Under Armour Probe Casts Cloud Over Company During CEO Change

Under Armour Probe Casts Cloud Over Company During CEO Change(Bloomberg) — Under Armour Inc. disclosed that federal officials have been probing its accounting practices for more than two years, bringing a fresh headache to investors just as the sports brand prepares for a CEO transition.The company said on Sunday that it’s cooperating with investigations by the U.S. Securities and Exchange Commission and the U.S. Department of Justice and doesn’t think it’s done anything wrong. The remarks, spurred by a report in the Wall Street Journal, came the day before Under Armour is slated to post its third-quarter earnings.“The company began responding in July 2017 to requests for documents and information relating primarily to its accounting practices and related disclosures, and the company firmly believes that its accounting practices and disclosures were appropriate,” Under Armour said in the statement Sunday.Investigators from the Justice Department and SEC were questioning people at the sports apparel’s base in Baltimore as recently as last week, the Journal reported, citing people familiar with the matter. The probe is focused on whether Under Armour inflated sales from quarter to quarter, the newspaper said.The investigation comes at a difficult time for the company, which has been wrestling with increased competition at home and an underperforming share price. It rattled investors in July by warning that full-year revenue would decline in North America. The stock has fallen 23% since that statement.Founder Kevin Plank, currently chief executive officer, turned the company from a football-focused startup into a global powerhouse that makes men’s and women’s apparel in dozens of categories — and even spacesuits.New CEOBut sputtering growth prompted it to embark on a multiyear restructuring plan aimed at regaining its edge. A new CEO, tapped last month from within Under Armour’s ranks, is meant to help get the company back on a growth trajectory. Patrik Frisk, Under Armour’s president since 2017, will take the reins on Jan. 1.Plank, 47, is stepping aside after more than two decades in charge, though he’ll remain on as executive chairman.No one at the Justice Department or the SEC immediately responded to requests for comment.Under Armour went public in 2005 and experienced rapid growth, with sales increasing to $5 billion in 2017 from $1.1 billion in 2010. Recently, though, keeping that momentum going has been a struggle.Under Armour’s best year-over-year revenue growth in the past three years came in the first quarter of 2016, when sales climbed 30%. It reported double-digit growth in each quarter of that year, slowing to single-digit rates thereafter. The first decline, a 4% drop from the year-earlier period, was in the third period of 2017.The latest quarter isn’t expected to mark much of a comeback on the sales front. Analysts are expecting the company to report a 2% decline in third-quarter revenue, according to data compiled by Bloomberg.\–With assistance from Molly Kissler.To contact the reporters on this story: James Ludden in New York at jludden@bloomberg.net;Eben Novy-Williams in New York at enovywilliam@bloomberg.netTo contact the editors responsible for this story: Matthew G. Miller at mmiller144@bloomberg.net, ;Nick Turner at nturner7@bloomberg.net, Dave McCombsFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

Central European governments accused of abusing European agriculture subsidies

Central European governments accused of abusing European agriculture subsidiesCentral European governments have been systematically abusing the European Union’s Common Agricultural Policy to enrich family members and political allies, an investigation claims.  The New York Times survey of subsidies in nine European countries found that millions of euros in agricultural subsidies had been directed to a handful of companies, often linked to national leaders. It alleged that the CAP had even underwritten “mafia-style land grabs” in Slovakia and Bulgaria.  Prominent beneficiaries reportedly include Andrej Babis, the billionaire prime minister of the Czech republic, who the paper says is linked to a company that received at least $42 million (£32 million) in subsidies last year.  Lukáš Wagenknecht, a senator from the opposition Pirate Party, last week filed a complaint against the European Council saying it should not allow Mr Babis to take part in the bloc’s budget discussions because his Agrofert conglomerate receives tens of millions of Euros in subsidies annually.  Mr Babis no longer owns the company and has denied a conflict of interests, but organisations including Transparency International claim that he remains its end beneficiary.   Andrej Babis, the Czech prime minister, denies a conflict of interest Credit: Martin Divisek/Bloomberg The paper also accused Viktor Orban, the prime minister of Hungary, of abusing the EU’s subsidies to fund a system of patronage linked to land leases.   It cited Mr Orban’s sale of 12 state farms to close associates when he was prime minister between 1998 and 2002, which became eligible for large subsidies when Hungary joined the EU in 2004.  In 2015, five years after he returned to power, Mr Orban’s government began to sell and auction leases to hundreds of thousands of hectares at cut price rates, arranging for most of them go to businessmen with close connections of Fidesz.  The paper implies that this created a system of “modern feudalism” in which small farmers were left beholden to barons who received land eligible for European subsidies based on their loyalty to Mr Orban.   Individuals who are reported to have built up considerable landholdings include Mr Orbans family and close business and political allies.  The European Union supported farmers with 58.82 billion Euros (£50.8 billion) in 2018. Subsidies are meant to support food production, rural community development, and environmentally friendly farming.  The subsidies it provides are often crucial to the survival of small farmers across the bloc.  Ivan Haralampiev, the Bulgarian farmer whose cow Penka was at the centre of an outcry over EU agricultural regulations in 2018, told the Telegraph that he had bought cattle only because the subsidies they qualified for made it possible to live.  The Telegraph sought comment from Mr Orban's office.  A spokesman for the Hungarian government said: “The procedures in Hungary for administering EU agricultural subsidies fully satisfy EU rules and regulations for the management of these funds. Hungary is also fully compliant in the sale of state land, which is regulated by law. Furthermore, it should be noted, that concerning a plot of land larger than 1,000 hectares, subsidies for or sale of that plot must follow strict rules. The NYT’s questions and sources clearly reflect a biased preconception about the topic.”