Woolworths Group Ltd (ASX: WOW) has settled a $100 million class action case brought on from shareholders accusing it of misleading conduct.
The supermarket faced the wrath of investors back in 2015 when it provided shock downgrades to its profit guidance.
This was caused by Woolworths’ decision to spend $500 million cutting grocery prices to recover clientele given up to Coles Group Ltd (ASX: COL) and Aldi.
That sudden cost, plus losses mounting from its foray into the hardware sector, saw the Woolworths share price decline from more than $36 in August 2014 to below $23 in November 2015.
Law firm Maurice Blackburn launched the legal action back in September 2018. Woolworths quietly updated the market late on Friday afternoon about the settlement.
“The settlement, in the sum of $44.5 million inclusive of all costs… will not have any financial impact on Woolworths Group,” the company stated.
“The settlement is without admission of any liability.”
Woolworths share price has recovered nicely since 2015
The supermarket’s price-cutting drive did work. It regained market share back from Coles and Aldi, with Woolworths shares now trading at $40.86 (at the time of writing).
Last month Goldman Sachs had a “neutral” rating for Woolworths shares, with a price target of $39.90. Its analysts are forecasting a 10.1% lift in year-on-year revenue when Woolworths’ half year results come out this month.
That growth will be mostly driven by groceries and Big W, with the hotels business dragging it back due to the COVID-19 pandemic.
Goldman Sachs is predicting the supermarket giant will pay out 48.8 cents of dividend per share, compared to 54 cents forecast by other analysts.
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Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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