Under Armour agrees to pay $434 million to settle lawsuit

Under Armour to pay $434 million over revenue growth fraud claims

by Faruk Imamovic
Under Armour agrees to pay $434 million to settle lawsuit
© Getty Images/Justin Sullivan

Facing an impending trial, Under Armour on Friday said it would pay $434 million to settle a class-action lawsuit that accuses the athletic apparel maker of tricking shareholders by covering up slowing sales growth in 2017 to hit Wall Street expectations.

The settlement remains contingent on court approval and heads off a trial set for July 15 in a federal court in Baltimore. "Under the terms of the agreement, Under Armour will pay $434 million to settle claims brought on behalf of purchasers of Under Armour's publicly traded shares from September 16, 2015, to November 1, 2019.

Under Armour has also agreed to two governance changes for a specified time period that are detailed in the company's 8-K filed with the SEC," the companies official statement states. The company and its CEO, Kevin Plank, were accused of intentionally making misleading statements about Under Armour's financial health.

This settlement is "an important victory," said Mark Solomon, lead attorney for shareholders and a partner at the Robbins Geller Rudman & Dowd law firm. He emphasized the central role of pension funds in holding companies accountable.

Still on course

Under Armour has consistently denied the allegations and said this settlement in principle is not an admission of guilt or a finding of wrongdoing. The settlement will be funded by existing cash and drawing on a $1.1 billion revolving credit facility.

Additionally, the company has agreed in a regulatory filing to keep the chairman and chief executive officer roles separate for at least three years. In 2021, the company agreed to pay $9 million to settle allegations by the U.S.

Securities and Exchange Commission that Under Armour misled investors about its sales growth. The SEC investigation found that Under Armour failed to disclose to investors that it had used a sales tactic to advance a total of $408 million in existing orders in the second half of 2015.

Financial provisions for legal contingencies related to the lawsuit are expected to reach $434 million in the first quarter of fiscal year 2025, compared to $100 million at the end of fiscal year 2024.