Would Whole Foods do better under new ownership?
A hedge fund that is the second largest shareholder of Whole Foods Market stock took a swipe at the slow pace of the company’s turnaround efforts and called for management to explore options including a possible sale of the company.
In filing with the Securities and Exchange Commission, Jana Partners, which owns 8.8 percent of the chain’s stock, said it has teamed up with a group of other shareholders to seek four spots on Whole Foods’ board of directors. The group is looking for the grocer to make improvements in analytics, branding, customer service and supply chain.
In recent years, Whole Foods has gone from being a darling of Wall Street to a company that is being pressured competitively on all sides. Its stock price has fallen substantially from the peak reached in 2013.
The chain has taken numerous steps to turn its business around including working with Dunnhumby, the analytics firm, to better understand and meet the needs of its shoppers. Whole Foods has also launched a loyalty program, shifted purchasing from local buyers to category managers at headquarters, and debuted a new concept 365 by Whole Foods Market. The company has created a national branding campaign including television commercials while focusing on being more price competitive.
Despite its various initiatives, Whole Foods has failed to gain traction.
Analysts at UBS, as reported by The Wall Street Journal, wrote, “The entrepreneurial culture that served [Whole Foods] well in its growth mode now needs to be more process-oriented. That can be a rough transition.”
The call by Jana Partners for the chain to explore its sale value is not the first of its kind. Last year, rumors circulated that Kroger might have an interest in acquiring Whole Foods. The speculation didn’t prove true. Many critics of the hypothetical deal pointed out that Kroger’s push into organics was largely responsible for Whole Foods’ problems in recent years. Buying the chain might make sense for Whole Foods, but didn’t offer much upside for Kroger.
- Activist Investor Jana Partners Takes Nearly 9% Stake in Whole Foods – The Wall Street Journal
- Whole Foods Pressured by Activist Investor Jana Partners – The New York Times
- Will Dunnhumby’s analytics do for Whole Foods what it did for Kroger? – RetailWire
- How price competitive does Whole Foods need to be? – RetailWire
- Should Kroger go after Whole Foods? – RetailWire
DISCUSSION QUESTIONS: Do you agree that the “entrepreneurial culture” at Whole Foods has become more of a liability that an asset in recent years? Would Whole Foods be more likely to perform better if it were acquired?