A shareholder has filed a class action suit against Mahwah-based Ascena Retail Group Inc. and two top executives, accusing the company and executives of misleading investors about issues related to its 2015 Ann Inc. acquisition.
The suit, filed by James Newman in United States District Court of New Jersey, alleges that less than a month after the deal closed, the acquisition “was a complete disaster for the company as Ann’s operations were in far worse condition than represented to the public.” In an effort to mask the true condition of Ann’s operations, the suit alleges the defendants “improperly delayed recognizing an impairment charge to the value of Ann’s goodwill” until 2017, leading to an overstatement of reported income and assets.
After announcing the nearly $1 billion write-down of the Ann acquisition in June 2017, Ascena’s stock fell 26 percent, according to the suit. In 22 more days, it fell an additional 35 percent.
A representative for Ascena confirmed that a “a shareholder rights law firm has recently filed a federal securities class-action lawsuit against Ascena retail group,” adding that “Ascena retail group believes this suit is without merit and will vigorously defend itself against these baseless claims.”