CEO Revamp Raises Questions About Whole Foods' Strategy
November 03 2016 - 2:53PM
Dow Jones News
By Annie Gasparro
Whole Foods Market Inc.'s plan to return to one chief from a
dual CEO setup the past six years raises fresh questions about its
future strategy to battle a slump in sales.
The struggling grocery chain said late Wednesday that co-founder
John Mackey will be the sole chief executive starting in January,
as co-Chief Executive Walter Robb steps down to streamline top
management.
"When business is going great, there aren't a lot of
disagreements, and it can work. But when times get tough, that's
when you start to bump heads," said Edward Jones grocery analyst
Brian Yarbrough. "With two strong-willed people [Messrs. Mackey and
Robb], this lasted a lot longer than we thought it would," he
added.
Whole Foods declined to make Messrs. Mackey or Robb available
for an interview or to elaborate on how the change will affect the
company.
Whole Foods has been fighting a losing battle to get more
shoppers in its high-end stores in recent years. The company said
Wednesday its comparable sales -- a key metric for retailers --
have declined for the past five quarters and aren't expected to
return to growth in the next year.
The natural foods industry has been under fire from traditional
competitors like Kroger Co. and Target Corp., which are stocking
more organic food at lower prices, and other factors like online
grocery shopping and tighter pocketbooks among consumers.
Sprouts Farmers Market Inc., which bills itself as a more
value-oriented fresh and organic foods chain, said Thursday its
profitability took a hit in the latest quarter as it offered more
promotions to drum up business. Its shares were recently down
12%.
Target, too, is still struggling to get its footing in grocery.
On Wednesday, it said its grocery chief is leaving the company amid
lackluster performance in her division.
At Whole Foods, Mr. Robb has championed a plan to invest in
offering more promotions and discounts to appeal to value-seeking
shoppers. It has yet to pay off, and some analysts say it could
take much steeper discounts and several more years to boost
sales.
Still, investors were impressed by the grocer's corporate cost
cuts, which came in faster than expected. And Whole Foods said its
sales trends are on the mend so far in the current quarter. Its
shares recently rose 1.8% in midday trading Thursday.
But losing the man with the most operational focus of the two
chiefs could result in changes to its strategy.
Even though Mr. Robb will remain on the board of directors, he
would no longer help run the day-to-day business.
Mr. Mackey, a self-proclaimed foodie and environmentalist, tends
to be a "big ideas guy," Mr. Yarbrough said.
In an interview earlier this year with The Wall Street Journal,
Mr. Robb said: "I have the background of being president and chief
operating officer. John is really brilliant at thinking 10 years
down the road. I've got a lot of passion around the experience for
our customers. John's got a lot of passion around healthy
eating."
Whole Foods initially created the dual-CEO structure in 2010
specifically for Mr. Robb -- a longtime friend of Mr. Mackey and a
leader at Whole Foods since 1991.
Mr. Mackey didn't want to leave, and Mr. Robb wanted to be a
CEO. "We went for a walk and figured it out," Mr. Robb said in that
earlier interview. He praised the dual-CEO concept as being the
best of both worlds.
Before Mr. Robb stepped into the co-CEO position, Mr. Mackey was
often getting himself into trouble for spouting off political ideas
as a well-known Libertarian or trash-talking a rival store
anonymously on online message boards.
He's still known for being somewhat of a wild card.
On Wednesday's call to discuss earnings, Mr. Mackey, compared
competition in the grocery industry to the Civil War. Ulysses S.
Grant, leading the Union Army, was always hearing from his generals
about what Robert E. Lee was doing, Mr. Mackey explained. "And one
day, Grant said, 'You know, I'm sick and tired of hearing what Lee
is going to do. Lee needs to worry about what we're going to do.'
And that's how I feel about our competitors."
Whole Foods was one of the few companies to still have a dual
leadership structure. Earlier this year, Deutsche Bank AG scrapped
the dual-CEO model, and software giant SAP let go of it in 2013.
But others, like Samsung Electronics Co., Oracle Corp. and Chipotle
Mexican Grill Inc. still have more than one chief.
Write to Annie Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
November 03, 2016 14:38 ET (18:38 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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