Woolworths is facing a potential $100 million class action launched on behalf of investors whose shares lost value following a shock 2015 profit downgrade by the supermarket giant.
The class action, brought by lawyers Maurice Blackburn, alleges Woolworths breached continuous disclosure obligations and engaged in misleading conduct by giving profit guidance that couldn’t be met.
Woolworths advised the market in February, 2015, that it would not meet its 2014/15 profit guidance, wiping nearly nine per cent, or $3.03 cents, off its share price on one day of trading.
The company downgraded its profit growth forecasts from a range of four to seven per cent to a much lower 1.8 to 6.6 per cent, on the back of plans to boost investment in its core supermarkets business.
Shares slid another seven per cent over two days in May when Woolworths revealed it would have to invest an additional $500 million in lowering its prices to meet heightened competition, including from newcomer Aldi.
Lead plaintiff in the class action Norman Wills, in a statement issued by Maurice Blackburn, said he used to think Woolworths was one of the most reliable businesses on the ASX.
“It looks like (Woolworths) has failed to inform the market of what was going on within the company. I’m really disappointed in the way the company behaved and Woolworths needs to be held to account,” Willis said .
Maurice Blackburn announced it would pursue a class action on behalf of shareholders back in April 2017 but it was delayed after financial backer IMF Bentham pulled out.
It filed the case with the Federal Court on Monday supported by International Litigation Funding Partners.
In a statement to the ASX, Woolworths said it would thoroughly defend itself against any proceedings.
Woolworths shares were up 22 cents, or 0.8 per cent, to $28.46 at 1311 AEST.
Woolworths Group Limited (Woolworths) said it notes media reports that law firm Maurice Blackburn yesterday filed class action proceedings in the Federal Court to be funded by what it understands to be an off-shore litigation funder.
Woolworths notes that a proposed class action was previously announced by IMF Bentham and Maurice Blackburn on 11 April 2017. Following that announcement, Woolworths corresponded with IMF Bentham. On 24 January 2018, IMF Bentham announced that it had decided not to proceed with funding the claim as it considered that the proposed class action did not meet its investment criteria.
Woolworths said it has received no further correspondence from Maurice Blackburn following IMF Bentham’s announcement prior to media reports.
Woolworths said it will consider any proceedings once served, but otherwise anticipates that they will be thoroughly defended.