There are no timeouts for Big 5 Sporting Goods Corp.
After repeated requests to retain its stock listing, Nasdaq relented when Big 5 finally filed its tardy 2004 annual report this month. But now a shareholder has sued the El Segundo-based company, alleging Big 5’s financial reporting problems were a breach of its fiduciary duties.
The shareholder, William Childers, filed a class action lawsuit last month in Los Angeles Superior Court against Big 5’s board of directors and executive officers. The complaint highlights accounts payable errors, delayed Securities and Exchange Commission filings and failure to hold the annual stockholders’ meeting on a timely basis.
In February, Big 5 announced it restated its finances for the fiscal years 2001, 2002 and 2003 due to accounts payable errors. Net income was reduced by a total of $4.7 million.
The company also missed deadlines to report its finances to the Securities and Exchange Commission. It eventually filed its annual report late, but has yet to file its first- and second-quarter statements, due on the extended deadline of Sept. 30.
As a result of Big 5’s reporting difficulties, the complaint claims that Steven Miller, Big 5’s chief executive, and Charles Kirk, chief financial officer, were unjustly enriched. In 2003, Miller earned just over $1 million in salary and cash bonuses, plus 30,000 stock options, and Kirk earned $453,452 in salary and cash bonuses, plus 10,000 stock options.
“Defendants willfully ignored the obvious and pervasive problems with Big 5’s accounting and internal control practices and procedures and made no effort to correct the problems,” stated the complaint, which did not specify damages.
In its annual report, Big 5 states the lawsuit is without merit, though it acknowledges that a judgment could harm its financial condition. “(Big 5) intends to defend the suit vigorously,” the report states.
Hotel Report
With few new L.A. hotels, occupancy rates should increase and the price for a night’s stay should continue to rise, according to an Ernst & Young hospitality report.
In the first six months of 2005, only two hotels with 175 rooms were added to the L.A. hotel supply. At the same time, there were only two hotels under construction, though 11 hotels are on the drawing board.
“When you look at L.A. and compare it to California and the rest of the markets around the country, it is well positioned,” said Troy Jones, a senior manager in Ernst & Young’s hospitality advisory services group. “We don’t have a lot of supply going into the market.”
The residential housing boom is diverting developers’ attention, according to Jones, but there is a side benefit for existing operators, who are able to charge more as heavy corporate travel pushes up the demand for hotel rooms.
For the first half of this year, the average daily room rate in Los Angeles rose by 5.5 percent and the occupancy rate increased by 3 percent over last year. By comparison, the room rates increased by 4 percent and occupancy increased by 2.8 percent nationwide.
The report covers the California hotel markets of L.A., San Francisco, Anaheim and San Diego. Los Angeles was the only market to experience room rate and occupancy rate hikes in each of the first six months of this year.
Food Fix
Junk Food Clothing Inc. designs vintage T-shirts with logos of the brands A & W; Root Beer, Squirt, Wheaties and Candy Land, all owned by large corporations.
Now, Los Angeles-based Junk Food is following in those brands’ footsteps. Owners Natalie Grof and Blaine Halvorson have sold the Junk Food for $22.5 million to Delta Apparel Inc., based in Duluth, Ga.
Grof and Halvorson, who started Junk Food in 1998, are staying in Los Angeles and will continue to head Junk Food’s operations, which generated $27 million in sales for the year ended June 30. Junk Food shirts sell for $22 to $48 at stores nationwide, including locally at Kitson, Fred Segal and Nordstrom.
Delta Apparel, which makes T-shirts, sweatshirts and tank tops, expects Junk Food to generate $33 million to $38 million in sales for the fiscal year ended July 1, 2006. The company booked $11.2 million in net income and $228.1 million in revenues for the fiscal year ended July 2.
Bye Baths
For business people on the road, there’s often little time to squeeze in a hot bath between meetings.
At least, that’s what the Beverly Hilton found when it asked guests about whether they take a bath while traveling. “We kept getting the response, ‘No, not really,'” said Brian O’Connor, a spokesman for the hotel.
So as part of the hotel’s $80 million makeover, the Hilton decided to nix the baths in 200 of the hotel’s 570 rooms. That gave the hotel the ability to shift around the plumbing and expand the size of the bathrooms.
Oasis West Realty LLC, the hotel’s owner, spent about $75,000 to renovate each hotel room. Of that, O’Connor said about 30 percent to 40 percent was dedicated to remodeling the bathroom. So far, O’Connor said guests like the room changes, which were wrapped up over the summer.
Executive suites are going for about $279 to $399 per night, up from $159 to $189 per night before the makeover.
*Staff reporter Rachel Brown can be reached by phone at (323) 549-5225, ext. 224, or by e-mail at
[email protected]
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