Steinhoff International Holdings NV's shares lost more than half their value on Dec. 6 after the owner of U.S. specialty bedding retailer Mattress Firm said it had begun an investigation into alleged accounting irregularities and its CEO had resigned.
In a five-paragraph statement, the Stellenbosch, South Africa-based company said "new information has come to light which relates to accounting irregularities requiring further investigation." It added that accounting firm PwC had been approached to perform an independent investigation.
"The company will publish the audited 2017 consolidated financial statements when it is in a position to do so," it said. "In addition, the company will determine whether any prior years' financial statements will need to be restated."
CEO Markus Jooste tendered his resignation with immediate effect, said Steinhoff, which is incorporated in the Netherlands.
Its shares plummeted following the announcement. In late-morning trading in Frankfurt, the stock was down 60%, or €1.80, at €1.20, giving it a market value of €5.17 billion. The drop wiped more than €5 billion off its market capitalization.
The company sells furniture, household goods and general merchandise. In addition to Mattress Firm, its brands include Poundland, Harveys and Bensons for Beds in the U.K., and Conforama in continental Europe. According to its 2016 annual report on its website, Steinhoff operates more than 11,000 stores and employs over 105,000 staff members.
The company had been due to report earnings for the year ended Sept. 30, 2017, on Dec. 6. However, in a statement Dec. 4, Steinhoff said it would report only unaudited results on that date. It added that the company and its auditors had "not yet finalized their review of certain matters and circumstances, most of which were raised by the criminal and tax investigation in Germany."
Steinhoff expected to publish its audited 2017 consolidated financial statements before Jan. 31, 2018, it said in the Dec. 4 announcement. It was unclear if the company would report unaudited figures on Dec. 6. A spokesman for the company did not immediately respond to an email from S&P Global Market Intelligence.
The company is embroiled in a court battle in the Netherlands and Germany with a former joint venture partner that questioned the treatment of a joint investment and its fiscal 2016 accounts.
Steinhoff had appointed legal and external audit firms in Germany to investigate the matter independently, and they concluded no evidence of any wrongdoing existed, it said in a Sept. 17 statement. "The annual accounts of Steinhoff International were established according to all applicable rules and to our best knowledge," Jooste said in the Sept. 17 statement.
A court decision is expected no later than Dec. 22, Steinhoff said.
In the 15 months to Sept. 30, 2016, it reported net profit of €1.44 billion, or 35.9 cents a share, on revenue of €16.44 billion. In 2016, Steinhoff changed its financial year to end Sept. 30 instead of June 30.
Chairman Christo Wiese will become executive chairman on an interim basis while the company embarks on a detailed review of all its business with a view to maximizing shareholder value, Steinhoff said. He will be assisted by Pieter Erasmus, a former CEO of South African investment and holding company Pepkor Group.
