It's easy to think of one company that's currently "be-Tween" a proverbial rock and a hard place. And while nobody can forecast how it will affect the company or its management, youth retailer Tween Brands
In August, the retailer that operates Limited*Too and Justice stores, released the results of its second quarter. Let's just say the numbers didn't quite live up to management's expectations. Sure, management can't always be right. After all, no one is perfect. But what makes this time a little bit sketchy is that between the time guidance was issued and the earnings release, CEO Michael Rayden was selling off $6.1 million worth of shares.
May projections of "conservative" per-share earnings were between $0.13 and $0.16, but actual earnings clocked in at $0.07 per share. The results sent the stock tumbling over 28% and shareholders running to the nearest lawyer.
Rayden's explanation for the sizable miss was that later back-to-school start dates and altered timing for state-tax holidays in Texas and Florida had trimmed results. But other retailers like Gap
But now, headlines for Tween include a string of press releases by attorneys who have filed class action suits, claiming that Rayden "violated federal securities laws by issuing various materially false and misleading statements that had the effect of artificially inflating the market price of the company's securities ..." The attorney's releases essentially invite aggrieved Tween shareholders to join in their class action suits in order to fight for the company to pay for damages on behalf of investors who bought Tween Brands between June 8 and Aug. 21.
I suppose the ultimate effect of these unfolding events is anyone's guess, but the lesson Fools can take away from this is: You can't always have faith in management, and performing due diligence is always a necessity. Fellow Fool Tim Otte recently questioned American Eagle's
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Fool contributor David Lee Smith doesn't own any of the companies mentioned above, although his daughter's shopping habits make him wish it were otherwise. He does welcome your questions or comments. The Motley Fool has a strict disclosure policy.