Tile Shop Responds to Allegation of Inflated Earnings

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

Tile Shop (NASDAQ: TTS  ) was one of the market's biggest losers on Thursday, dropping nearly 39% to close at $12.95 a share. The stock sank after news broke that the specialty tile retailer allegedly inflated its fiscal 2013 earnings. Investment company Gotham Research publicly released a report today that claims Tile Shop pumped up earnings by as much as 200% this year by buying goods at cost from one of its largest suppliers.

The company in question is China-based Beijing Pingxiu, which according to reports is controlled by Fumitake Nishi, the brother-in-law of Tile Shop CEO Robert Rucker. If the family affair is true, Tile Shop would likely be forced to restate historical earnings results.

Tile Shop responded to the allegation after the market closed on Thursday, saying in a press release that the company "adamantly denies these allegations and believes that the financial statements are properly stated and its business practices are appropriate." However, the Tile Shop also specified that it has since "suspended its relationship" with Beijing Pingxiu, and will continue to investigate this situation going forward. Shares of Tile Shop current have a short interest of more than 8%, according to Finviz.


Read/Post Comments (0) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2727436, ~/Articles/ArticleHandler.aspx, 9/19/2014 10:04:18 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement