Woolworths class action

Maurice Blackburn, Australia’s leading class action law firm, has filed a shareholder class action against Woolworths Group Limited (formerly Woolworths Limited) (ASX:WOW) (Woolworths) for alleged breaches of its continuous disclosure obligations and for allegedly engaging in misleading or deceptive conduct.

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The action has been commenced on behalf of aggrieved Woolworths investors who purchased Woolworths shares between 29 August 2014 and 6 May 2015 and suffered losses following the announcement by Woolworths on 27 February 2015 that its sales and profit growth would be below the guidance that had previously been given, and reaffirmed, and the revelation on 6 May 2015 that it had been using the wrong metrics in relation to price competitiveness and stock availability in the second half of 2014 and until January 2015.

Background to the allegations

  • 29 August 2014: Woolworths provides guidance that FY15 NPAT expected to increase between 4% and 7%.
  • 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 announced it was downgrading its FY15 NPAT guidance to “the lower end of the current analyst NPAT growth forecast range for FY15 of 1.8 – 6.6%” and that  price investment (reducing prices) of $500m would be implemented and funded by a costs savings offset.  Woolworths maintained that “there is a clear path to meet” its previous guidance, but that “we have decided to provide ourselves with additional flexibility to make the necessary investments [in the Australian Supermarkets business] to deliver on our long term plans and the associated shareholder value creation.  These investments will impact second half FY15 results.” Woolworths also advised they would no longer give specific guidance and that further details of Woolworths’ strategic plan would be provided at the “Investor Strategy Day” on 6 May 2015.
  • 27 February – 2 March 2015: Woolworths’ share price declined $4.66 or 13.7% over two trading days.
  • 6 May 2015: 3Q15 Sales Call and Investor Strategy Day presentation, Woolworths clarified that following the results of a strategic review in January 2015, management learned it was using the wrong price and stock metrics and there was a need for a price investment.
  • 6 – 7 May 2015: Woolworths’ share price declined ~5% on 6 May 2015 and a further 2% on 7 May 2015.

Registration of Interest

Registration is open to Woolworths shareholders who purchased WOW shares between 29 August 2014 to 6 May 2015. Register your claim now

Contact details

For any queries please feel free to call Maurice Blackburn on 1800 931 357 (Toll free) or email us at Woolworths@mauriceblackburn.com.au.

FAQs - your questions answered

The claim will be against Woolworths Limited (ASX: WOW) (Woolworths). Proceedings will be conducted as a class action in the name of a Representative party on behalf of class members. The class action will determine the claim of the Representative and the common issues. Current and former Woolworths shareholders who acquired shares in Woolworths in the relevant period (see below), may be entitled to seek compensation for damages or losses caused by Woolworths’ alleged breaches of the Corporations Act 2001 (Cth) and/or other Federal and State statutes.

To be eligible to participate in the claim, you must have acquired Woolworths shares anytime between 29 August 2014 and 6 May 2015 inclusive and held some or all of those shares at the commencement of trading on 6 May 2015. 

No. Eligibility in this regard is not determined by whether or not you still hold shares in Woolworths. So long as you acquired an interest in Woolworths shares during the relevant period you are at this stage eligible to register to participate in the Woolworths Class Action.

Woolworths used “net profit after tax” (NPAT) and growth of NPAT (NPAT Growth) as key measures of its performance. On 29 August 2014, Woolworths made statements to shareholders and the market that Woolworths’ FY2014 NPAT Growth demonstrated that it was delivering strong and sustainable NPAT growth in established parts of the business and that it expected that FY2015 would be another year of growth with NPAT expected to increase by 4% to 7%. Woolworths repeated or did not qualify these statements on two later occasions: in September 2014 with the release of the company’s 2014 Annual Report and again in late November 2014 at the company’s AGM. 

Then, on 27 February 2015, with the release of its FY2015 half year results, Woolworths amended its guidance so that it would no longer be providing specific NPAT guidance and would instead reference “analyst consensus” of 1.8% to 6.6% NPAT Growth for FY2015 and that WOW expected that NPAT Growth would be at the lower range of analyst forecasts. Woolworths also stated that it would be making investments into its Australian Supermarkets business which would impact its second half FY2015 results. Following the announcement on 27 February 2015, there was a substantial increase in trading in Woolworths shares, and the share price plunged by almost 10%. On the next day of trading, 2 March 2015, the price of Woolworths shares continued to fall, with an overall decline of almost 14% from 27 February to 2 March 2015. 

