Mohawk Industries Named in Class-Action Lawsuit

Chattanooga, TN, July 10, 2020-A class-action lawsuit filed against Mohawk by the Public Employees Retirement System of Mississippi has negatively impacted the company’s stock value by 20%; according to analyst Stifel, the suit, “alleged among other things that Mohawk executives engaged in a scheme to ‘channel stuff’ its Conventional Flooring Products in an effort to make the company’s sales growth and performance appear far better than they were.”

The Chattanooga Times Free Press reports, “The suit said the products weren't delivered to customers and the intent was to conceal from investors the true reasons for the company's ballooning inventory… Throughout the period from April 2017 to July 2019 at the end of each financial quarter, the suit said that employees in Mohawk's North American distribution centers were instructed to load goods on company trucks on Fridays and pretend to deliver them on Saturdays to customers they knew were closed for deliveries.

“The suit, filed in U.S. District Court in the Northern District of Georgia, said Mohawk also made repeated false statements to misrepresent and conceal the truth behind the company's rising inventory levels and slowing inventory turnover."

Adds Stifel, “The stock declined dramatically during the period that encompasses this lawsuit for persons who bought the stock between April 28, 2017 to July 25, 2019. The stock closed at $238.88 on April 27, 2017 and climbed to $284.65 on December 4, 2017 but steadily declined to $111.31 on December 24, 2018. It rebounded to $156.39 where it closed on July 25, 2019. This 50%+ decline over a period often times invites litigation.”

The lawsuit, filed January 3, 2020 and amended June 29, 2020, is a 194-page document that was filed in U.S. District Court in Rome, Georgia, and it demands a jury trial. 

On July 13, Mohawk filed an 8K, disclosing, among other things, that it received subpoenas from a U.S. attorney and the Securities and Exchange Commission, shortly before a class-action complaint alleging securities-law violations was filed.

The company reports that it will vigorously defend itself against the accusations. 

Related Topics:Mohawk Industries