NEW YORK, Sept. 3, 2002 (PRIMEZONE) -- The law firm of Abbey Gardy, LLP has filed a class action against Duane Reade, Inc. ("Duane Reade" or the "Company") (NYSE:DRD) and its Chairman of the Board in the United States District Court for the Southern District of New York, on behalf of all persons or entities who purchased Duane Reade securities during the period from April 25, 2002 and July 24, 2002, inclusive. (the "Class Period").
The Complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5 promulgated thereunder, by issuing a series of material misrepresentations to the market during the Class Period, thereby artificially inflating the price of Duane Reade securities. On April 25, 2002, the start of the Class Period, defendants issued Duane's First Quarter 2002 earnings new release for the quarter ending March 31, 2002. Duane reported recorded first quarter sales and earnings results as follows: net sales increased 12.5% to $305.8 million and net income was $5.3 million, or $0.22 per share, before a previously disclosed one-time non-cash charge, compared to net income of $2.6 million, or $0.14 per share, in the prior year period. With respect to the slight decline in gross profit margin for the quarter, defendants stated in the news release that it was "primarily attributable to the temporary dampening of front-end sales in the post September 11 period and also due to a $0.4 million LIFO provision in the period." In addition, defendants misled the public by presenting a very positive outlook for the second quarter projecting that Duane Reade would earn between $0.40 to $0.44 cents per share. Suddenly, on July 25, 2002, defendants issued a news release announcing that Duane Reade's second quarter profits had plummeted by more than half because Duane Reade had failed to disclose previously that a) in connection with the "$218 convertible notes offering," which was completed in April 2002, it had incurred expenses of $7.7 million, after tax, which expenses would sharply reduce Duane Reade's profits in the second quarter of 2002 and cause Duane Reade to report earnings significantly lower than the level defendants told the market to expect; b) had sharply lowered prices in their stores commencing in April 2002 and planned to continue such program throughout the second quarter in an effort to increase revenues, knowing that this would cause reduced profit margins in the second quarter; c) was experiencing increased "shrink," primarily due to increased theft and vendor errors, which would further erode profits in the second quarter of 2002; d) was experiencing an increase in sales of generic drugs as a percentage of total drug sales, which sales were at lower prices than sales of branded equivalents; e) was experiencing a fall-off in higher margin items, including cosmetics, snacks, jewelry and toys; and f) had embarked on a program, beginning in April 2002 when defendants learned that they would receive $9 million in business interruption insurance proceeds from the claims submitted in the aftermath of September 11, to open in the second quarter five additional stores to the number of new stores originally planned to be opened during the second quarter which, together with the three additional unplanned stores opened in the first quarter of 2002, would cause Duane Reade to incur additional costs of $1.5 million, including $800,000 in store pre-opening expenses, in the second quarter of 2002.
In response to the surprise negative announcement on July 25, 2002, the price of the Company's common stock dropped from a closing price of $23.55 per share on July 24, 2002 to a closing price of $14.60 per share on July 25, 2002.
Plaintiff seeks to recover damages on behalf of all those who purchased or otherwise acquired Duane Reade securities during the Class Period. If you purchased or otherwise acquired Duane Reade securities during the Class Period, and either lost money on the transaction or still hold the securities, you may wish to join in the action to serve as lead plaintiff. If you purchased Duane Reade securities during the Class Period, you may, no later than October 15, 2002, request that the Court appoint you as lead plaintiff.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class. Under certain circumstances, one or more class members may together serve as "lead plaintiffs." Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff.
Abbey Gardy, LLP has been retained as one of the law firms to represent the Class. The attorneys at Abbey Gardy, LLP have extensive experience in securities class action cases, and have played lead roles in major cases resulting in the recovery of hundreds of millions of dollars to investors. If you would like to discuss this action or if you have any questions concerning this Notice or your rights as a potential class member or lead plaintiff, you may contact Nancy Kaboolian, Esq. of Abbey Gardy, LLP at (800) 889-3701 or email nkaboolian@abbeygardy.com.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca