Shares of 99 Cents Only Stores fell as much as 12.6 percent on Wednesday after the City of Commerce-based discount retailer said its recently hired chief financial officer had resigned, along with two board members.
Late Tuesday, 99 Cents Only Stores said Chief Financial Officer Jim Ritter, who joined the retailer in mid-December, had resigned to pursue other opportunities. Also resigning were directors Ben Schwartz and Howard Gold, son of company's founder David Gold, after discussions with the New York Stock Exchange about independence requirements.
Schwartz, former chairman of supermarket chain Foods Company Markets, could not be deemed independent because the company had made payments to a company run by his son. Howard Gold subsequently resigned so the board could retain a majority of independent directors. The company said it is Howard Gold's intention to rejoin the board once another independent director is in place.
In mid-afternoon trading on Wednesday, 99 Cents Only shares were down $1.21, or 8.5 percent, to $12.99 after falling as low as $12.40 earlier.
The company has had a string of accounting-related problems in the past year. Earlier this week, 99 Cents Only Stores delayed the release of its fourth-quarter financial statement to give the company time to evaluate its lease accounting procedures, and said it may have to restate previously reported results.
The company also said in a Securities and Exchange Commission filing that it has found "material weaknesses" in its internal controls and its management information technology. Its auditors will express an "adverse opinion" on the effectiveness of its controls as of Dec. 31.
The troubles date back to mid-2004, when 99 Cents Only lowered earnings guidance, announced a re-evaluation of its inventory procedures, particularly at an overstocked warehouse in Los Angeles, and struggled with the hospitalization of David Gold, its chief executive.
Then, the stock fell to roughly $14 a share from the $22 range, and analysts began putting pressure on the company to hire a deeper bench of managers, rather than rely on Gold and his sons.
In an effort to beef up its line-up of directors, the company named Eric Flamholtz, a management professor at the Anderson Graduate School of Management at UCLA, to its board last year.
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