Robbins Arroyo LLP: El Pollo Loco Holdings, Inc. (LOCO) Misled Shareholders According to a Filed Class Action
Robbins Arroyo LLP announces that a class action complaint was filed against El Pollo Loco Holdings, Inc. (NASDAQGS: LOCO) in the U.S. District Court for the Central District of California, Southern Division. The complaint is brought on behalf of all purchasers of El Pollo Loco securities between May 15, 2015 and August 13, 2015, for alleged violations of the Securities Exchange Act of 1934 by El Pollo Loco’s officers and directors. El Pollo Loco Holdings, Inc., through its subsidiary, El Pollo Loco, Inc., develops, franchises, licenses, and operates quick-service restaurants under the El Pollo Loco name in the United States.
El Pollo Loco Accused of Issuing Misleading Sales Growth Guidance
According to the complaint, El Pollo Loco officials repeatedly and unjustifiably touted the company’s sales growth in company-wide “comparable store sales,” a key metric closely watched by market analysts and investors. During an investor conference call on May 14, 2015, El Pollo Loco officials reported a continuation of the company’s positive sales growth trend for the first quarter of fiscal year 2015, reporting better than expected revenue and earnings for the quarter, driven by a 5.1% increase in comparable store sales, and confirming guidance for the second quarter of 2015 in the 3-5% range. However, the complaint alleges that at the same time company officials were touting El Pollo Loco’s strong financial state, customer traffic to El Pollo Loco restaurants had been substantially declining since the first quarter of 2015. This in turn hurt the company’s sales in the first half of 2015 and diminished its ability to meet its sales growth guidance for the second quarter of 2015.
In the first quarter of 2015, El Pollo Loco abandoned its highly popular value-priced menu, which was a key factor that drove customer traffic to the company’s restaurants. The complaint alleges that company officials closely tracked and monitored comparable store sales on a real-time basis and knew, but concealed from investors, that traffic at El Pollo Loco restaurants was significantly declining. In addition, within days of the misleading statements and omissions that artificially inflated the price of the company’s stock, several top El Pollo Loco executives suspiciously sold over six million shares of El Pollo Loco common stock for proceeds of more than $132 million. These company insiders allegedly knew that customer traffic was rapidly deteriorating and that the company’s 3-5% comparable sales growth guidance was not achievable. On August 13, 2015, the company announced store sales growth for the second quarter of 2015 was 50% lower than the 3-5% growth that company officials had led the market to expect. On this news, El Pollo Loco stock fell 20% to close at $14.56 per share on August 14, 2015, the lowest closing price since the company’s initial public offering on July 14, 2014.
El Pollo Loco Shareholders Have Legal Options
Concerned shareholders who would like more information about their rights and potential remedies can contact attorney Darnell R. Donahue at (800) 350-6003, or you can complete the form below and we will contact you directly.
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