- By Jacob Maslow
FieldTurf is marketed as a smart and profitable investment by Tarkett (TKTT.PA), the parent company that manufactures it.
But while the artificial playing surface is touted as FIFA quality, high performance, durable, weather resistant and even eco-friendly (all claims that can be viewed in a video produced by Tarkett advertising the FieldTurf), lawsuits against the company allege the playing surface failed to perform as expected. In fact, multiple school systems across California have filed lawsuits alleging the manufacturer sold defective artificial turf fields and then refused to replace them when they wore out sooner than guaranteed.
The intrinsic value of XPAR:TKTT
The problem: FieldTurf fails to live up to claims
The claims against FieldTurf USA Inc. are twofold: First, purchasers of the turf (primarily school districts and other athletic departments) allege that the turf did not last nearly as long as the eight to 10 years the manufacturer promised. One coach, whose story was cited in a recent article in Forbes, talked about the "black crumbs surface" and the artificial grass wearing out to the point of being hazardous for athletes. A study, summarized in this article from Reuters, found that ACL injuries are more common when athletes play on artificial surfaces such as FieldTurf.
The second part of the problem is that in addition to the fields failing to meet their promised life expectancy, purchasers of the turf claim that the manufacturer refused to replace the playing surfaces, breaching their warranty agreement.
In many of the cases that have been filed against FieldTurf, school officials claim that the company promised them that the FieldTurf would last between eight and 10 years, and they were given eight-year warranties. About six years after purchase, however, the fields began breaking, splitting and thinning, according to an article in 4-Traders.com.
The school systems allege that FieldTurf knew the artificial playing surfaces it sold were defective because FieldTurf in 2011 had filed a lawsuit against its fiber supplier Ten Cate for providing faulty fibers. The article says that the school systems are seeking a combined $15.7 million in damages.
What's next for Tarkett?
In addition to facing litigation from customers who purchased the turf and believe the company violated its warranty agreement, it is possible that parents of children who have been injured on the deteriorating artificial playing surfaces may have product liability claims against the company.
An injury lawsuit might allege that Tarkett violated its duty to consumers to manufacture a product free of defects and should be held liable for injuries caused by defective products.
Of course, in addition to paying settlements in the event that cases are resolved in plaintiffs' favor, Tarkett and FieldTurf USA may face damage to their reputations, losing future profits.
While the price of Tarkett's shares almost doubled last year, moving from 18 euros ($18.74) to 35 euros, the share price recently fell by 1 euro. The slip could be an indication of what is to come for the company as litigation proceeds.
Disclosure: The writer of this article has no position in the company mentioned.
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This article first appeared on GuruFocus.
The intrinsic value of XPAR:TKTT