Why Tile Shop Holdings (TTS) Is Down Today

NEW YORK (TheStreet) -- Tile Shop Holdings  (TTS) was plunging 8.2% to $13.51 on Tuesday after the retailer fired CEO Robert Rucker's brother-in-law, Fumitake Nishi, once an independent investigation discovered he had committed "multiple violations of the company's business ethics policy," according to its press release.

The violations stemmed from Tile Shop's relationship with Beijing Pingxiu, a licensed Chinese export trading company owned by Nishi that Tile Shop and some of its Chinese vendors used. Nishi received $1.1 million in illicit "consulting services" fees, according to the investigation.

Both Robert W. Baird and Credit Suisse lowered their target prices on the stock in the wake of the news. Baird downgraded Tile Shop to "neutral" from "outperform" and lowered its target price to $13 from $24, while Credit Suisse lowered its target price to $20 from $22 and estimates for 2013 and 2014 to 38 cents and 47 cents, respectively.

"The issues appear to be isolated to this one individual, based on the findings, and there was no evidence that TTS' results had been overstated because of those relationships," Credit Suisse writes in its report.

TheStreet Ratings team rates TILE SHOP HOLDINGS INC as a "sell" with a ratings score of D. TheStreet Ratings Team has this to say about their recommendation:

"We rate TILE SHOP HOLDINGS INC (TTS) a SELL. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. Among the areas we feel are negative, one of the most important has been very high debt management risk by most measures."

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