Domino's Faces Class Action Over Alleged Misleading Statements About Japan Market Performance

Domino’s Pizza Enterprises is under legal scrutiny after being served a shareholder class action alleging misleading or deceptive conduct related to its performance in Japan. The action, filed by Australian legal consultancy Echo Law, targets shareholders who invested in the company between August 18, 2021, and November 3, 2021.

The lawsuit centers on a trading update Domino’s issued on November 3, 2021, which claimed that its Japan operations were experiencing “excellent compounding sales” and that new store openings in the country remained robust. The company also reported that sales and customer counts were significantly higher compared to the pre-COVID period, attributing this to structural changes in marketing, pricing, and store penetration.

However, the class action suggests that these statements may have been misleading or deceptive, potentially inflating the company’s performance metrics and prospects in Japan. The revelation of this legal challenge has led to a 2.5% drop in Domino’s shares, which are now trading at A$29.18, marking their lowest point since late August.

The timing of the class action aligns with a period of turbulence for Domino’s. Earlier this year, the company faced a significant downturn when analysts revised their earnings outlook downward following its decision to close low-volume stores in Japan and France. This move had already contributed to a notable drop in the company’s share price, hitting a nine-year low in July.

Echo Law has yet to provide further comments on the case, and Domino’s has not publicly responded to the allegations beyond acknowledging the filing. The outcome of this legal action could have significant implications for Domino’s, impacting both its financial standing and reputation.

As the case progresses, shareholders and market observers will be watching closely to see how the allegations affect Domino’s and what potential repercussions may arise from the ongoing litigation.