US: Whole Foods Under New Pressure As Activist Investor Unveils Stake

Whole Foods Market has come under renewed pressure after activist investor Jana Partners announced that it has built up an 8.8% stake in the natural foods grocer.

The investor group said it believes the chain’s “shares are undervalued and represent an attractive investment opportunity”.  Jana added that it plans to have discussions with the Whole Foods board and management about instituting changes to help address the chain’s “chronic underperformance”.  It also said it will look for ways to improve real estate and capital allocation strategies for Whole Foods as well as discuss the small-store format.

Jana has a previous history of pressurising players in the grocery industry, most recently with Safeway and ConAgra Foods.  The Whole Foods move comes after the grocer has struggled in recent times, forcing it drop its plans to reach the 1,200-store mark.

Whole Foods said it “welcomes investment in the company and is open to the views and opinions of all of our shareholders. We value constructive dialogue toward our shared goals of creating shareholder value, successfully executing on our strategic priorities and taking actions that will position the company for continued success.”

Separately, Bloomberg News reported that Amazon had considered a possible bid for Whole Foods in autumn 2016, but eventually decided not to go ahead with the same.  Citing an unnamed source, the report says that Amazon held internal discussions about such a move, although they never coalesced into concrete plans.

NAM Implications:
  • The main contribution of an activist shareholder would probably be to encourage divestment as a source of increased shareholder value.
  • A likely response of management will be to re-assess profitability by branch and sell-off those units not performing to new standards.
  • Opportunity for suppliers to demonstrate the cost and value of their contribution to Whole Foods’ P&L…