BALA CYNWYD, Pa., Oct. 8, 2002 (PRIMEZONE) -- Shareholders of Duane Reade, Inc. (NYSE:DRD) ("Duane" or the "Company") who desire to serve as a lead plaintiff in a shareholder class action lawsuit now pending in federal court in New York (02-CV-6962) must submit an application with the Court by October 15, 2002 according to the law firm of Schiffrin & Barroway, LLP.
The lawsuit seeks damages for violations of the federal securities laws on behalf of all investors who purchased Duane Reade, Inc. securities between April 25, 2002 and July 24, 2002 (the "Class Period").
Schiffrin & Barroway, LLP has prosecuted shareholder class actions for over fourteen years and has recovered more than $1 billion for investors. If you are a shareholder of Duane Reade, Inc. and want to learn more about this lawsuit and about becoming a lead plaintiff, you may visit our website at http://www.sbclasslaw.com/cgi/signup.cgi.
The complaint alleges that the New York-based Duane Reade, Inc., 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 diluted share, before a previously disclosed one-time non-cash charge, compared to net income of $2.6 million, or $0.14 per diluted 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." Additionally, 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's second quarter profits had plummeted by more than half because Duane had failed to disclose previously that a) in connection with the "$218 convertible notes offering," which was completed in April 2002, had incurred expenses of $7.7 million, after tax, which expenses would sharply reduce Duane's profits in the second quarter of 2002 and cause Duane 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; 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 spend approximately $5.0 million in the second quarter on product promotions due to lost vendor promotional allowances; and g) 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 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 Duane common stock dropped precipitously, falling 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, decline of approximately 38%, on volume of 5.4 million shares traded, compared to average trading volume of 321,000 shares for the previous five trading days.
If you purchased Duane Reade, Inc. securities between April 25, 2002 and July 24, 2002, you may be a member of the class and have until October 15, 2002 to move the court to become a lead plaintiff. In order to serve as lead plaintiff, however, you must meet certain legal requirements. To be a member of the class, however, you do not need to take any action at this time. Should you decide to seek appointment as a lead plaintiff, you may retain Schiffrin & Barroway, or retain counsel of your choice.
To learn more about your rights and interests in this case and your ability to potentially recoup your losses, please contact Schiffrin & Barroway (Marc A. Topaz, Esq. or Stuart L. Berman, Esq.) directly at 888-299-7706 (toll free) or 610-822-2221, fax number 610-822-0002, e-mail at info@sbclasslaw.com or visit our website at www.sbclasslaw.com.
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca