By  on June 11, 2007

A lawyer has filed a class action complaint accusing Macy's Inc. of misleading investors by concealing its true financial condition after the merger with May Department Stores Co. and is seeking more shareholders to join the case.

Alfred G. Yates Jr., a Pittsburgh attorney specializing in antitrust law, filed the complaint last week in U.S. District Court in Manhattan on behalf of Robert L. Garber, a Macy's shareholder. According to court papers, the goal of the $27 billion department store chain was to inflate the shares of Federated Department Stores Inc., which has officially changed its name to Macy's Inc.

Macy's declined to comment.

Yates, who has brought similar suits against Legg Mason Inc. and Winn-Dixie Stores, sent out a press release looking for other shareholders to participate as lead plaintiffs in the case. The complaint alleges that directors and officers of Macy's purposefully concealed the information.

The complaint said that, between Feb. 8 and May 15, Macy's overstated sales projections — primarily because of its "failed" integration of May doors. The retailer's action misled stockholders and the stock price rose significantly.

According to the complaint, "[Macy's] stock price increased dramatically on Feb. 8, 2007 — on more than twice the average daily trading volume over the preceding 10 days — when it reported January sales and preliminary fourth-quarter profit that exceeded estimates." This is said to have led to a trading high of $46.70 by March 23.

From May 10 to May 15, Macy's revealed that its same-store sales were down 2.2 percent, and revenue would be coming in 2 percent lower, while sales at stores open at least a year rose only 0.6 percent, missing the retailer's own forecast.

The complaint states, "On this news, the company's stock price plunged to a price nearly 18 percent lower than its class period high, erasing over $3 billion in market capitalization."

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