Woolworths faces $100m class action over profit downgrade

Law firm Maurice Blackburn has launched a class action against the supermarket giant over a shock profit downgrade.

The class action will only go ahead if enough shareholders sign up.

Law firm Maurice Blackburn has launched a $100m shareholder class action lawsuit against supermarket giant Woolworths over a shock profit downgrade in February 2015.

Maurice Blackburn alleges Woolworths identified a profit shortfall in October 2014 but did not downgrade its profit forecast until February 27, 2015, sending its share price tumbling by 13.7 per cent.

The law firm’s class action principal, Andrew Watson, said the alleged failure to disclose the shortfall was not just a “technical breach”.

“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.”

The claim is open to shareholders who held stock in Woolworths between November 27, 2014, when chairman Ralph Waters said the board stood by earlier guidance that net profit after tax would be up by between 4 per cent and 7 per cent in the 2015 financial year, until February 27.

Maurice Blackburn said it opened an online portal for shareholders to register for the class action today.

The lawsuit is to be funded by IMF Bentham.

IMF Bentham investment manager Wayne Attrill said the lawsuit would only go ahead if enough shareholders signed up.

“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,” he 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.”

Woolworths (WOW) has been contacted for comment.

Company shares were up 11c, or 0.4 per cent, to $26.69 at 11.15am (AEST).