Supermarket giant Woolworths could face a shareholder class action for allegedly failing to properly inform investors of its profit guidance downgrade in the 2014/2015 financial year.  

Legal firm Maurice Blackburn, which has opened an online registration portal for aggrieved shareholders to join and sign up on the potential legal action, has said the claim could exceed $100 million.

The class action has alleged Woolworths breached the Corporations Act by failing to properly inform investors it would not meet its profit growth forecasts in 2015.

According to principal lawyer on the action, Andrew Watson, Woolworths knew it was significantly behind on its profit projections as early as October 2014 but allegedly maintained its guidance until it reported half year earnings in February 2015.

The downgrade of its profit forecast on that day triggered a fall of nearly 14 per cent in its share price over 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,” 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.”

Global litigation funder IMF Bentham said the action would only proceed if enough shareholders come forward seeking redress.

Woolworths said it has not been served with proceedings and would defend any action.

According to the statement issued by the retail giant, it has, at all times, complied with its continuous disclosure obligations.

IMF Bentham senior investment manager Wayne Attrill said the action offered a chance for shareholders to send a strong message to Woolworths.

“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,” he said.

Background to the allegations below:

• August 29 2014 Woolworths provides guidance that FY15 NPAT expected to increase 4 per cent to 7 per cent.
• October 8 2014 Woolworths aware of significant risks to forecast profit.
• “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…”
• November 21 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.
• November 27 2014 Guidance reaffirmed at the Woolworths AGM 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 per cent and 7 per cent. 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 per cent to 7 per cent for Financial Year 2015.