Under Armour (NYSE:UA) (NYSE:UAA) has had a rough few years, with shareholders feeling the brunt of the pain. Both classes of shares are down about 50% over the past five years.

This gloom wasn't always the case. Under Armour was once a Wall Street darling, with its unique apparel that keeps wearers cool (or warm) and dry resonating with athletes and regular folks with active lifestyles. The company also grew other categories, such as footwear and accessories.

However, growth has slowed over the last couple of years. In 2016, revenue increased by about 22%, but this dramatically slowed to the 3%-4% range over the next couple of years. In the most recent third quarter, revenue fell by roughly 1% compared to the year-ago period, although cost savings and other initiatives helped boost profitability.

There's more going on than meets the eye, though.

Under investigation

Slowing sales growth, troubling enough on its own, has been compounded by the November revelation that the company has been under investigation by both the U.S. Securities and Exchange Commission (SEC) and Department of Justice (DoJ).

In response to a Wall Street Journal article, Under Armour said in a filing with the SEC that it "has been responding to requests for documents and information from the SEC and DOJ regarding certain of the Company's accounting practices and related disclosures, beginning with submissions to the SEC in July 2017. The Company continues to believe its accounting practices and related disclosures were appropriate."

The Wall Street Journal reports that the issues in question relate to whether the company improperly shifted sales to make a period's top line appear better.

Under Armour said in a statement that "For many years, quarterly shifts in wholesale revenue related to timing of shipments based on financial goals; customer requests; year-to-year seasonal variance; different fiscal calendar alignments; product availability; logistics; and numerous other dynamics have been, and continue to be, part of the normal course of business practices in the apparel, footwear and retail sector."

I find it particularly troubling that the governmental agencies have been looking into these issues since at least July 2017 and the company did not alert investors to that fact until the Wall Street Journal article forced the issue.

Competition heats up

Under Armour's merchandise does not appear so different right now. There is a lot of competition from big companies such as Nike (NYSE: NKE) and adidas (OTC: ADDYY).

The company is feeling the heat most keenly in North America, which generates most of Under Armour's sales and profits. Under Armour's North America revenue for the first nine months of this year fell by more than 3%. Management lowered its 2019 forecast for the region's top line when the company reported second-quarter results in July, now expecting a slight decline compared to its original outlook of flat sales. On the latest earnings call, management dropped its overall top-line forecast.

CFO Dave Bergman said during the company's third-quarter earnings call that "We now expect revenue to be up approximately 2%, compared to our previous expectation of 3% to 4% driven by lower-than-planned excess inventory to service the off-price channel, ongoing traffic and conversion challenges in direct to consumer, and continued negative impacts from changes in foreign currency." He went on to say that each had a roughly similar negative impact. The troubles with traffic and getting people to buy are the most disconcerting.

At Under Armour's Investor Day presentation a year ago, management outlined a five-year, "protect and perform" plan that included innovation and using analytics to improve results and remain competitive. Thus far, these efforts have not shown up in the results.

Under the founder's control

Amidst the accounting inquiry and weakening results, Under Armour has a new CEO starting in the new year. Patrik Frisk, currently the COO, will step up, replacing founder Kevin Plank.

Plank will remain executive chairman and take on the title of "brand chief." He will remain heavily involved, and under the arrangement, Frisk will report to him.

Plank also exercises control over the company via his nearly 65% voting power since he owns a lot of the supervoting Class B shares. Under Armour has three classes of stock: the Class A shares have one vote; Class B shares have 10 votes; Class C shares do not have any voting rights.

What's wrong with him having control? Nothing, in and of itself. Plank deserves kudos for starting the company and growing it to over $5 billion in sales. However, with weakening growth, lower profitability, and an ongoing accounting investigation that he and his team didn't bother to mention, perhaps it's time he stepped aside more completely to let others run the company.

Maybe nothing will come of the investigations. Still, there is the risk that the company will have to restate prior results, and future sales growth may not look so rosy if the company has to adopt a more conservative accounting approach. 

It's impossible to predict the outcome or the effect on Under Armour's results right now. When you can't trust that the numbers are right, it is difficult to invest in a company, even if you believe its top-line growth will rebound. That's not a risk that investors need to take, which makes the prudent course to sit on the sidelines.