Whole Foods Wins Votes, but Not Without Grumbles -- WSJ
February 18 2017 - 3:02AM
Dow Jones News
By Heather Haddon and David Benoit
Whole Foods Market Inc.'s annual shareholders meeting convened
Friday amid investor concern about the organic-food retailer's
ability to address decelerating sales growth and steep reductions
in its share value.
Some investors are saying the Austin, Texas-based company is at
an inflection point as it works to improve its performance in the
increasingly competitive grocery industry. Absent improvement it
could face a challenge to the board in about six months' time,
according to people familiar with the matter.
A Whole Foods spokeswoman declined to comment.
Protest votes against directors without a competing slate of
nominees -- as was the case Friday -- are unlikely to unseat
current board members but can embolden activists and critics to try
to campaign in the following year, especially if performance hasn't
changed.
Shareholders approved the most closely watched proxy resolutions
Friday, including ones pertaining to the former co-CEO's severance
package and two board members questioned by analysts over their
record for attendance and independence.
The vote came just a week after Whole Foods delivered a downbeat
financial outlook, with executives dropping plans to expand to
1,200 stores in the U.S. and announcing the largest number of
stores closures at one crack in the company's nearly 40-year
history.
The entire grocery industry is sluggish as increased competition
has eaten into margins and slowed growth. Food-retail stock prices
are down an average of 2.17% year to date, according to FactSet
data.
But mainstream grocers' expansion into natural and organic
products has particularly hurt Whole Foods in a sector it once
dominated. The company's stock has lost more than half its value
since its most recent peak in 2013.
Whole Foods founder and CEO John Mackey pledged last week to use
data and promotions to lure back core shoppers to its 469 stores in
the U.S., Canada and the U.K.
Mr. Mackey on Friday faced investors alone for the first time in
six years after the company recently ended its dual-CEO leadership
structure.
Wall Street analysts last week were largely positive on the
company's shift to more fiscal discipline.
"A recovery seems likely," said Laura L. McGonagle, senior vice
president at Trillium Asset Management, a Boston investment firm
that owns Whole Foods shares.
But others believe the company has a long way to go to turn
around its bottom line and expect pressure on leadership to
grow.
Neuberger Berman, a top-10 investor with about 2.4% of Whole
Foods stock, has been privately pushing for faster change at the
company, people familiar with the matter said. The firm believes
Whole Foods resonates better with millennials and sells more
prepared foods than rivals, but that management hasn't kept up with
the chain's growth, the people said.
"Where are the next-generation kids who are talking about farm
to table? They are trying to embrace that crowd in a groovy way but
they've missed the boat. That's a problem," said Julie Goodridge,
founder and chief executive for Boston-based NorthStar Asset
Management, which decreased its stake in Whole Foods to 1% from 3%
last fiscal quarter after owning the company's stock since
1992.
Ahead of Friday's vote, proxy advisers added to the pressure by
raising concerns about Whole Foods' board attendance, executive pay
and the "coziness" of its board, according to Glass Lewis &
Co.
Glass Lewis raised red flags over the board's independence last
month and recommended against the severance package for Walter
Robb, who stepped down as co-CEO in December but remains on the
company's board. Mr. Robb didn't respond to requests for
comment.
On Friday, 84% of the voting shareholders approved the
compensation allowances for Whole Foods' board, including Mr.
Robb's $10 million severance package. All of the board members were
re-elected with at least 84% of the vote.
Write to Heather Haddon at heather.haddon@wsj.com and David
Benoit at david.benoit@wsj.com
(END) Dow Jones Newswires
February 18, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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