Foot Locker, Execs Facing Class Action Over Allegedly Artificially Inflated Stock Prices [UPDATE]
Last Updated on February 28, 2020
City of Warren Police And Fire Retirement System v. Foot Locker, Inc. et al
Filed: March 9, 2018 ◆§ 1:18cv1492
A proposed class action has been filed against Foot Locker, Inc. and its CEO and CFO on behalf of a proposed class of individuals who bought the shoe and apparel retailer’s common stock between August 19, 2016 and August 17, 2017 (the class period).
Case Updates
Update – October 8, 2019 – Judge Tosses Foot Locker Shareholder Lawsuit
The proposed class action detailed on this page was dismissed without prejudice by U.S. District Judge Ann M. Donnelly, who ruled on September 30, 2019 that the plaintiffs failed to sufficiently demonstrate that claims and statements made by Foot Locker and its CEO and CFO within the class period were false or misleading.
The plaintiffs have until October 28, 2019 to file an amended complaint.
A proposed class action has been filed against Foot Locker, Inc. and its CEO and CFO on behalf of a proposed class of individuals who bought the shoe and apparel retailer’s common stock between August 19, 2016 and August 17, 2017 (the class period).
On August 19, 2016, Foot Locker announced in its financial results for its 2016 second quarter that store sales had grown 4.7 percent, the complaint says, with the company’s net income reaching $127 million and earnings per share jumping 12 percent. That same day, the case continues, Foot Locker held a conference call in which it made positive statements about the company’s business figures and financial outlook. The next date mentioned in the complaint is November 18, 2016, when the company reportedly announced positive overall results and made statements regarding the company’s then-strong business metrics. More positive sentiment from Foot Locker came in February 2017, the lawsuit adds.
According to the suit, statements issued by Foot Locker during the above-reference time period were materially false and misleading in that they omitted certain adverse details, including:
- That Foot Locker’s vendors were “transitioning to selling through various online retailers,” hampering the usefulness of the company’s many brick-and-motor stores and the relationships it had with vendors; and
- That competition between online retailers “increased the pricing competition Foot Locker faced” while product demand in stores had decreased.
The case says that a May 19, 2017 press release from Foot Locker announced its revenue for the year’s first quarter had plummeted drastically, with store sales fairing just as poorly. As it had done previously, the company held a conference call with investors:
“During the conference call held with investors and analysts that morning, [the defendants] further disclosed that this trend was not restricted to the second half of 2016 and 1Q17, but would continue, and that the Company was then forecasting second quarter 2017 comparable store sales up only in the low single digits, with profits relatively flat compared to the 2Q16.”
Upon this news, Foot Locker stock prices declined precipitously, the lawsuit says. The individual defendants, with alleged knowledge of Foot Locker’s true business outlook, “sold 192,162 shares of their personally held” company stock during the class period, the complaint claims, reportedly earning more than $13.38 million.
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