Grocer's Strategy in Spotlight -- WSJ
November 04 2016 - 3:02AM
Dow Jones News
Whole Foods' move to drop dual-CEO setup raises questions about
rebound plans
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-CEO 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.
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 performance gauge for
retailers -- have fallen 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. stocking more organic
food at lower prices and other factors such as online grocery
ordering 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
profit took a hit in the latest quarter as it offered more
promotions to drum up business. Its shares fell 11.3% Thursday.
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 of offering more
promotions and discounts to attract value-seeking shoppers. It has
yet to pay off, and some analysts say it could take much steeper
discounts and several years to boost sales.
"Walter has been the day-to-day operations person, and clearly
the day-to-day is not going well," said BMO Capital Markets analyst
Karen Short, saying the management shake-up could be a first step
in addressing broader strategy issues. Whole Foods was one of the
few companies with a dual-leadership structure.
Mr. Robb, who will remain on the board of directors and as a
senior adviser, said in an interview earlier this year with The
Wall Street Journal: "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."
Decisions by Mr. Mackey, a self-proclaimed foodie and
environmentalist, will likely be watched closely in coming months.
Jim Hertel, a grocery-store consultant at Willard Bishop, said:
"Will [Mr. Mackey] just go back to the basics from when Whole Foods
was doing well? Because if so, he'd be going back to a time that
doesn't exist anymore. The competitive landscape has changed."
Whole Foods initially created the dual-CEO structure in 2010 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 the interview earlier this year.
Before Mr. Robb stepped into the co-CEO position, Mr. Mackey
faced heat for his political banter and for trash-talking a rival
store anonymously on online message boards. He is still known for
being somewhat of a wild card, industry observers say.
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 said. "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."
Write to Annie Gasparro at annie.gasparro@wsj.com
(END) Dow Jones Newswires
November 04, 2016 02:47 ET (06:47 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
Whole Foods Market, Inc. (NASDAQ:WFM)
Historical Stock Chart
From Aug 2024 to Sep 2024
Whole Foods Market, Inc. (NASDAQ:WFM)
Historical Stock Chart
From Sep 2023 to Sep 2024