Friedman’s Inc.’s Stock Plummets
NEW YORK (AP) _ Friedman’s Inc.’s stock plummeted Wednesday after the jewelry store chain placed its chief financial officer on leave and disclosed that authorities had expanded their fraud investigations.
New York Stock Exchange-listed Friedman’s shares Wednesday afternoon traded down 39 percent, or $4.66, at $7.33. The stock set a 52-week low at $6.51, below the $7.23 set May 19.
Late Tuesday, Friedman’s, one of the country’s largest jewelry retailers, said probes by the Department of Justice and the Securities and Exchange Commission now include reviews of the company’s allowance for doubtful accounts and other financial matters.
Additionally, Friedman’s expects to increase its allowance for doubtful accounts to 14 percent to 17 percent of accounts receivable as of Sept. 27, compared with the previous estimate of 10.5 percent.
Additionally, the legal and audit costs associated for the Justice Department investigation will weigh on results.
Wedbush Morgan Securities analyst Joan Storms cut her rating on the stock to ``sell″ from ``buy,″ saying the higher doubtful account reserves call into question the company’s business model.
The jeweler’s in-store credit program brought in store traffic and repeat sales, she said. But if Friedman’s is having problems collecting from customers, the business plan may not work.