Skechers Hit with Securities Class Action in New York Over 2015 Stock Drop [UPDATE]
Last Updated on February 28, 2020
Steamfitters Local 449 Pension Plan v. Skechers U.S.A., Inc. et al.
Filed: October 20, 2017 ◆§ 1:17-cv-08107
A proposed securities class action claims a 2015 dip in stock prices can be traced to Skechers overstating the strength of its Domestic Wholesale segment.
Case Updates
Update – October 29, 2019 – Lawsuit Dismissed with Prejudice
The stock-drop lawsuit detailed on this page has been dismissed with prejudice by United States District Judge Analisa Torres.
In an order submitted on September 23, Judge Torres granted the defendant’s request for dismissal and outlined a number of deficiencies with the proposed class action. The judge took particular issue with the “vague and conclusory” allegation that Skechers knew or should have known during the class period that resolution of a West Coast dock workers’ labor dispute would have a material effect on the company’s revenue for the approaching back-to-school season. Judge Torres elaborated that the court found that the plaintiff’s suit “states only the thinnest casual connection between the strike call-off and the slowdown” in the sneaker-maker’s earnings. Moreover, even if the court accepted a plausible connection between the call-off of the West Coast dock strike and Skechers’ earnings, Judge Torres wrote, the information allegedly omitted from the company’s financial statements “would have been based on” a potential future revenue shortfall, and not on one that “had already occurred or necessarily would occur.”
Judge Torres summarily found that the lawsuit failed to allege a primary violation of the Securities Exchange Act and ruled that statements made by the defendants in the run-up to the 2015 back-to-school season were not actionable because they constituted opinion or puffery – or were protected by a “safe harbor” provision within the Private Securities Litigation Reform Act – and were not misleading to shareholders.
The Steamfitters Local 449 Pension Plan has filed a proposed class action in New York on behalf of everyone who purchased (or otherwise acquired) Skechers U.S.A., Inc. common stock between April 23, 2015 and October 22, 2015. The lawsuit, alleging violations of the Securities Exchange Act of 1934, claims the footwear company, during this time period, repeatedly touted the strength of customer demand within its domestic wholesale segment, which Skechers said would lead to continued sales growth. The lawsuit alleges Skechers issued materially false and misleading statements regarding customer demand and sales growth in the back-half of 2015, and failed to disclose that:
- Domestic wholesale customers took early receipt of fall 2015 inventory, which reportedly caused delays of receipt and cancelations of orders scheduled for delivery in the second half of that year;
- As a result, the stated growth rate for the company’s Domestic Wholesale sector was unsustainable; and
- The company’s positive business and operations statements lacked “a reasonable basis.”
Skecher’s financial results for the third quarter of 2015 fell short of analysts’ estimates, the lawsuit says, with common stock prices falling $14.55 per share, or 31.5 percent.
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