According to a lawsuit filed against Performance Sports Group, or PSG, which owns the Bauer and Easton brands, the company is being accused of Fraud and Stock Market manipulation.
The company is alleged to have relied on a practice called “channel stuffing” to falsify revenue and net income while hiding the true financial state of its business. If such allegations are found to be true, those actions would be fraudulent and deceptive.
The lawsuit was filed in New York district court and comes as PSG disclosed on Wednesday that it has been under investigation by securities and exchange commissioners in the U.S. and Canada. The lawsuit alleges PSG moved future orders into earlier financial quarters by pressuring hockey retailers to accept sticks, skates and other product they did not need to increase the company’s sales.
One “Confidential Witness”, known as the owner of a Bauer retail store in Salem, New Hampshire, and being identified as “CW3″ is testifying as to his knowledge.
“As CW3 recounted, [Bauer vice president of sales Paul] Healey and Davis “both knew that the hockey equipment market was saturated, yet they insisted that their retailers increase orders every year,” the lawsuit says. “Even though the number of amateur hockey players in the U.S. remained flat or decreased, PSG put more [product] into the market than the market could handle.”
“PSG threatened customers with the loss of their discounts if they did not increase the size of their orders each year or if they did not agree to accept merchandise shipment early.”
On its face, if true, the strategy would have appeared to have paid off.
Profits and margins reported publicly increased beyond those that were projected. This drove the price and value of PSG stock beyond what it would have been valued at.
While none of this may directly impact players now, it may in the future. TJHN will update this story as more information becomes available.
Joe Hughes
