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Here’s Why Shares of This Whole Foods Supplier Are Cratering

Inside A Whole Foods Market Inc. Store As Earnings Figures Are ReleasedInside A Whole Foods Market Inc. Store As Earnings Figures Are Released
Customers shop in this photo taken with a tilt-shift lens at a Whole Foods Market Inc. store in Oakland, California, U.S., on Wednesday, May 6, 2015.Photograph by David Paul Morris — Bloomberg via Getty Images

It might tout healthy and natural foods, but Hain Celestial’s financial reporting is certainly not in the best shape.

The maker of Celestial Seasoning tea announced Monday that it would delay the release of its fourth quarter and full year financial results due to an accounting issues and would miss guidance—dragging the stock down over 27% in pre-market trading Tuesday.

Hain is currently reviewing whether it had recognized revenue when it shipped the products to its distributors, which include Walmart and Whole Foods, rather than after those products were sold to customers.

Hain said it would not reveal those earnings until it has completed an evaluation of “its internal control over financial reporting.”

The natural goods maker noted that the review would not ultimately effect the total revenue recognized by the company, though due to unrelated issues, it does not “expect to achieve its previously announced guidance for fiscal year 2016.”



While shares of the natural foods maker had risen 32% year to date on takeover speculations by the market’s close Monday, news of the earnings delay quickly erased those gains as investors worried that the accounting review could cloud Hain’s acquisition prospects.

The natural foods maker’s accounting issues also echo vaguely of the problems that plagued Valeant and specialty pharmaceutical company, Philidor over the past year.

Earlier this year, Valeant announced that it had mistakenly reported $58 million of 2014 revenue after products had been delivered to the Philidor rather than to the consumer. But unlike Hain—based on the limited information we have now—Valeant again booked those revenues in 2015 when it acquired Philidor and sold the same drugs to consumers.