Activist Investors Ready to Shake Up Whole Foods

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Activist Investors Ready to Shake Up Whole Foods

04/11/2017

Investment firm Jana Partners LLC has teamed with several food retail experts to purchase a nearly 9 percent stake in natural and organic grocer Whole Foods Market, collectively making them the chain’s second-largest investor and positioning them to shake up operations.

In a filing with the Securities and Exchange Commission, the investors said that they acquired the shares because they are "undervalued and represent an attractive investment opportunity.”

The investors intend to have discussions with Whole Foods’ board and management regarding several topics. Among them are chronic underperformance for shareholders, changing the makeup of the board and senior management, optimizing real estate and capital allocation strategies – including the 365 by Whole Foods Market small-store format – and improving performance via advancing brand development and addressing core operating deficiencies in such areas as customer loyalty and analytics, category management and analytics, and technology and digital capabilities.

"Jana has substantial experience analyzing and investing in the grocery sector, and, more broadly, across the food and retail sectors,” the filing read. “And the other reporting persons collectively possess significant operational, financial and nutritional expertise, including … experience creating significant shareholder value in the food and grocery sectors.”

Along with the New York-based activist investment firm, those involved in the purchase are Diane Dietz, president and CEO of skin care brand Rodan + Fields, who previously was chief marketing officer of Safeway Inc.; Thomas Dickson, previously chairman and CEO of Harris Teeter Supermarkets Inc.; Glenn Murphy, who was previously CEO of Canadian drug store chain Shoppers Drug Mart and held several high-level roles at Canadian grocery operator Loblaw Cos.; Mark Bittman, a food journalist and columnist for The New York Times; and former Barclays analyst Meredith Adler.

The news follows reports of numerous woes faced by the Austin, Texas-based grocer, which announced its sixth consecutive quarter of declining comparable-store sales two months ago, causing it to adjust its outlook for fiscal 2017. In its second fiscal quarter of 2017, it plans to shutter the remaining two of its three commissaries, and close more stores than it opens.

Although the investors clearly have a desire to shake things up at the top of Whole Foods, an outright sale to a competitor such as the Cincinnati-based Kroger Co. could make more sense, Brian Yarbrough, an analyst at Edward Jones, told Bloomberg. The news outlet also reported that Seattle-based ecommerce giant Amazon.com, seen as a possible bidder for Whole Foods, once considered a takeover of the chain last fall but did not go forward with the deal, according to an anonymous source.