Under Armour, CEO, CFO Facing Securities Class Action Lawsuit

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A proposed class action filed in Maryland court on behalf of individuals who purchased Under Armour common stock between April 21, 2016 and January 30, 2017 claims the sports apparel giant and its CEO and CFO broke federal securities laws. The 22-page complaint alleges that in its quest to rise to the level of competitors such as Nike, Reebok and Adidas, Under Armour issued a “series of false representations about the company’s venue, growth and vitality” in violation of the Securities Exchange Act of 1934.

In addition to allegedly making false and misleading statements, Under Armour also failed to disclose material facts about the company’s operations and prospects, the lawsuit claims. From the lawsuit:

“Specifically, [the defendants] made false and misleading statements and 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, but nevertheless purported itself as a growth company that would continue to develop and market game-changing products.”

The complaint then mentions Under Armour’s lofty aspirations to “continue growing 20 percent annually.” Unfortunately for the company, its sales grew only 12 percent in the fourth quarter of 2016, with North American revenues only jumping up six percent.

“In point of fact, Under Armour’s twenty-six consecutive quarters of greater than 20 percent sales growth came to a halt on Tuesday, January 31, 2017, when Under Armour announced, prior to the opening of the market, weaker-than-expected fourth quarter earnings, and that its Chief Financial Officer … would be unexpectedly stepping down, despite only serving at the position for thirteen months,” the lawsuit reads.