Under Armor to pay $434 million to settle sales disclosure lawsuit

Under Armor said Friday it agreed to pay $434 million to settle a 2017 class-action lawsuit that accused the sportswear maker of defrauding shareholders about growing its revenue to meet Wall Street forecasts.

The proposed agreement, subject to court approval, avoids a trial scheduled for July 15 in federal court in Baltimore.
The shareholders' lawsuit accused apparel maker and CEO Kevin Plank of intentionally misleading them about the company's financial health.

In 2021, the Baltimore-based company agreed to pay $9 million to resolve Securities and Exchange Commission (SEC) allegations that it misled investors about its revenue growth.

In its investigation, the SEC found that Under Armor failed to disclose to investors that it employed a sales tactic to accelerate or “advance” a total of $408 million in existing orders in the second half of 2015.
Mark Solomon, lead shareholder attorney and partner at litigation firm Robbins Geller Rudman & Dowd, called the proposed settlement an “important victory” that underscored the key role of pension funds in holding companies accountable.

Under Armor said it intends to pay the settlement amount of $434 million through cash on hand, as well as by drawing on its $1.1 billion revolving credit facility.

The company added in a regulatory filing that it had agreed to also continue separating the roles of president and CEO for a period of at least three years.

Under Armor said it has consistently denied the allegations and entered into this settlement in principle, which is not an admission or determination of guilt or wrongdoing.

The company expects its total accrual in legal proceedings contingencies related to the lawsuit to reach $434 million during the first quarter of fiscal 2025, from $100 million at the end of fiscal 2024.