Whole Foods Surges After Jana Goes Activist

Tyler Durden's picture

Who says activist investors are dead, swallowed whole by the relentless passive, ETF wave?

Moments ago Whole Foods, which has seen its stock suffer a painful decline for the past two years, spiked on a WSJ report that Barry Rosenstein's Jana Partners has amassed a 9% stake in WFM and is pushing the organic grocer to speed up its turnaround efforts while also exploring a possible sale. 

According to the WSJ, Jana, which is Whole Foods’ second-largest shareholder, plans 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."

Because, the thinking goes, management never thought of that before.

And while Jana’s campaign is simply the result of the stock sliding (leading to unhappy LPs), forcing the activist investor to scramble and boost the flailing share price, the truth is that Whole Foods 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 have fallen over the past 18 months. Same-store sales fell 2.5% during its fiscal year that ended in September 2016. The company’s market value currently stands at around $10 billion.

Some more details from the WSJ:

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.

To be sure, investors are not happy with the stock's performance: "some 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.”

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.

At the end of the day, however, a transformation at WFM may be out of management's hands, especially if the upwardly mobile consumer class has seen its discretionary income swallowed by spending on such mandatory outlays as Obamacare, or has been eating up by inflation and the occasional iPhone. In any case, with a relatively modest net debt load, one thing is certain in WFM's future: a surge in stock buybacks, all else equal.

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silverer's picture

It's not about selling food. It's about hurrying up and making the inner circle millionaires.

Arnold's picture

Could they put in a GMO section, please?

I'm feeling a bit peckish and EBT doesn't buy more than a mouthful in your stores.

Thanks.

Poopy's picture
Poopy (not verified) Raffie Apr 10, 2017 2:25 PM

IT'S GOOD FOR THE GOOSE, JUST NOT FOR THE J00CE!  J00S SHUN DIE-VERSITY LIKE THE PLAGUE

ONLY COMPLETE IDIOTS DON'T KNOW WHY THE 'NAZI-J00S DON'T PRACTICE THE DIE-VERSITY LIES THEY PREACH....

NO ASIANS ALLOWED TO IMMIGRATE TO ISRAEL...='NAZI JOO-BAG DIVERSITY!!!!
NO BLACKS ALLOWED TO IMMIGRATE TO ISRAEL = 'NAZI JEW DIVERSITY
NO WHITES ALLOWED TO IMMIGRATE TO ISRAEL = 'NAZI JEW DIVERSITY
NO CHRISTIANS ALLOWED TO IMMIGRATE TO ISRAEL = 'NAZI JEW DIVERSITY
NO MUSLIMS ALLOWED TO IMMIGRATE TO ISRAEL = 'NAZI JEW DIVERSITY
NO HISPANICS ALLOWED TO IMMIGTRATE TO ISRAEL = 'NAZI JEW DIVERSITY
95% OF THE MEDIA RUN BY JEWS = 'NAZI JEW DIVERSITY
100% OF THE FEDERAL RESERVE BANK OWNED BY JEWS = 'NAZI JEW DIVERSITY

YET.....ALL JEWS WELCOME IN ISRAEL (EXCEPT BLACK JEWS)  ...not raycess,,,,SAYS THE 95% 'NAZI J0O RUN MEDIA!!!!

YET THE JEW RUN MEDIA TELLS ALL WHITE COUNTRIES DIE-VERSITY IS WONDERFUL and WE need unlimited Invaders....

W/O calling me names, can any white person explain WHY DIE-VERSITY IS NOT GOOD FOR JEWS?

Hint: IT'S A RHETORICAL QUESTION.....

(I KNOW, BUT DO YOU STUPID GOYIM&SCHVARTZES KNOW??????)....DIE-versity.....GET THE HINT MORONS????

GOOD FOR YOUSE, BUT not GOOD FOR THE 'NAZI JOUSE?

WAKE THE FUCK UP WHITE PEOPLE (and blacks capable of independent thought).....

MsCreant's picture

This is about Whole Foods how...?

Arnold's picture

Thanks,Raffie.

I am always amazed at what the inmates know around here.
Introduce yourself when we meet at FEMA, South Bay.
My name will still be Arnold.

Raffie's picture

You will be best to die then go into the FEMA camp.

FEMA camp will be very much like island of doctor moreau.

Experiments and harvesting big time.

junction's picture

Jana Partners is just another shakedown hedge fund that believes in asset stripping and lying to the public.  Whole Foods is an overpriced supermarket chain that cannot compete with Aldi, Trader Joe or Costco.  If WF's share price goes up 15%, Jana is out of here before the share price craters again.

Raffie's picture

Whole Foods will be turned into another Grocery Outlet discount food place. LOL

Laowei Gweilo's picture

so, 'Mostly Whole Foods'

i mean, yeah, i'm sure it's not perfect but you probably still have a far better chance of avoiding GMOs at Whole Foods than Safeway =p

so, assuming you never believed their corporate marketing to begin with, it still serves a decent purpose as a convenient option when local farmer markets or butchers are not available.

