According to a press release dated September 9, 2011, the Defendants violated federal securities laws by failing to disclose material adverse facts about the Company’s true financial condition, business and prospects.
Specifically, the complaint alleges that defendants failed to disclose the following adverse facts, among others: (i) that the Company was facing increased low-cost competition from retailers such as Wal-Mart and Target Corp., which was negatively impacting the Company’s business and financial condition; (ii) that a previously completed acquisition was a complete disaster for the Company as the acquired company’s operations were in far worse condition than had been represented to investors; (iii) that the Company was not operating according to internal expectations and could not achieve the guidance sponsored and/or endorsed by defendants; and (iv) that, as a result of the foregoing, defendants lacked a reasonable basis for their positive statements about the Company, its operations and prospects.
On July 23, 2010, the Company issued a press release announcing its fiscal 2010 first quarter results and that the Company had launched a “turnaround,” designed to strengthen operating and financial foundation. On August 13, 2010, the Company announced the closing of certain stores as part of the Company’s operational and revenue-driven turnaround initiative, the purported Turnaround Strategy, designed to generate sustained profitability and cash flow, drive sales growth, restore competitive margins to the business and strengthen the foundation of the Company for the long term. Then on December 10, 2010, the Company shocked investors after revealing, for the first time, that the Company was performing so far below expectations and the purported Turnaround Strategy was failing so miserably that the Company would likely be forced to file for bankruptcy protection. In response to this announcement, the price of securities declined precipitously.
On December 8, 2011, the Court issued an Order approving the selection of lead plaintiffs and lead counsel.
On March 16, 2012, Plaintiffs filed an Amended Complaint.
On April 30, 2013, the Court issued an Opinion granting in part and denying in part the motion to dismiss of a group of Defendants and granting the motion to dismiss of a separate group of Defendants.
On May 8, 2014, the parties entered into a Settlement Agreement. The Settlement was preliminarily approved by the Court on August 13.