PHILADELPHIA, Aug. 16, 2002 (PRIMEZONE) -- Notice is hereby given that a class action lawsuit was filed on August 14, 2002, in the United States District Court for the Southern District of New York, on behalf of all persons and entities who purchased or otherwise acquired the common stock of Duane Reade, Inc. (NYSE:DRD)("Duane" or the "Company"), between April 25, 2002 and July 24, 2002, inclusive (the "Class Period").
The action, numbered 02-CV-6478, is pending in the United States District Court, Southern District of New York, located at 500 Pearl Street, New York, New York against defendants Duane Reade, Inc. and Anthony J. Cuti. The Honorable Naomi R. Buchwald is presiding over the case. A copy of the Complaint is available from the Court or the Law Offices Bernard M. Gross, P.C. Please visit our website at http://www.bernardmgross.com or contact us by phone at 866-561-3600 (toll free) or by E-mail at susang@bernardmgross.com.
The complaint charges Duane Reade, Inc. and Anthony J. Cuti, Chairman of the Board of Directors and Chief Executive Officer with violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and Rule 10b-5, by issuing a series of materially false and misleading statements to the market during the Class Period. 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.
Plaintiff seeks to recover damages on behalf of Class members and, are represented by the law firm of Law Offices Bernard M. Gross, P.C. which has significant experience and expertise in prosecuting class actions and has recently filed cases in the following securities:
COMPANY SYMBOL PURCHASED DURING LEAD PLAINTIFF
CLASS PERIOD FILING DEADLINE
Capital One COF-NYSE 1/15/00-7/16/02 9/17/02
Financial
Corporation
Citigroup, Inc. C-NYSE 7/24/99-7/23/02 9/23/02
Cross Media XMM-NYSE 11/5/01-7/11/02 9/16/02
Marketing
Corporation
Eclipsys ECLP-NASDAQ 7/23/01-6/27/02 9/27/02
Corporation
Flextronics FLEX-NASDAQ 10/20/01-6/4/02 8/19/02
Int'l Ltd.
Insight NSIT-NASDAQ 4/26/02-7/17/02 9/27/02
Enterprises, Inc.
Merck & Co. MRK-NYSE 7/1/99-6/21/02 8/30/02
Touch America TAA-NYSE 1/30/01-11/14/02 8/26/02
f/k/a Montana
Power Company
PerkinElmer, Inc. PKI-NYSE 7/15/01-4/11/02 9/6/02
If you bought the common stock of Duane Reade, Inc. between April 25, 2002 and July 24, 2002, you may, no later than October 15, 2002, move the Court to serve as lead plaintiff of the Class, if you so choose. In order to serve as lead plaintiff, however, you must meet certain legal requirements. If you wish to discuss this action or have any questions concerning this Notice or rights or interests with respect to these matters,
PLEASE CONTACT: Law Offices Bernard M. Gross, P.C.
Deborah R. Gross, Esquire
Susan Gross, Esquire
1515 Locust Street, Second Floor
Philadelphia, PA 19102
Telephone: 866-561-3600 (toll-free)
or 215-561-3600
E-mail: susang@bernardmgross.com or
debbie@bernardmgross.com.
Website: http://www.bernardmgross.com
More information on this and other class actions can be found on the Class Action Newsline at www.primezone.com/ca.