Whole Foods CEO Under Pressure to Prove He Can Stop Sales Slide

  • Organic grocer set to report earnings amid slumping profit
  • Co-founder John Mackey has taken sole control during crisis

Whole Foods Said to Shake Up Board

The pressure is on at Whole Foods Market Inc.

With an activist shareholder threatening to push for a sale of the company, investors are eager for signs that Chief Executive Officer John Mackey can respond to the worst sales slump in more than a decade.

John Mackey

Photographer: Patrick T. Fallon/Bloomberg

Mackey, who co-founded the organic grocery store in 1980 and built it into a powerhouse, has taken sole control amid the crisis. Same-store sales and profit have plunged in recent quarters as customers flee the upscale chain for conventional retailers offering organic food at lower prices. With Whole Foods reporting earnings after the close of trading in New York on Wednesday, the spotlight is on Mackey to show signs of a turnaround.

“They’re under a lot of pressure,” said Ajay Jain, an analyst at Pivotal Research Group, who has a sell rating on the stock. He called recent store traffic declines at Whole Foods “alarming.”

Sales at Whole Foods have dropped for six straight quarters, with analysts predicting the company will post another decline. The company is trying to shed its reputation for being overpriced and draw in new customers by controlling costs and pushing discounts. But changing the image won’t be easy, according to Charles Grom, an analyst at Gordon Haskett Research Advisors.

“History has taught us that changing a consumer’s perception of a retailer is very difficult to do,” Grom said in a recent note.

Shares of Whole Foods have outperformed the S&P 500 index so far this year, gaining 19 percent through the close of trading on Tuesday. Most of that surge came after Jana Partners, an activist firm with a long track record, announced it had taken a stake in the company and would push for changes, including possibly a sale of the company. Jana, which is threatening to shake up the company’s board of directors, assembled a team including former retail and grocery executives to help figure out how to fix Whole Foods.

As it grapples with a prolonged sales slump, Whole Foods has seen its earnings per share, excluding some items, drop for three straight quarters, with analysts predicting the slide will continue this year.

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