Abercrombie & Fitch Derivative Litigation Dismissed

Abercrombie & Fitch Derivative Litigation Dismissed - 3/13/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

DISMISSAL NEWS:

Abercrombie & Fitch Derivative Litigation Dismissed
Julie Zeveloff

Securities Law 360. March 13, 2009
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EXCERPT: The consolidated derivative shareholder actions against Abercrombie & Fitch Co. and its executives have been dismissed while related securities fraud claims over alleged insider trading and artificial inflation of the company's stock price remain pending. Judge Edmund A. Sargus Jr. of the U.S. District Court for the Southern District of Ohio on Thursday rendered a judgment dismissing the derivative portion of the case, which has been pending since 2005. The court's opinion was filed under seal and an attorney for Abercrombie said he could not comment on the matter. The consolidated actions, which included four derivative and six investor actions, accused Abercrombie and its senior officers of reporting strong sales during the second fiscal quarter of 2005 even though the company's gross margin had declined considerably from the previous year. According to the securities fraud complaint, Abercrombie executives maintained that the company's most important and expensive product line, denim, was strong and increasing dramatically, while in reality the company was accumulating excess inventories of denim and other products, forcing drastic markdowns, employee giveaways and discounted sales to low-end retailers to get rid of overstock. As a result of the officers’ misrepresentations, Abercrombie’s stock price rose from under $58 to an all-time high of over $74 during the class period, June 2, 2005, to Aug. 16, 2005, according to the consolidated complaint. Meanwhile, knowing Abercrombie's profit margins were declining, company executives shed shares of company stock, the complaint contended. “While the stock traded at these artificially high levels, and while knowing that Abercrombie’s profitability was declining, defendants unloaded 1.9 million of their own Abercrombie shares within a matter of days in June and July for total proceeds of a staggering $137 million,” the suit alleged. After posting lower-than-expected second quarter results in August 2005, the retailer's stock price tumbled to $56.65…

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