Floor & Decor Facing Proposed Securities Suit After ‘Disappointing’ Q2 2018 Financial Results

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A proposed securities class action has been filed against Floor & Decor Holdings, Inc. and its CEO, CFO, and several controlling shareholders over claims that they failed to alert investors to negative business trends while touting the company’s health.

According to the case, the flooring retailer reported strong sales growth and product demand since its initial public offering in May 2017. In a May 2018 press release announcing its first quarter financial results, the company, the suit goes on, indicated that it had increased its financial projections for the remainder of the year based on a strong first quarter performance. Some market analysts, however, “expressed disappointment that the sales outlook had not been increased even more,” which caused a nearly $10 per share stock drop on May 4, 2018.

Later that month, the suit says, Floor & Decor filed with the SEC a registration statement in connection with a second offering of 10 million shares of common stock. In the registration statement, the defendants, the lawsuit points out, noted that there were risks that “could” negatively impact financial results “if” they occurred. The lawsuit argues that these risks, however, “were already materializing” at the time the defendants filed this statement.

According to the case, the May registration statement failed to disclose that the company was experiencing a decline in sales trends that would eventually lead to a reduction of its sales and financial outlook for the rest of 2018. Indeed, in August 2018, Floor & Decor released “disappointing” financial results along with “sharply reduced” financial guidance, the case says, which reportedly caused the price of the company’s stock to drop over 21 percent.