Woolworths deferred clarification of its decision to downgrade NPAT guidance until its Investor Strategy Day on 6 May 2015, at which time it revealed that:

  • the prices in its Australian Supermarkets business were actually, and not merely perceived to be, higher than its competitors’ prices;
  • it had been using the wrong metrics in relation to price competitiveness and stock availability in the second half of 2014 and until January 2015.
  • with revised metrics in place, investment in price and service was necessary to reverse the trend of poor sales performance; and
  • margins and NPAT would necessarily be affected.

The price of Woolworths shares dropped 5% on 6 May 2015 and continued to fall on the next day of trading, resulting in an overall decline of 7% between 6 and 7 May 2015.

The Woolworths Class Action focuses on the NPAT guidance given by Woolworths on 29 August 2014, Woolworths’ amendment of guidance on 27 February 2015 and the revelation on 6 May 2015 that it had been using the wrong metrics in relation to price competitiveness and stock availability in the second half of 2014 and until January 2015. The action will allege that, during the relevant period, Woolworths breached various provisions of the Corporations Act 2001 (Cth), ASX Listing Rules, the Australian Securities and Investments Commission Act 2001 (Cth) and the Australian Consumer Law

These alleged contraventions involved making false and/or misleading statements, engaging in misleading or deceptive conduct, and/or breaching continuous disclosure obligations in relation to information that a reasonable person would expect to have a material effect on the price or value of Woolworths shares. It will be alleged that these contraventions prevented Woolworths shareholders and the market generally from being in a position to make informed investment decisions on the basis of complete, accurate, and timely information.

Where seven or more people have claims that arise out of similar circumstances (such as, in this case, acquiring Woolworths shares during the relevant period), a class action can be brought by one claimant on their own behalf and as a representative of others. The class action process saves time and expense and avoids the need for the courts to determine common issues of fact or law more than once and enables disputes and claims involving large numbers of people to be resolved via a single case.

Shareholder class actions are an important part of the legal system and alongside regulatory action ensure corporate accountability. Maurice Blackburn has the leading shareholder class actions practice in Australia. We are the only law firm in Australia to have successfully recovered in excess of $100m in a single shareholder class action, and have done so on seven occasions to date.

Participating in the Woolworths Class Action will not expose you to any out of pocket costs. Unless and until there is a successful outcome, all costs will be borne either by Maurice Blackburn or the litigation funder, International Litigation Funding Partners Pte Ltd (ILFP). In the event of a successful outcome, any costs payable to either Maurice Blackburn or the funder will be deducted from, and will not exceed, the Resolution Sum. 

If the class action is successfully resolved, ILFP will receive, pursuant to the Funding Agreement, a return of the costs and expenses it has paid and a percentage of your recovery. Clause 10 of the Funding Agreement sets out ILFP’s entitlements.

In light of the evidence currently available, Maurice Blackburn considers that a successful outcome in this instance is probable. However, we do not, and cannot, guarantee or predict that a successful outcome is certain. In addition, ILFP has chosen to invest significant resources in prosecuting the claim.

It is difficult at such an early stage to predict how much you may ultimately recover as a result of losses that may have been suffered in relation to Woolworths shareholdings.

Assuming that Woolworths is found to have breached the Corporations Act 2001 (Cth) and/or other laws which caused you loss, the size of your claim will depend on how the Court assesses your loss.

The methodology that a Court may ultimately adopt when assessing your loss is not fully settled in Australian law and may depend on the evidence you are prepared, or able, to give. It may, for example, be the difference between the amount you paid for the Woolworths shares and the amount you received when you sold them (or the value of the Woolworths shares you still hold). Alternatively, loss might be assessed on the basis of the difference between the price you paid for the shares and their true or real value at the time of purchase (that is, the price you paid for the shares was inflated).

There are also other methodologies that a Court might adopt. 

At the appropriate time, we will be able to provide you with a loss calculation, to give you an idea of your possible loss on one of the methods which might be employed by the Court. However, all claims will be the subject of further investigation and legal advice and your loss figure may change.

You may opt out of the class action in accordance with a notice that will be sent to you in the course of the action. If you choose to opt out, you will no longer be included in the class action and your Funding Agreement will terminate. However, some terms of the Funding Agreement you signed will continue to apply, with the effect that if you receive a settlement or judgement from Woolworths after you opt out, you will remain liable to pay your share of ILFP’s commission and costs that ILFP has paid, from any recovery you receive (see clause 18.7 of the Funding Agreement).

You also have a cooling off period of 21 days after signing the Woolworths Funding Agreement (see clause 3 of the Funding Agreement).

We will only use and/or disclose your personal information strictly for the purpose of the legal proceedings, or as required by the Court or by law. In all other cases, we will seek your consent before disclosing any of your personal information.