Woolworths to take stock of ASX disclosures as investors take aim

11 April 2017
Investors hit by a Woolworths (ASX:WOW) share price dive of 13.7% on the back of a 2015 shock profit downgrade are preparing to launch a shareholder class action against the retail and supermarket giant alleging breaches of the Corporations Act.

Australia’s leading class action law firm, Maurice Blackburn Lawyers, together with the support of global litigation funder IMF Bentham, today opened an online registration portal for aggrieved shareholders to sign up to a claim that could well exceed $100million.

Class Action Principal from Maurice Blackburn, Andrew Watson said that whilst investigations into the case were continuing, it was clear Woolworths had known it was significantly behind on its profit projections as early as October 2014 but continued to maintain its profit guidance until the publication of its half year accounts in February 2015.  When the profit guidance was revised down Woolworths shares tumbled losing $4.66 or 13.7% of their value in two days.

“When corporations don’t abide by the laws requiring they make timely and accurate market disclosures, these aren’t mere technical breaches – it causes loss to shareholders, undermines the integrity of the market and distorts the efficient allocation of capital that could go to more deserving companies.” Mr Watson said

“The end result is that shareholders, both individual everyday Australians and large institutional investors entrusted with members’ savings such as large superannuation funds, unwittingly suffer the consequences and lose out in a major way.”

Senior Investment Manager at IMF Bentham, Wayne Attrill, said that like all shareholder class actions that attracted litigation funding, it was a market-based response to a market-based issue and would only proceed if enough shareholders supported seeking redress.

“This is a chance for investors who believe they were deprived of information on the true state of affairs of the company standing up and being able to access a meaningful redress mechanism whilst sending a strong message to the company that such breaches aren’t acceptable,” Mr Attrill said.

“A strong culture of good corporate conduct is as important as ever when it comes to attracting future investment in our economy, and strong enforcement mechanisms through the public regulator and private redress via class actions help reinforce that message.”

Background to the allegations

  • 29 August 2014 Woolworths provides guidance that FY15 NPAT expected to increase 4% to 7%.
  • 8 October 2014 Woolworths was aware of significant risks to forecast profit.  Its defence in ACCC proceedings admits that it:
    Forecast that there would be a variance on budget for gross profit before freight for the Woolworths Supermarkets business, for the half year to 31 December 2014, in the amount of approximately $53 million…”
  • 21 November 2014 Commercial Director of Woolworths Supermarkets instructs internal team to identify ways in which Woolworths could mitigate the risk that the supermarkets business would not meet its budgeted gross profit for the half year ending 31 December 2014.
  • 27 November 2014 Guidance emphatically reaffirmed at the Woolworths Annual General Meeting at which then Chairman Ralph Waters stated: 
    “Earlier in the year management provided guidance for the 2015 financial year of growth in net profit after tax of between 4% and 7%. Following a recent review by the Board, I am pleased to reaffirm our previous guidance today.”
  • 27 February 2015, Woolworths Ltd (ASX: WOW) announced that it was downgrading its previously issued guidance of growth in its Net Profit After Tax (NPAT) of 4% to 7% for Financial Year 2015.

To find out more about the class action investigation, contact the IMF Client Liaison Team by email on 402702@imf.com.au or call 1800 016 464.