On Monday, shares of Under Armor Inc. (UA, Financial)(UAA, Financial) closed 1% to 2% higher despite sinking at the open on its announcement that the company and its executives received Wells Notices from the U.S. Securities and Exchange Commission regarding its accounting treatment of sales covering the third quarter of 2015 through the period ending December 2016.
Background
Under Armor’s Wells Notices refer to the company’s use of “pull forward” sales in connection with revenues for the aforementioned quarters. SEC staff is specifically focused on the company’s disclosures regarding “pull forward” sales to meet sales objectives.
A Wells Notice does not necessarily mean that Under Armor or its executives have violated any accounting laws. The Baltimore-based sports apparel and equipment manufacturer said in its press release that the SEC has not alleged any revenue recognition or other violations of generally accepted accounting principles relating to that or any other period.
Under Armor said it will engage in dialogue with SEC staff regarding the matter and work toward a resolution. The company also said that CEO Kevin Plank and Chief Financial Officer David Bergman maintained that their actions were appropriate.
Shares soar over 1% despite tumbling at the open
Shares of Under Armor recovered from an early plunge: Class A shares closed at $11.20, up 2.66% from the previous close of $10.91 despite tumbling to an intraday low of $10.71. Likewise, Class C shares closed at $9.95, up 1.22% from the previous close of $9.83 despite sinking to an intraday low of $9.54.
GuruFocus ranks Under Armor’s financial strength 5 out of 10 on the back of interest coverage ratios underperforming 54.80% of global competitors. Additionally, Under Armor’s Altman Z-score of 2.12 stands between the warning level of 1.81 and the safe level of 2.99 while the company’s Piotroski F-score is a modest 4 out of 9.
Gurus with large holdings in Under Armor include Steve Mandel (Trades, Portfolio)’s Lone Pine, Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Joel Greenblatt (Trades, Portfolio)’s Gotham Asset Management.
Disclosure: No positions.
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