BobEore's picture

Yup.

Whole Foods was the inevitable result of what happens when 'Free Market Capiltalists"(tm) see a bunch of ol hippies start making a living wage by growing some 'edible' herb and selling at farmer's markets...

and decide to crack down before the outbreak of 'Whirled Peas.' Mnunchin-like parasites of all descriptions will now feast pon the remains of another effort to support the Merikan economy by ripping off customers and squeezing small scale farmer 'suppliers.

Organic standards watered down... hundreds of mom n pop natural foods stores wiped out from Alaska to Arizona... big money paves another piece o paradise!

From those few of us who got out in time -and whole - msg in a bottle to you John Mackey, and your 'distressed' buddies...

https://www.youtube.com/watch?v=3Sihonv0Lg8

Never One Roach's picture

I'm not paying $5 for a carrot and the arrogant attitude their employees throw at customers.

you can buy the same pack of crackers for almost $2 less at the competitor across the street, for example, and their employees have a better attitude.

E.F. Mutton's picture

Rotisserie Chicken at Sam's Club - $4.99

Rotisserie Chicken at Whole Foods - $20

Smug Factor Differential - Priceless (if you're a Trendy Shitbag)

Freddie's picture

A few years ago, a neighbor's kid got a job there.  They staffed up at the opening then made shit up to fire a bunch of employees about 1 month after opening.   They don't hire anyone over 40 or 50 much either.

F them.  Trader Joes is much better and cheaper.  The workers are generally very cheerful and friendly at Trader Joes too.  Far far less smug factor.

vealparm's picture

Sprouts is another great newcomer. Their stores are great, great produce at very low prices. The employees are cheerful and helpful. They are growing fast in the west and will also hurt "Wholely Overpriced Foods".

813kml's picture

I don't mind paying the premium, where else can you find roast unicorn and fried dodo wings?

It's a shame that WF stopped carrying beer-battered mermaid tails, but apparently they can't be sustainably farmed because they keep clawing each other's eyes out when housed in close quarters.

Lore's picture

The markup is outrageous -- and yet, the location in my town is always jumping.  Customers seem strangely brainwashed not to think in terms of Competition or Value.  Snowflakes and hippies predominate: lots of purple and green hair and "COEXIST" bumper stickers. 

Thinking of broader market conditions, I'm going to stick my neck out here by stating that in the longer term, I smell another Sears in the making, with small shareholders holding the bag as usual. 

Joyo Bliss's picture

Your comment reminds me of the saying: "a fool and his money are soon parted."

NAVIGATOR0832's picture

But sometimes theres some fine looking ass walking around there after work.  

NAVIGATOR0832's picture

excuse me, we dont take EBT,

spastic_colon's picture

thats ok it was at 65 in 2014

Peterman333's picture

Sell to Kroger and get it over with.

TheFreeLance's picture

It is unclear to me what WFM is supposed to do. It deals with thousands of tiny vendors to get that "local" product angle. It is costly and inefficient even tho the vendors are given all the work to do to merchandise their products. What is it the sharps look at and go, "Aha! THAT'S the problem!"

Grandad Grumps's picture

I never shop at Whole Foods. It is just overpriced, with nothing special about the quality. We have a lot of choices in our area, maybe 12 grovery stores closer than the closer Whole Foods.

Raffie's picture

Trader Joe's not bad for different food items.

Corn chowder is pretty good there. Weird shaped can.

MsCreant's picture

Whole Paycheck. This cannot be a mystery why this retailer is flailing. I shop there for very specific things (my proteins) but I am turning to other resources for produce and go to the regular grocer for other items which are priced cheaper. I shop four different stores now. I do buy local and organic where possible. A little research and bulk buying can save you a lot of money. Whole foods is getting a lot less of my whole grocery bill than they used to.

yogibear's picture

Exactly. A way over-priced business model.

NAVIGATOR0832's picture

Whole foods is not for grocery shopping.  It is for looking at wierd people and the things that the sell there.  

Canary Paint's picture

Yeah, it has been a few years since I lived in the States, but even then, in an area with sufficient rural surroundings, one could negociate directly with producers raising their own livestock and/or crops to get a good amount of, if not cheaper, competitively priced goods.

Add a middle man to that and one has a product that is priced for the above lower-middle-class only. However, it is attractive to a certain brand of customer who wants to bypass the standard production chain.

While a business has to be profitable, the basis of the business model is obviously NOT optimizing profits and thus EPS. The model is to provide a market to a certain group of people with certain desires and that very market will necessarily not have as strong a margin.

Then, we find ourselves in the position where the above lower-middle-class is being hollowed out, so things are rough (but probably not catastrophic because the interest is still there). Then, some activist investor who thinks he knows about everything because he was good at one thing poops himself because the EPS is not as good as the projection in his spreadsheet and thinks having the same business model as the competitors, when differenciation was what created the initial success, is a good idea.

It is sort of on Whole Foods because it is a middle man in a domain that should be decentralizing. There only market should be those with the money to buy these goods and who also don't have time to go seek out the producers. If they expand beyond that, then yeah... Get ready for pain.

