Shareholder Suits Contend Oakley Fraudulently Misled Investors

Two disgruntled Oakley Inc. shareholders on Wednesday alleged in civil lawsuits that the Irvine-based sunglasses manufacturer had fraudulently misled shareholders about an impending slowdown in sales and profits.

The suits, which seek unspecified damages, allege that Oakley executives failed to tell investors that sales through Oakley’s leading retail outlet during the waning months of the year would be slower than anticipated.

Lacking timely knowledge of the slowdown in sales, an unknown number of investors acquired Oakley shares based on the expectation that sales and profits would rise during the fourth quarter ending Dec. 31, the suits allege.

Oakley officials were unavailable for comment.

In recent weeks, Oakley has acknowledged that its sales were being hurt by slower-than-anticipated demand from Sunglass Hut, a Coral Gables, Fla.-based retailer that accounts for more than a third of Oakley’s retail sales. But Oakley executives recently told retail industry analysts that sales would rebound as new sunglasses now being introduced make their way into the retail market.

The suits were both filed Wednesday in state Superior Court in Santa Ana. The plaintiffs were Herschel Harman, who purchased 1,500 shares of Oakley stock at prices ranging from $13.875 to $20.25 and Yosef S. Rosenshein, who purchased 200 Oakley shares at $15.50.

The suits both seek to represent Oakley investors who purchased the company’s stock between Oct. 9 and Dec. 4.

Oakley, which hit a 52-week high of $27.125 in May, tumbled dramatically in October along with other sunglass company stocks after Sunglass Hut indicated that demand for sunglasses was slowing. Oakley closed down $.375 on Wednesday in New York Stock Exchange trading at $10.75, slightly above its 52-week low of $10.625.

Oakley’s founder and chairman, Jim Jannard, on Monday announced that he would buy back 1 million shares of the company. Jannard, who said that the stock was a good value at its current low price, would own slightly more than 50% of the company after the purchase is completed.