Whole Foods Market Inc. (WFM) might be scheduled to repots its fiscal-year 2017 second-quarter earnings next week, but the CEO of the embattled grocer has his attention fixed on something else, according to Karen Short at Barclays. (See also: Whole Foods Can Make Cerberus Complete in Grocery.)
Whole Foods Founder and CEO John Mackey has written a book titled “The Whole Foods Diet: The Lifesaving Plan for Health and Longevity.” The New York Post reported that Mackey began a tour for the new book in April at a new Whole Foods store in New York, which saw a dismal attendance. In a recent note, Short raised worry regarding “the potential for management to be spread too thin by various non-core initiatives.” The analyst pointed at the book tour as an example.
Whole Foods spokeswoman Robin Kelly, in an email to TheStreet, countered Short’s argument, writing that Mackey is more focused on Whole Foods and delivering optimum value to shareholders than ever before. Kelly also noted that Mackey’s planned visits to Washington, Chicago, Detroit and Los Angeles, which were supposed to kick off in June, have been scrapped.
Short also touched on the upcoming earnings, noting that she together with her team “struggled to think of any” factors that will improve the situation of things at Whole Foods. The natural and organic food grocer has reported a comparable store sales decline in the last six quarters, declining by 2.4% in its fiscal first quarter. Given the lackluster growth situation, the grocer dialed back on its new store plans.
Strength and Uncertainty
Whole Foods is currently defending itself against activist hedge fund Jana Partners, which is calling for the company to put itself up for sale or risk a proxy contest, setting a Sept. 6 deadline. Mutual fund manager Neuberger Berman is also pressing Whole Foods to sell itself. Kroger, Amazon and private equity-backed Albertson have been named as potential buyers.
“We believe shares could move higher post results if fundamentals further deteriorate as we believe it adds credibility to JANA’s case (i.e. reinforcing JANA’s sense of urgency for a call to action),” Short noted.
If, on the other hand, Whole Foods posts a modest improvement to fundamentals, shares could trend lower because it could strengthen the management’s position, while elongating the period of uncertainty, Short warned.