The U.S. attorney's office has opened an inquiry into Carter's Inc., the Atlanta-based manufacturer of children's clothing such as OshKosh B'gosh, and the company's president has been ousted.
The actions are the result of an independent investigation and audit after the company reported that discounts given to some wholesale customers were improperly reported by certain sales people, affecting earnings back to 2003.
The company has been unresponsive to calls from the newspaper since the issue came to light in October.
On Wednesday, a Carter's news release said President Joseph Pacifico's employment ended on Dec. 21. Michael D. Casey, chairman and CEO, immediately took on the role of president.
The release said Carter's was informed that the U.S. attorney's office is conducting an inquiry. Carter's also sent a report to the Securities and Exchange Commission.
The company also announced Wednesday that it promoted Brian J. Lynch, a former Disney employee, to executive vice president and brand leader for the Carter's brand, and that it hired Lisa A. Fitzgerald from Land's End to be executive vice president and brand leader for the OshKosh B'gosh brand.
The company has yet to restate earnings but did report the cumulative after-tax impact of the adjustments resulted in a 3 percent reduction in "retained earnings," equal to $7.5 million, for the period from 2003 to 2008 and the first half of this fiscal year.
The news that earnings would be adjusted -- initially reported on Oct. 27 -- spurred several shareholder lawsuits. The company's stock also dove that day by nearly 25 percent to close at $21.56. At least one analyst prior to that day had set a target stock price of $33.
On Wednesday, after the news of the executive reshuffling and earnings impact, the stock rose by nearly a dollar to close at $25.96.
The company has yet to release third-quarter earnings or a final restatement of earnings back to 2003. The company said that will happen "as soon as practicable."
In its 2008 annual report, Carter's said it had a 14.1 percent market share of the $24 billion baby and young children's apparel market -- giving it the No. 1 position.
Sales in 2008 rang in at $1.5 billion. Carter's clothing is sold in 400 company-operated retail stores and thousand of department and chain stores nationwide.
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