WJR News

Domino’s Pizza Enterprises (DMP.AX), the Australian arm of the global pizza chain, is facing a shareholder class action after being accused of misleading investors in 2021 about its expected performance in the Japan market. The lawsuit, filed by Echo Law, claims that Domino’s comments on its Japan operations led to significant losses for shareholders.

In a market filing on Monday, Domino’s denied any liability and stated its intent to vigorously defend itself in court. Despite this, shares of Domino’s were down as much as 2.8% at A$29.1 following the news.

Allegations of Misleading Statements

The class action relates to an announcement Domino’s made on November 3, 2021, in which the company praised its Japan operations, stating that the country had seen “excellent compounding sales” and a strong performance in new store openings. Domino’s attributed the success to “structural changes in marketing, pricing, and store penetration”, claiming that sales and customer counts were “materially higher” than pre-COVID levels.

However, according to Echo Law, the legal firm representing the shareholders, Domino’s failed to provide a true picture of its performance, and the alleged misleading statements led to substantial financial losses for investors. The class action seeks compensation for shareholders who acquired an interest in the company between August 18, 2021, and November 3, 2021.

The Legal Battle Ahead

Echo Law confirmed that it had filed the case in the Federal Court of Australia on behalf of affected shareholders, stating, “The class action seeks to recover the loss and damage suffered by shareholders as a result of Domino’s alleged conduct.”

Domino’s, for its part, has asserted that the company did not engage in any wrongdoing and will defend itself in court. This lawsuit comes at a challenging time for the company, as it grapples with store closures and a decline in its stock value.

Domino’s Recent Struggles

Earlier this year, Domino’s announced the closure of low-volume stores in both Japan and France. The decision led analysts to downgrade their earnings forecasts for the company, driving its shares to their lowest point in over nine years. The closures have intensified scrutiny over Domino’s international strategy, particularly in regions where the company previously showed strong performance.

What’s Next for Domino’s and Shareholders?

This class action could have significant financial implications for Domino’s Pizza Enterprises if the court rules in favor of the shareholders. The company will likely face an extended legal battle as it defends its statements about its Japan operations in 2021.

The broader implications of the case could also impact Domino’s reputation, especially in the context of corporate transparency and its communication with investors.