Proceedings for the multi-million dollar class action brought forward by shareholders against department store retailer Myer have begun.
Former Myer chief executive Bernie Brookes is at the centre of claims against the struggling retailer, after “making misleading claims” to investors in 2015.
It’s alleged Brookes reassured investors that profits would grow despite the Myer board not having issued such a guidance, and ignoring the fact that the company’s profit had fallen 22 per cent to $98.5 million in 2014.
“When a company makes a forecast it has an obligation…to keep looking at the forecast and keep changing if it remains valid or not,” Norman O’Bryan, QC, told the Federal Court in Melbourne, the SMH reports.
“Myer did not do that. Mr Brookes made a profit forecast on September 11, 2014 and Myer pretended it didn’t happen.”
Myer’s trading in the first quarter of 2015 was down 15 per cent, and would have required a 23 per cent increase in profit in order to beat its 2014 result, with O’Bryan noting the Christmas period being “Atlas holding up the universe” for Myer.
The Myer board, when decided whether to update the market on profit expectations, referred to analyst consensus forecasts compiled by Bloomberg rather than taking Brookes comments into account.
Richard Umbers, Brookes replacement, warned net profit would fall to between $75 and $80 million in 2015, causing a freefall in Myer’s share price, down by approximately 12 per cent.
The claim will continue, and Myer executives are expected to give evidence for the period in question.
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