Carter's gets sued after saying it would restate earnings

By Rachel Tobin Ramos

The Atlanta Journal-Constitution

Several law suits have been filed suit against Carter's Inc., the Atlanta-based maker of children's clothing, after the company's recent announcement it would have to restate earnings as far back as 2004.

The company still hasn't released third quarter results pending a review of its accounting as for promotional price allowances to retailers.

Lawyers in Atlanta and Washington are seeking lead plaintiffs and class action status for at least two suits against the maker OshKosh B'Gosh children's clothing. And other firms are investigating the situation, according to press releases.

The two complaints already filed accuse Carter's officers and directors of violating the Securities Exchange Act by issuing false and misleading statements about financial results, which artificially inflated stock prices.

After Carter’s announced it would have to restate about four years of earnings, the stock price plunged in value. Shares declined nearly 24 percent and the company lost more than $350 million of market capitalization, said the law firm Barrack, Rodos & Bacine of Philadelphia.

Analyst Gerrick Johnson with BMO Capital Markets said the suits were not unexpected, as the stock dropped due to "something the company had control over," as opposed to something driven by consumer tastes. He added that Wall Street was reacting to a "worst case scenario."