Floor & Decor Holdings stock slides after Spruce Point short report By Investing.com

Floor & Decor Holdings (NYSE:) shares fell 1.7% Monday after Spruce Point Capital released a short report on the stock, stating they see a potential 40% to 60% downside in the stock.

The firm, which issued a “Strong Sell” opinion on the stock, said that after conducting a forensic review of Floor & Decor, a specialty retailer of floor tiles and accessories operating 78,000 square foot stores, they “have grave concerns about the credibility of management and the Board, viability of the company’s strategy, accuracy of its financial reporting, and sustainability of its share price momentum and valuation expansion.”

“Investors should be on red alert,” argues Spruce Point, claiming that the CFO (now President) worked at Blockbuster and Carter’s in senior financial accounting roles during periods both companies had “crippling financial restatements and were under SEC and DOJ scrutiny.”

The firm also expressed further concerns regarding the company’s management, noting that both FND’s Board Chairman and Audit Committee Chair worked together at Linens’ N Things as CEO and CFO/CAO, which fell into bankruptcy.

“Warning: FND had a previous material weakness, recently made a variety of accounting, financial reporting, and business practice changes adverse to customers and slowed new store growth below 20%,” cautions Spruce Point.

Spruce Point also believes the market underappreciates FND’s expansion into lower-income geographic markets, where building foundation issues dictate less tile usage.