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Some shareholders whose investments in Domino's Pizza Enterprises (ASX: DMP) were burnt after a November 2021 market update will be able to take part in a class action against the Brisbane-based group, alleging misleading statements were made to the market as well as disclosure breaches around performance in Japan.
Domino's shares fell by approximately 18 per cent after the market update on 3 November 2021 after the group announced short-term forecasts were challenging amidst changes in consumer behaviour.
The company had expanded aggressively in the Japanese market, opening a new store every three days at one point, and seemed to benefit from COVID-related lockdowns.
But after a State of Emergency was lifted in September 2021 and restaurants, bars and shopping centres reopened, Domino's started to see negative year-on-year sales in Japan.
These challenges were perhaps an omen of more difficult times to come for Domino's in Japan and in mid-2024 the group announced plans to shutter up to 80 low-volume stores, although with further openings the net decline is more like 60 locations.
However, this recent development is not a concern of the class action, which specifically relates to shares or long equity swaps in DMP purchased between 18 August 2021 and 3 November 2021.
"The proceeding will allege that, between 18 August 2021 and 3 November 2021, DMP engaged in misleading or deceptive conduct, made misleading statements, and breached its obligations of continuous disclosure to the market in relation to the representations made about its expected performance in the Japan market," says Echo Law, which has filed the claim in the Federal Court.
In a statement to the ASX, Domino's denied any liability and said it would be defending the proceeding.
It has been an active period for Echo Law, which last month filed a class action in the Federal Court against Qantas (ASX: QAN) budget subsidiary Jetstar over its policies and practices around refunds for flights cancelled during the pandemic.
The claim is similar to one that was filed by the same law firm against Qantas itself last year.
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