Costco Wholesale Corporation
- Company Name
- Costco Wholesale Corporation
- Stock Symbol
- Class Period
- June 6, 2018 to October 25, 2018
- Motion Deadline
- January 5, 2019
- Western District of Washington
The complaint charges Costco and certain of its officers with violations of the Securities Exchange Act of 1934. Costco engages in the operation of membership warehouses in the United States and internationally. The Company offers low prices on a limited selection of national products in certain categories to produce high sales volumes and rapid inventory turnover.
The complaint alleges that during the Class Period, defendants made false and misleading statements and/or failed to disclose adverse facts pertaining to the Company’s business and operations. Specifically, defendants failed to disclose that Costco lacked effective internal control over financial reporting and, as a consequence, defendants’ statements about Costco’s business and operations made during the Class Period were false and misleading and/or lacked a reasonable basis. As a result of this information being withheld from investors, the price of Costco common stock was artificially inflated to as high as $241 per share during the Class Period.
On October 4, 2018, Costco announced that “in its upcoming fiscal 2018 Annual Report on Form 10-K, it expect[ed] to report a material weakness in internal control. The weakness relates to general information technology controls in the areas of user access and program change-management over certain information technology systems that support the Company’s financial reporting processes. The access issues relate to the extent of privileges afforded users authorized to access company systems.” Following this news, the price of Costco stock fell $12.86 per share, or over 5.5%, to close at $218.82 per share on October 5, 2018. Then on October 26, 2018, Costco filed its Annual Report on Form 10-K with the SEC for the fiscal year ended September 2, 2018. In the Form 10-K, Costco stated that it had “identified a material weakness in internal control related to ineffective information technology general controls . . . in the area of user access and program change-management over certain information technology . . . systems that support the Company’s financial reporting processes.” According to the Form 10-K, based “on this material weakness, the Company’s management concluded that at September 2, 2018, the Company’s internal control over financial reporting was not effective.” On this news, the price of Costco stock declined $8.21 per share to close at $218.19 per share on October 26, 2018.