Robbins LLP: El Pollo Loco Holdings, Inc. (LOCO) Misled Shareholders According to a Recently Filed Class Action
Robbins LLP announces that a securities fraud class action complaint was filed in the U.S. District Court for the Central District of California, Southern Division. The complaint alleges that officers and directors of El Pollo Loco Holdings, Inc. (NASDAQGS: LOCO) violated the Securities Exchange Act of 1934 between May 15, 2015 and August 13, 2015, by making materially false and misleading statements about El Pollo Loco’s business prospects. 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 Fails to Disclose Declining Sales Growth
According to the complaint, El Pollo Loco, in an attempt to mitigate the effects of rising labor costs, removed its $5 menu from its menu boards in February 2015, which in turn drove away its value-conscious customers. During the first and second quarters of 2015, the company expanded its product offerings to include higher-priced shrimp and steak, which increased the company’s costs during the first half of 2015. El Pollo Loco officials concealed the deleterious impact of this strategy on first quarter 2015 traffic at its stores and issued a series of misleading statements regarding the company’s second quarter 2015 comparable store sales growth. As a result, El Pollo Loco stock traded at artificially inflated prices, while allowing company officials to sell tens of millions of dollars of their personally held shares.
On May 15, 2015, El Pollo Loco issued a release announcing its first quarter 2015 financial results, stating that the company experienced strong operating momentum through solid sales and earnings growth. In a conference call that followed the release, company officials made further positive statements about the company’s strong store sales trends and ability to meet its second quarter 2015 guidance. Then, on August 13, 2015, the company announced its second quarter 2015 results, stating that sales had only grown 1.3%, including a 0.5% decrease for company operated restaurants, conceding the negative impact of the reduction of the value portion of its menu and introduction of higher priced offerings. In response, El Pollo Loco’s stock declined $3.80 per share, or 20%, to close at $14.56 per share on August 14, 2014, approximately 33% below the price where company officials had just sold $132 million of their own El Pollo Loco shares.
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.