On the other hand, I kind of hope the activist investors who spent their money on a differentiated business model, and then start screeching to copy the other grocery stores, get kicked in their stupid, fucking, well-tended teeth.

biker's picture
biker (not verified) Apr 10, 2017 2:08 PM

Whole Foods, more slave labor opportunities, since private prisons are the new hype.

$0.15 cents an hour is the new minimum wage!

yogibear's picture

LOL, a small grocery bag and it's $200.00.

Yeah, real trendy.

koaj's picture

Considering I can buy organic and gluten free in Costco, why would I ever go to Whole Foods? Also, Wegmans has the same stuff and is much cheaper.

Squid Viscous's picture

what a fucking ripoff, good place for a truck bomb to get rid of some top 1% scum

chancee's picture

And there was a massive call spread in whole foods that popped up on the trade flash screen this morning on TOS... I pulled up the chart and wondered why anyone would be making such a bullish bet right now... now I know.

Squid Viscous's picture

SEC will be right on it just like the Panera call buyers.

after some moar porn, maybe involving dogs, and kids

SpinDrift's picture

interesting you should say that. worked with a contractor for a while out of CHI who did some gigs with Nanex and trading floor stuff - wicked smart guy and as straight as they come. tells me one day he was doing a server migration for a trading firm and that no shit, the woman who was the floor boss says to him "look, there's stuff on that server you don't want to see but it HAS to get migrated - those files HAVE to be copied over and available first or there will be a shitstorm later" - eluding to the trading guys going off if it wasn't. he gets the new stuff online, copies over the files, sets the perms and on his way out takes a peak...all hard core porn including dog and horse animal shit. guess the traders use it like red meat or something - land something big and 'ding ding let's see that bitch take the horse dong again!'. fuck.knows. people are strange.

Victory_Garden's picture

Whole Foods=world's largest seller of GMO foods grown and pissed on in mexico, because california is too radioactive to grow food that will not kill the eater of this carp.

Uptickin rads:

https://www.youtube.com/watch?v=37OUTv21jec

buzzsaw99's picture

it's hard to feel sorry for them when they were gobbling up the stock while it was constantly making five year lows. i eat colossal amounts of whole fruits, veggies, nuts, etc., and i have never been in one. i'm guessing neither has anyone from jana or they never would have bought so many overpriced shares.

1.21 jigawatts's picture

In Japan its pronounced "Whore Food".

Bernie Madolf's picture

Let's see sub 2% margins and 23x pe. If your margins are that tight as the highest priced player...

there are turds I'd rather buy.

I'm guessing it goes chp 11 by 2027 but need to gather the bag holders for a while

Consuelo's picture

 

 

"...the truth is that Whole Foods 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."

 

What to do, what to do, when in a usury $$$crisis, call in the ----- Barry Rosenstein...

Manipuflation's picture

Barry Rosenstein= short it.

TheFreeLance's picture

You have to know what to buy, where. I have a Trader Joe's and WF 5 min. away, a Publix 10. I ditched my Costco membership after they got rid of their great AMEX, a four-digit a year arbitrage play for us for years. Most of my meat and produce comes from WF. Trader Joe's has the odd pre-pack deal, frozen stuff, and oh the damn wine. Publix fills in for the rest, including absolutely money fresh catfish filets for $7/lb. The non-perishables and snackables that once came from Costco? Amazon subscription. Saves me $35/month on paper products alone.

Sokhmate's picture

It's getting real in the whole foods parking lot

https://youtu.be/2UFc1pr2yUU

StreetObserver's picture

They're going to do to Asswhole Foods what they did to Sears, overload it with debt, stripmine it of value and leave it a smoking ruin.

In Marin County, there are two Asswhole Food stores in the same town, competing against each other to try and put local high quality markets out of business. Hasn't worked so far.

If you like fake Chinese grown ""organic"" food, the Chinese Quality Assurance cadres say it is!, Mexican sewage watered produce, and like to spend more time deciphring labels and figuring out what the differences between "natural" "all-natural", "best", "better", "healthy","GMO free", "unlabled", "our best quality", "on special", "GMOs Aren't Mentioned"  is than actually shopping, then Asswhole Foods is for you.

Meanwhile, a mile away is a huge 100% organic grocery that just opened and is kicking Asswhole Food's two asses by selling the real thing grown locally and certified by people you can trust.

Boca's picture

where's that store, I'd like an alternative to the farmers markets

Insearch's picture

That be Good Earth.... all organic even hot prepared foods

TheFreeLance's picture

Your problem is you live in California. I get pasture raised (grass fed is tough garbage) beef and pork from hours away in GA and NC via my WF. Everything ground is ground in house and maybe $1/2lb more than the plebs spend to buy pink slime at Kroger. I pay ZERO attention to labels because I am smart and know what to look for in produce, meat, and seafood. "Organic" is a myth for hippies.

adr's picture

Just like the stock market. Erase a years worth of justified losses in a couple days on nothing but hopium hype.