According to the law firm press release, the complaint charges Family Dollar and certain of its officers and directors with violations of the Securities Exchange Act of 1934. Family Dollar operates a chain of approximately 7,500 general merchandise retail discount stores in 45 states, which sell consumables, home products, apparel and accessories, and seasonal and electronics products.
The complaint alleges that during the Class Period, defendants issued materially false and misleading statements regarding Family Dollar’s then-present sales demand, profitability and financial results for the first quarter of 2013, ended November 24, 2012, and for December 2012. As a result of defendants’ false statements, Family Dollar’s stock traded at artificially inflated prices throughout the Class Period, reaching a high of $71.20 per share by November 30, 2012. Meanwhile, Family Dollar’s senior executives cashed in, selling their own Family Dollar stock at artificially inflated prices, including its Chief Executive Officer who sold more than $15.6 million worth of his Family Dollar stock during the Class Period.
Then, on January 3, 2013, before the markets opened, Family Dollar issued a press release disclosing that sales in the Company’s first quarter 2013 – which had ended November 24, 2012 – had significantly underperformed, with significant increases in sales of lower margin consumables rather than higher margin discretionary products, that the Company’s soft holiday sales in December had required significant discounting, that the Company’s inventory had become bloated, and that, as a result, defendants were slashing the Company’s 2013 financial guidance. The price of Family Dollar stock dropped on this news, falling $8.30 per share – or approximately 13% – to close at $55.74 per share on January 3, 2012.
According to the complaint, the true facts, which were known by the defendants but concealed from the investing public during the Class Period, were as follows: (a) the Company’s intentional efforts to increase sales of lower margin consumables, such as cigarettes, Pepsi drinks, gift cards, magazines and other high-turnover merchandise, in order to increase foot traffic and better compete against chains such as Dollar General Corp and Wal-Mart Stores Inc., had significantly diminished profits in the first quarter of 2013 and in December 2012; (b) significant price cuts undertaken in an attempt to move unsalable inventory had also significantly diminished profits in the first quarter of 2013 and in December 2012; (c) Family Dollar’s sales of more profitable discretionary items such as toys and other household goods had significantly underperformed expectations in the first quarter of 2013 and during December 2012; (d) bloated inventories in Family Dollar’s stores would significantly weigh down 2013 profitability; and (e) based upon the above, defendants lacked a reasonable basis for their positive statements about the Company’s sales and profitability during the Class Period, in particular their first quarter and fiscal 2013 guidance.
On May 14, 2013, the Court granted the Pipefitter’s Motion for Appointment as Lead Plaintiff and approved their Selection of Robbins Gellar Rudman & Dowd LLP as Lead Counsel.
On June 24, 2013, Pipefitters Local No. 636 and Defendants stipulated to the dismissal of this action, pursuant to to Rule 41(a)(1)(A)(ii) of the Federal Rules of Civil Procedure