Jana Partners Takes Nearly 9% Stake in Whole Foods -- Update
April 10 2017 - 3:14PM
Dow Jones News
By David Benoit and Heather Haddon
Activist investor Jana Partners LLC has amassed a nearly 9%
stake in Whole Foods Market Inc. and wants the upscale organic
grocer to speed up its turnaround efforts while also exploring a
possible sale.
Jana, Whole Foods' second-largest shareholder, is planning to
press the chain to improve its technology and operations to better
compete with larger rivals, shake up its board and find out how
much a potential bidder might be willing to pay, according to
people familiar with the matter.
Whole Foods couldn't immediately comment.
Jana's campaign is the latest quandary for Whole Foods, which
has struggled to make the transition from high-flying upstart with
a loyal following into a large, national chain with the kind of
back-office systems tracking customers and inventory that rivals
use to keep costs down and sales up.
Whole Foods' stock has risen 4% over the past 12 months,
compared with a 15% gain in the S&P 500, and has lost more than
half its value since peaking in 2013. Sales, meanwhile, have fallen
over the past 18 months. Same-store sales -- a key retailer metric
-- fell 2.5% during its fiscal year that ended in September 2016.
The company's market value currently stands at around $10
billion.
Jana has lined up a potential slate of board nominees, the
people said, four months before the deadline to launch a board
fight. That's likely a signal that Jana, which has quietly reached
settlements with several companies this year to install new
directors, will be aggressive in demanding change at Whole
Foods.
The activist hasn't yet met with Whole Foods' current board or
executives, the people said.
With Whole Foods, Jana is departing a bit from its usual
approach. The fund, founded by Barry Rosenstein in 2001, typically
works with management and boards behind the scenes. It's played a
role in changing the boards of Bristol-Myers Squibb Co., Tiffany
& Co. and Blackhawk Network Holdings Inc., all without the kind
of public fight associated with activists.
Jana's campaign will amplify the quieter grumblings of other
Whole Foods shareholders. Mutual-fund giant Neuberger Berman, which
owns about 2.4% of Whole Foods, has been privately pushing for
faster change at the company, The Wall Street Journal has reported.
The firm has complained that the chain hasn't fully capitalized on
its popularity among millennials or prepared foods sales, areas
where it bests its rivals.
At Whole Foods' annual meeting in February, the board was
re-elected but faced a high protest vote. Two directors got around
85% support and an advisory vote on executive compensation got 84%,
levels that signal investor angst.
Some investors say that while the company is taking the right
steps, it's moving too slowly to catch up to rivals that are years
ahead in retail technology and customer management. They've
indicated that management had to perform this year or risk a louder
uprising this fall.
"We think [Whole Foods] needs to move from a growth phase to an
efficiency phase," UBS analysts wrote in tagging the company with a
sell rating last month. "The entrepreneurial culture that served it
well in its growth mode now needs to be more process-oriented. That
can be a rough transition."
Write to David Benoit at david.benoit@wsj.com and Heather Haddon
at heather.haddon@wsj.com
(END) Dow Jones Newswires
April 10, 2017 14:59 ET (18:59 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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