Another major shareholder pressures Whole Foods to explore sale
- Mutual-fund manager Neuberger Berman, which owns a 2.7% stake in Whole Foods, has joined the chorus of voices calling for the retailer to explore putting itself up for sale, according to The Wall Street Journal.
- In an interview with the Journal, firm members said Whole Foods has a top-notch brand and prepared food sales, but has been too slow to adopt retail technology and practices that would help it compete against other chains.
- Neuberger Berman expressed concern about John Mackey remaining company CEO. It also advised Whole Foods to hire directors in critical areas like real estate, finance and technology.
A little more than two weeks after activist investor Jana Partners bought a nearly 9% stake in Whole Foods, another influential shareholder is pressuring the natural and organic retailer. Neuberger Berman, which typically avoids public clashes with the companies in which it invests, is clearly frustrated with the company’s inability to capitalize on its assets.
The two firms, which have not worked together, have turned up the heat on Whole Foods CEO John Mackey to sell the company he started 40 years ago — or at least make drastic changes to the way it operates.
Will they get their wish? Last week's news that Albertsons was exploring an acquisition of Whole Foods indicated they could, perhaps even sooner than they'd hoped. Other names have surfaced as observers speculate on possible suitors, including Kroger, Amazon, private equity, and even international grocers like Germany’s Metro. For now, though, the only certainty is that the rumor mill is working in full force, as it so often does when the possibility of acquisition is in the air.
"I think this is just smoke," Neil Stern, senior partner at retail consulting firm McMillanDoolittle, told Food Dive.
Stern, among others, believes Mackey wants to right the ship himself, and will resist a sale for as long as possible. The 63-year-old executive and his team have a plan in place that includes many of the traditional grocery tactics the company has long resisted, including price cuts, centralized purchasing, loyalty programs and a more data-driven approach to merchandising. They're the steps that industry players, including Jana and Neuberger Berman, believe need to happen.
But Whole Foods set its new course back in 2015 and hasn’t seen much improvement from it. Mackey has promised to speed up these efficiency measures as it slows store growth, but many are skeptical that he and his team can execute on the plan.
Whole Foods is in a tough position. It needs to act more like a conventional grocer, but still maintain its unique identity with its most loyal shoppers. How, exactly, it goes about doing this is up for debate. However, it seems clear that if Mackey doesn’t deliver results quickly, he will be forced by shareholders to put the company he founded up for sale.
- The Wall Street Journal Another Large Investor Calls on Whole Foods to Explore Sale
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