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Skechers Hit With Shareholder Lawsuits

Investors accuse shoe firm of failing to disclose troubles that weighed down stock price.

April 07, 2003|P.J. Huffstutter | Times Staff Writer

Skechers USA Inc. -- the Manhattan Beach-based shoe company known for its hip product lines and even hipper young clientele -- has been hit with a slew of shareholder lawsuits and accused by angry investors of selling off shares while failing to disclose competition troubles that have weighed down its stock price.

At least seven class-action suits have been filed since the end of March, with the latest filed Friday in District Court in Los Angeles.

The most recent complaint alleges that the company -- along with founder and Chief Executive Robert Greenberg; his sons, director Jeffrey Greenberg and company President Michael Greenberg; director Geyer Kosinski; and Chief Financial Officer David Weinberg -- made "false and misleading" statements regarding its sales and growth.

The suit alleges that Skechers officials didn't tell investors that by taking on the role of distributor, the company's sales would be accelerated in the short term and later slow down.

The complaint accuses the executives of taking advantage of this knowledge and selling off 1.54 million shares of Skechers stock, worth $33.8 million, in May and June last year.

Although the company has a cash reserve of about $125 million and good inventory levels, intense competition both in the domestic and international markets was part of the reason Skechers posted an $8.6-million loss for the fourth quarter of 2002, its first loss since going public in June 1999.

Skechers stock has plummeted from a peak of $40 in mid-2001 to a 52-week low of $5.16 on March 10. The roller-coaster drop includes a 42% one-day fall in December, after Robert Greenberg warned for the third time in three months that earnings would fall short of expectations.

The company's stock closed Friday at $6.73, down 2 cents.

Robert Greenberg dismissed the suits in a statement March 28: "These are some of the same lawyers who have sued us before and had their entire case dismissed. The company will vigorously defend itself and we are confident that our actions will be completely vindicated by the courts."

Company officials could not be reached for comment Sunday.

The company has focused on designing footwear for all kinds of shoe buyers -- men, women, teens and kids -- and all kinds of tastes, marketing more than 1,000 different styles that range from basic brown shoes to steel-toed sneakers. In comparison, the average shoemaker has 100 to 200 selections and usually is identified with a specific type of shoe, analysts say.

Yet, the apparel business is one in which styles shift rapidly, a brand's cachet can dim suddenly and even a seasonal fluctuation will pluck profits from the bottom line. Added to that is Skechers' daunting array of rivals, which include Adidas-Salomon, Steven Madden Ltd. and C&J Clark International Ltd.

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