Starbucks hit with class action lawsuit over alleged investor deception

A class action lawsuit was filed Wednesday against Starbucks Corporation, its CEO Laxman Narasimhan, and its CFO Rachel Ruggeri.

The lawsuit accuses the company of misleading investors about its financial health and growth prospects.

The lawsuit alleges that Starbucks provided overly optimistic revenue projections while concealing significant challenges, particularly in the Chinese market.

The lawsuit, filed in the U.S. District Court for the Western District of Washington, claims that Starbucks’ executives made misleading statements regarding the company’s “Reinvention” strategy and expected financial performance for 2024.

According to the complaint, these statements artificially inflated the price of Starbucks’ stock, causing investors to suffer significant losses when the company’s actual financial situation was revealed.

The core of the allegations centers on Starbucks’ announcements in November 2023, when the company highlighted solid financial results and projected continued growth.

However, the complaint says these optimistic projections did not account for critical issues, particularly the slower-than-expected recovery in China and increased competition, ultimately leading to a significant decline in sales and revenue.

On April 30, Starbucks disclosed disappointing financial results for the second quarter of fiscal year 2024, including a 4% decline in global comparable store sales and a 2% drop in net revenues.

Following this announcement, Starbucks’ stock price plummeted by over 15% in a single day, triggering the class action lawsuit.

The lawsuit accuses Starbucks of violating federal securities laws by making false and misleading statements and failing to disclose adverse facts known to company executives.

The plaintiff is seeking damages for the losses suffered by investors who purchased Starbucks securities between November 2, 2023, and April 30, 2024.

In response to this filing, Starbucks sent KIRO 7 News the following statement:

“The allegations in the complaint are without merit. Starbucks takes great care in communicating transparently and authentically with its stakeholders, including its investors, partners, customers, and community.”

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