Newell Brands (NWL) -), parent of brands including retailer Yankee Candle as well as Sharpie and Graco, is in the legal spotlight after the U.S. Securities and Exchange Commission fined the consumer-products company $12.5 million for what the agency charged was misleading investors.
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Newell agreed to a deal with the SEC to pay that fine and settle the case. Also settling the charges, Newell's former chief executive, Michael Polk, agreed to a fine of $110,000.
In the case the SEC charged only parent Newell and the ex-CEO, not any of the company's subsidiaries.
In the settlement, the company and Polk agreed to “cease and desist from violating certain provisions of the securities laws,” the SEC said in a statement.
As part of the agreement, Newell Brands and Polk neither admitted nor denied the allegations.
The charges centered on Newell's disclosures of the brand's core sales growth, which the SEC called a commonly used financial metric designed to provides clarity on a company’s underlying sales trends.
In 2016 and 2017, Newell and Polk allegedly boosted the brand’s core sales growth numbers in a manner that was not aligned with Newell’s actual, but undisclosed, sales trends.
That move allowed the company “to announce ‘strong’ or ‘solid’ results in quarters it internally described as disappointing due to shortfalls in sales,” the SEC said in a statement.
“According to the order, Newell pulled sales forward into earlier quarters without adequate disclosure and engaged in accounting practices that were inconsistent with [Generally Accepted Accounting Principles], while overriding its internal accounting controls.”
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And that, the SEC said, enabled Newell to give the misleading appearance that Newell had achieved core sales growth “in line with its targets and deprived investors of information relevant to an accurate and complete understanding of Newell’s actual sales trends,” the agency reported.
The order "finds that Newell’s former CEO issued an instruction to ‘scrub’ the company’s accruals after he learned that the company was projecting a ‘massive’ and ‘disappointing’ miss for the quarter,” Mark Cave, the SEC's associate director within the Division of Enforcement, said.
It's been a tough year for Newell, a consumer-products company with other brands including Rubbermaid, Coleman and Oster.
Earlier in 2023 the company had issued a disappointing forecast and cut jobs.
The stock at last check was off nearly 4% at $8.32. The stock has lost about a third of its value this year.
The company named a new CEO, Chris Peterson, who took the helm in May. And in late July, Peterson called for “a new corporate strategy based on a comprehensive companywide capability assessment.”
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