Under Armour agrees to pay $434 million to settle class action lawsuit

Under Armour Inc. has agreed to pay $434 million to settle a 2017 class action lawsuit.

The case shed a harsh – and ultimately costly – light on the practice of bringing forward sales from another quarter, as well as on Under Armour’s disclosures and accounting of sales in 2015 and 2016.

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In 2021, Under Armour agreed to a $9 million civil settlement in a separate but similar Securities and Exchange Commission case.

Under Armour has consistently denied the allegations made by shareholders in the class action lawsuit and stated that it agreed to the settlement in principle “given the costs and risks associated with litigation.”

A judge still has to approve the deal, under which Under Armour would also agree to keep the roles of chairman and CEO separate for three years. In addition, the board’s Human Resources and Compensation Committee would have to approve any restricted stock awarded to the CEO, CFO and general counsel during the three years.

Mehri Shadman, Under Armour’s general counsel and corporate secretary, said: “We firmly believe that our sales practices, accounting practices and disclosures were appropriate and deny any wrongdoing in this case. Today’s announcement allows us to put this more than seven-year-old matter behind us, allowing us to avoid the ongoing distraction of litigation and provide certainty to the company at a time when we are executing on important strategic priorities.”

Under Armour plans to pay the settlement by drawing on its cash on hand, its $1.1 billion revolving credit facility, or both. As of March 31, the company had $859 million in cash and equivalents.

While it’s a bill Under Armour can pay, it comes at a difficult time for the company after founder Kevin Plank returned as CEO in March, following the relatively recent move by former Marriott International executive Stephanie Linnartz to take over the corner office.

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But Plank is clearly looking to make a fresh start and get the brand back on track after lower wholesale sales and inconsistent execution.

“We are taking advantage of this critical moment to make proactive decisions to build a premium positioning for our brand, which will put pressure on our top and bottom lines in the near term,” Plank told investors in May. “Over the next 18 months, we have a huge opportunity to restore Under Armour’s brand strength by doing more with less and focusing on our core principles: driving demand through better products and storytelling, implementing smarter strategies like simplifying our operating model and improving our customer experience. In parallel, we are focused on managing costs and executing the strategies necessary to grow our brand and drive shareholder value.”

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