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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Investors that purchased shares in Woolworths in the period of 29 August 2014 to 6 May 2015 (inclusive) can sign up to retain Maurice Blackburn in a class action to recover losses alleged to have been suffered after Woolworths’ share price dropped on the back of its announcements on 27 February 2015 and 6 May 2015 that it would not meet its FY15 NPAT guidance and that it would take time and significant investment to restore sales momentum that had been lost during the relevant period.

Companies are required to have a reasonable basis for their guidance and must notify the ASX as soon as they have or ought to have information which would cast doubt on prior guidance.

Our investigations raise serious questions as to whether Woolworths had a reasonable basis for its initial guidance and whether it should have notified the ASX sooner that it was likely to miss that guidance.

If Woolworths lacked a reasonable basis for its guidance, investors may have paid an inflated price for Woolworths shares, and they may be able to recover their losses through this class action.

For further information and background to the class action, refer to the FAQs at the bottom of this page.

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 is against Woolworths Limited (ASX: WOW) (Woolworths). Proceedings are being 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 three later occasions: in September 2014 with the release of the company’s 2014 Annual Report and again on 3 and 27 November 2014 with the release of the company’s first quarter sales results and at the company's AGM respectively. 

Then, on 27 February 2015, with the release of its FY2015 half year results, Woolworths downgraded its FY15 NPAT guidance to "the lower end of the current analyst NPAT growth forecast range for FY15 of 1.8 – 6.6%" and said 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% over the two trading days from 27 February to 2 March 2015. 

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

  • prior to February 2015,
    • it had lost focus on its customers;
    • its prices in FY15 had been rising by more than its competition;
    • the number of items being purchased by customers in its stores was declining by more than its competition;
    • the number of times customers were shopping in its stores was significantly below its competitors; and
    • a significant amount of labour had been taken out of stores;
  • it needed to:
    • restore sales momentum;
    • invest money to neutralise its competition on pricing;
    • put more labour hours back into stores;
    • dramatically improve on-shelf availability for customers;
    • rapidly address matters affecting customers' in-store experience; and
    • rebalance the number of new store openings with refurbishments to existing stores, which had been deliberately cut back;
  • it would take time to build customer trust and regain sales momentum; and
  • it was on a 3 year journey.

At the same time, Woolworths also released disappointing 3Q15 sales results, which were indicative of the extent of the problem and the fact that, notwithstanding investments being made, it would take time for Woolworths to improve its customer retail offer and competitive position.

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. The action alleges 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 is 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 several 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.