By Christiana Sciaudone
Investing.com -- Mohawk Industries Inc (NYSE:MHK). fell 25%, and is down 30% since July 1, when Robbins LLP said it was investigating the company for fabricating revenue.
The flooring company misled investors by saying it was seeing growing demand that never materialized, according to the shareholder rights law firm, alleging Mohawk may have violated the Securities Exchange Act and executives may have breached their fiduciary duties to shareholders.
Robbins said that starting in 2017, Mohawk started highlighting sales growth. Last July, “after repeatedly reporting financial results that missed analysts' estimates and the company's guidance range, Mohawk revealed sales in its Flooring NA segment were down 7% because "lower demand" for certain conventional flooring products had created excess inventory that impacted Mohawk's sales and margins,” Robbins wrote in a statement.
“It appears that Mohawk had been channel stuffing by causing its distributors to take on surpluses of Conventional Flooring Products that were greater than demand to make Mohawk's sales growth and financial performance appear better than they were,” Robbins wrote.
According to The Motley Fool, the Public Employees' Retirement System of Mississippi filed a lawsuit claiming accounting fraud at Mohawk in January, which includes testimony from a former Mohawk employee who claims the company has used fictitious sales to artificially boost revenue since 2017.
Sales for the first quarter fell 6% compared to a year earlier, with revenue down in all three of its main segments.
Shares are down by more than half since the start of the year.