Thursday, April 13, 2017
Shares of Whole Foods Market jumped nearly 10 per cent on Monday after activist investor Jana Partners took a nearly nine per cent stake in the company and suggested the retailer should consider putting itself up for sale, according to media reports. In a regulatory filing Monday, Jana said it believes Whole Foods “shares are undervalued and represent an attractive investment opportunity.” The investor group also said it has “substantial experience” in the grocery and food sectors and intends to have discussions with the current board and management about making changes.
Jana is attempting to engage with Whole Foods CEO John Mackey, sources told CNBC, although the investor group has yet to speak about its ideas with the grocer’s management.
“Whole Foods Market welcomes investment in the company and is open to the views and opinions of all of our shareholders,” Whole Foods spokeswoman Brooke Buchanan responded in a statement. “We value constructive dialogue toward our shared goals of creating shareholder value, successfully executing on our strategic priorities and taking actions that will position the company for continued success.”
Buchanan added that the retailer remains “committed to driving value for all Whole Foods Market shareholders and will continue to act to achieve this important objective.”
Texas-based Whole Foods has been struggling as other grocers make inroads into its natural and organics foods business. The company also has faced deceleration in customer counts and average purchase amounts. Both trends – combined with overall food price deflation – have contributed to Whole Foods slashing forecasts and posting same-store sales declines for the past six straight quarters.
“Whole Foods’ business has been deteriorating for several years now,” said Ajay Jain, an analyst who covers Whole Foods for Pivotal Research. He pointed out that same-store sales have been negative for at least two years now and adds “there has not been any stabilization in fundamentals recently.”
The Pivotal analyst said the “most worrisome metric” is the company’s customer traffic slowing and he believes Jana might be “underestimating how difficult it’s going to be to turn the business around.”