Stockholders v 99 Cents Only Stores (6/2004)
Lawsuit Says 99 Cents Only Stores Didn’t Discount Its Books Deeply Enough
Several class actions have been filed against deep discount store operator 99 Cents Only Stores (NYSE:NDN) and certain of its officers and directors by stockholders who purchased the company's common stock between March 11, 2004, and June 10, 2004. The actions claim that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.
The action alleges that the defendants concealed from the investing public that: (1) in order to inflate the company's margins, especially to show success in its newer markets, the defendants created the appearance of profitability and success by, among other things, not accruing for the roll-out of the company's advertising implementation and distribution costs; (2) the company's margins were being eroded by a mix-shift tied to lower margin grocery items, freight costs, higher dairy costs, and a higher mark-down and shrink provision (up to $10 million); (3) the defendants had knowingly tolerated very weak internal controls; (4) the company's inventory was artificially inflated -- for instance, it carried $10 million worth of deli products on its books as an asset when they not salable because they had past their expiration date; (5) the company's southern California distribution center was in shambles; (6) its workers' compensation problems were not declining as represented; and (7) as a result of the above, the company was not on track to achieve EPS for Q2 04 of 0.20.
If you purchased securities issued by 99 Cents Only Stores during the applicable period, you may request appointment by the court as a lead plaintiff if you do so by August 13, 2004. 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 your claim is typical of the claims of other class members, and that you 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 affected by the decision whether or not to serve as a lead plaintiff. You may retain any counsel of your choice to serve as you in this action, or you may choose to do nothing, and remain in the class as a silent member.
