Investment sparks jump in Whole Foods shares

by Monica Watrous
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Whole Foods 
Investors are pushing for a potential sale of the natural grocery chain.
 

NEW YORK — Whole Foods Market shares jumped 10 percent to $34.17 on April 10 following news that investor Jana Partners LLC had acquired an 8.3 percent share in the natural grocery chain. In a filing with the Securities and Exchange Commission Jana Partners said it intends to push the company’s board of directors and management to consider strategic options, such as a potential sale. The investment fund also named three candidates it would nominate for election to the company’s board of directors.

The Austin, Texas-based retailer, beleaguered by heightened competition and six quarters of same-store sales declines, recently cut its full-year sales and profit forecast and revealed plans to close nine of its 469 stores this quarter. At the end of last year, Whole Foods co-CEO Walter Robb departed the company, as co-founder John Mackey became the sole CEO.

To regain footing in the marketplace, Whole Foods in recent years has offered coupons and discounts, launched its first-ever TV marketing campaign and began selling conventional produce as a cheaper alternative to organic fruits and vegetables. The company also unveiled its new smaller-format 365 by Whole Foods stores to attract millennial consumers. More recently, the company said it would correct course by focusing on retaining its core customer, the natural and organic shopper.

“Just like the conventional supermarkets are trying their very best to keep their customers from eroding to Whole Foods Market, we’re going to do the best job that we can to keep our core customers from migrating back over to those guys,” Mackey said during a Feb. 8 earnings call. “We’re refocusing on our very best customers, and that means we’re decelerating our growth.”

Along with Jana Partners, individual investors named in the filing include Glenn Murphy, founder and CEO of FIS-Holdings, Ltd.; Diane Dietz, president and CEO of Rodan & Fields, LLC; Thomas W. Dickson, former chairman and CEO of Harris Teeter Supermarkets, Inc.; Meredith Adler, a consultant in the food and retail sectors; and Mark Bittman, a food journalist and author. Jana Partners said it would nominate Murphy, Dickson and Adler to the Whole Foods board of directors at its 2018 Annual Meeting.

Whole Foods did not provide immediate comment. Shares of the company, which climbed as high as $57 in early 2015, closed at $31.07 on April 7, the last trading day before the investment was disclosed.

Jana Partners has a history of pushing change at food and retail companies, including Safeway, Petsmart and Walgreens Boots Alliance. In 2015, the investment fund took a 7.2 percent stake in Conagra Brands, then known as ConAgra Foods, securing two board seats at the packaged food company and calling for the eventual sale of its private label business. 

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