(CN) - Ohio-based retail chain Big Lots Inc. allegedly lied about the company's financial state, causing its stock to trade at artificially inflated prices between Feb. 2, 2012 and April 23, 2012, investors claim in a class action.
Big Lots sells discontinued and overstocked products through retailers in the U.S. and Canada. The company derives most of its profits from U.S. sales, operating over 1400 stores in 48 states and 82 stores under the Liquidation World banner in Canada.
According to the complaint, Big Lots' top officers failed to tell investors that the company's consumable product lines, which represents a third of the Big Lots sales, was deteriorating and that its electronic product lines were also experiencing difficulty due to shoppers searching for online deals for pricey products.
On March 2, 2012, Big Lots issued its guidance for the year predicting an estimated comparable store sales increase of 2 - 3 per cent for U.S. stores and income from continuing operations was projected to be $3.40 - $3.50 diluted earnings per share. Big Lots stock rose as high as $46.81 per share on March 27, 2012, but after issuing a press release on April 23, 2012 forecasting a significant decline in first quarter sales, the company's stock took a drastic drop of $11 per share to $34. 71 on the same day.
"As a result of defendants' false statements, Big Lots stock traded at artificially inflated levels during the Class Period. However, after the above revelations seeped into the market, the Company's shares were hammered by massive sales, sending them down nearly 26% from their Class Period high," the complaint states.
Meanwhile, CEO Steven Fishman, CFO Joe Cooper, Executive Vice President Charles Haubiel, II, and Chief Information Officer Lisa Bachmann, all named as defendants in the suit, allegedly dumped hundreds of thousands of their shares for approximately $37 million on the back of the artificially inflated prices.
Shareholders are represented by Joseph F. Murray and Brian K. Murphy of Murray Murphy Moul + Basil LLP in Ohio, Darren J. Robbins and David C. Walton of Robbins Geller Rudman & Dowd LLP in San Diego, and Francis A. Bottini of Chapin Fitzgerald Sullivan & Bottini LLP in San Diego.