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Blog Coverage: Activist Investor Jana Partners Acquires Nearly 9% Stake in Food Retail Chain Whole Foods Market

Upcoming AWS Coverage on Weis Markets Post-Earnings Results

LONDON, UK / ACCESSWIRE / April 12, 2017 / Active Wall St. blog coverage looks at the headline from Whole Foods Market, Inc. (NASDAQ: WFM). In a 13–D filing with the US Securities and Exchange Commission (SEC) on April 10, 2017, Jana Partners LLC and its associates disclosed that they held 8.8% stake in Whole Foods Market. The activist investor firm Jana procured the shares over a period of 60 days, and felt that they were undervalued and had great investment potential. Register with us now for your free membership and blog access at:

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One of Whole Foods Market's competitors within the Grocery Stores space, Weis Markets Inc. (NYSE: WMK), reported on March 09, 2017, its Q4 and year-end results for FY16. AWS will be initiating a research report on Weis Markets in the coming days.

Today, AWS is promoting its blog coverage on WFM; touching on WMK. Get all of our free blog coverage and more by clicking on the link below:

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About Whole Foods

Austin, Texas based Whole Foods is a leading natural and organic food supermarket chain which has over 462 stores out of which 441 stores are in US, 12 stores are in Canada, and 9 stores in the UK. The Company has a workforce of over 87,000 people across its locations. Whole Foods recorded sales of over $15.7 billion in FY16.

The food items sold exclusively by Whole Foods do not contain artificial preservatives, colours, flavours, sweeteners, and hydrogenated fats. It offers over 30,000 organic stock keeping units (SKUs), which include fresh produce packaged goods, bulk, frozen, dairy, meat, bakery, prepared foods, coffee, tea, beer, wine, cheese, nutritional supplements, vitamins, body care, pet foods, and household goods. Some of Whole Foods brands include 365 Everyday Value, Allegro Coffee, Whole Foods Market, Whole Paws, and Engine 2 Plant-Strong.

Earnings Highlights

In February 2017, Whole Foods had disclosed its Q1 2017 earnings results for the period ending on January 15, 2017. The Company recorded total sales of $ $4.9 billion for the quarter and a diluted EPS of $0.30 with EBITDA at $360 million, or 7.3% of sales. However, the store sales decreased by 2.4% in this quarter. The Company's debt stood at $1.1 billion at the end of the quarter. John Mackey, Co-founder and CEO of Whole Foods Market had assured that the Company would make necessary changes to its processes and operating model to ensure higher returns for its shareholders.

Industry Woes and Other Challenges

Like all retail businesses, Whole Foods has also been facing the brunt of diminished footfalls as well as reduction in average spending in the stores. This trend along with overall food price deflation has impacted the financial performance of Whole Foods in last few quarters. Increased competition from rivals like Sprouts Farmers Market, Trader Joe's, and Kroger has also impacted its sales and market position.

Whole Foods tried to counter the negative trend by cutting costs, closing underperforming stores and shelving expansion plans, but faces an uphill task.

Modus Operandi of Jana Partners and its impact on Whole Foods future

Activist hedge fund Jana Partners was founded in 2001 by Barry Rosenstein and is known for investing in Companies that have been undervalued. The hedge fund takes up positions in these undervalued Companies and then works with its management to aggressively push for strategic changes that would unlock value of these Companies. The suggestions could vary from splitting up the business to selling off part of the Company's business or considering merger with other potential partners - Case in point being Jana's investment in Companies like Safeway, Inc. in 2013 which later merged with Albertsons Companies Inc. in 2014 in a $9.1 billion deal. Jana invested in ConAgra in 2015 which later on split its business into two Companies in 2016 with ConAgra Brands, Inc. handling the consumer brands business and Lamb Weston handling the frozen potato business.

Jana taking up a substantial stake in Whole Foods has led to intense speculations about how this will play out. In the filing with SEC, Jana has listed some of the changes that it expects to discuss with the Board of Directors and Management of Whole Foods. These include addressing the underperformance for shareholders, changes in the Board and Management team for better governance, optimizing real estate and capital allocation for better return on investment, improving brand and operational efficiencies, taking help of analytics, technology and digitization to improve buying practices, pricing strategies, communication and online offerings. Improve in-store management, changing grocery procurement, and distribution strategy, improving customer loyalty etc.

Given that Whole Foods is known for its reluctance to discuss Company matters with third parties, Jana has hinted that it would take all necessary steps to increase shareholder value as well as nominate its representatives in the Board of Whole Foods. This is to ensure that review of strategic alternatives can be initiated and future plan of action can be formulated. Jana has already identified a group of professionals who can join Whole Foods Board as Directors and engage other interested members to explore strategic options for the Company.

How Jana goes about unlocking shareholder value and what type of strategic alternatives it comes up with, or whether it lines up a string of suitors for Whole Foods, is to be seen.

Stock Performance

On Tuesday, April 11, 2017, the stock closed the trading session at $33.55, dropping 1.81% from its previous closing price of $34.17. A total volume of 16.63 million shares have exchanged hands, which was higher than the 3-month average volume of 5.32 million shares. Whole Foods Market's stock price rallied 10.19% in the last three months, 17.69% in the past six months, and 15.36% in the previous twelve months. Furthermore, since the start of the year, shares of the Company have gained 10.08%. The stock is trading at a PE ratio of 24.26 and has a dividend yield of 1.67%.

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SOURCE: Active Wall Street