the stock, they don't have to disclose it. So they didn't.
Coach always said "Talk is cheap"... Except when it reveals fundamental issues about your business. Take these 2 soundbites from Under Armour's earnings call:
- “So now we’re focused on 2020 and beyond.”
- “The next chapter” was mentioned multiple times.
- If you had a 3rd quarter like Under Armour's, you'd want investors looking to the future too.
Under Armour stock plummeted 18% because its core biz is the real issue... While your wardrobe trended athleisure, Under Armour doubled-down on more "ath," less "leisure." CEO/founder Kevin Plank just gave up his role to become the brand chief, dedicated to make Under Armour even "louder." Now we're seeing how that injures UA:
- Its home market: Sales in North America fell 4%. That was offset by 5% growth internationally, but sales for the entire company shrank over the past year by 1%.
- The core product of sports apparel: Sneaker sales dropped 12% – and if you can’t do sneakers, can you really take on Nike?