This lawsuit alleges that executives at El Pollo Loco hid from investors the negative impact of rising labor and food costs and the decrease in same store traffic so that insiders could sell millions of dollars of stock at artificially inflated prices.
El Pollo develops, franchises, licenses, and operates quick-service restaurants (approximately 172 company-operated and 243 franchised) in the United States.
What investors are part of this class action ? The class period is currently defined as all persons who purchased El Pollo common stock between May 15, 2015 and August 13, 2015, inclusive (the “Class Period”). El Pollo common stock trades under the symbol “LOCO”.
Procedural Status. The lawsuit was filed on August 24, 2015 and is captioned Turocy v. El Pollo Loco Holdings, Inc. et al. It was filed in the California Central District Court. Its civil docket number is 8:15cv01343. The lead plaintiff deadline is October 23, 2015.
The complaint alleges the company concealed the negative impact that certain menu changes and increases in labor costs in California were having on sales growth in a series of false and misleading statements regarding El Pollo sales and its ability to meet projections; including:
· El Pollo made false and misleading statements which caused stock to continue trading at inflated prices and allowed certain controlling shareholders to cash-out share at inflated prices;
· El Pollo reintroduced its value menu, previously removed to increase average orders, while concealing store traffic decline requiring the return of the value menu; and
· El Pollo failed to disclose that store sales during the second quarter of
2015 were 50% lower than the 3%-5% growth the El Pollo executives had led the market to expect.
Following an August 13, 2015 company release announcing second quarter 2015 results and accompanying remarks http://investor.elpolloloco.com/eventdetail.cfm?EventID=163270 detailing second quarter 2015 “system-wide comparable restaurant sales [had only grown] 1.3%, including a 0.5% decrease for company-operated restaurants, and a 2.6% increase for franchised restaurants", El Pollo stock price declined by 20% from its closing price of $18.36 per share on August 13, 2015 to $14.56 per share on August 14, 2015, allegedly 33% below the price where El Pollo executives had just sold $132 million of their own shares and 42% below the Class Period high of $25.37 per share on May 15, 2015.
This case is in the notice period. When a shareholder brings suit under certain federal securities law, generally that shareholder must give notice via a press release. This notice starts a 60 day period of time when any shareholder can investigate the underlying claims of the lawsuit and then elect to bring suit as well. At the end of this 60 day period, the court appoints one shareholder (or a group of shareholders) to prosecute the securities litigation. We will review the docket again in June and update this page as warranted.