(Adds confirmation of board changes, share price, background)
By Michael Flaherty and Lauren Hirsch
NEW YORK May 10 Whole Foods Market Inc
named a new chief financial officer and five independent
directors who were not on activist investor Jana Partners'
slate, in a dramatic shakeup as the high-end grocer seeks to
boost dwindling profits and a sagging stock.
Shares of Whole Foods rose more than 2 percent to $37.25 in
after-hours trading on Wednesday, as it named former Kohl's Corp
executive Keith Manbeck as chief financial officer,
effective May 17.
Whole Foods, which posted its seventh straight quarterly
same-store sales decline, also appointed Gabrielle Sulzberger as
The new independent directors are former Footlocker Chief
Executive Ken Hicks, Morningstar founder and Executive Chairman
Joe Mansueto, former Best Buy Co Inc Chief Financial
Officer Sharon McCollam, Panera Bread Co founder and
Chief Executive Ron Shaich, and State Street Global Advisors CEO
The shakeup came after Jana Partners took an 8.3 percent
stake in the company and nominated four directors for the board.
Mutual fund firm Neuberger Berman, which owns a 2.7 percent
stake, has also pressured Whole Foods to take steps to improve
its stock price, which has fallen steadily since peaking in
Reuters earlier on Wednesday reported that Whole Foods
planned to remove more than half its board, citing a person
familiar with the matter. The board, with 12 directors, is
expected to remove another two directors by year-end, said the
source, who was not authorized to speak publicly about the
matter and requested anonymity.
Whole Foods has been losing shoppers to rivals as the
natural and organic category it pioneered has gone mainstream at
retailers including Kroger Co and Wal-Mart Stores Inc
, as well as newer competitors like Amazon.com Inc
and meal kit provider Blue Apron.
The grocer has not struck a standstill agreement with Jana,
the source said, meaning the hedge fund can continue to pressure
it to improve performance. Standstill agreements usually offer
an activist hedge fund representation on the company's board in
exchange for support and silence for at least the next year.
Jana and a spokesman for Whole Foods were not immediately
available for comment.
In a filing in April, Jana said it was frustrated with Whole
Foods' lack of engagement regarding its strategic review, noting
its "apparent unwillingness to engage in discussions with third
parties regarding such alternatives."
Jana has nominated four directors for Whole Foods' board,
including former Gap Inc CEO Glenn Murphy, former Harris
Teeter Supermarkets CEO Thomas "Tad" Dickson and former Barclays
stock analyst Meredith Adler.
Jana can still nominate that slate at the next Whole Foods
annual meeting, which is expected in February.
Late last year, Whole Foods returned co-founder John Mackey
to the role of solo CEO after six years of splitting the job
with Walter Robb, who focused on operations, betting that Mackey
would be best to lead a turnaround.
After Jana disclosed its stake, acquisition speculation
swirled around the company, though a suitor has yet to emerge.
Whole Foods posted quarterly sales of $3.74 billion, edging
past analysts' average estimate of $3.73 billion according to
Thomson Reuters I/B/E/S.
The Austin, Texas-based company reported a 2.8 percent fall
in sales at stores open at least 13 months, less than the 3.1
percent drop expected by analysts polled by Consensus Metrix.
Net income declined to $99 million, or 31 cents per share,
from $142 million, or 44 cents per share, a year earlier.
Excluding certain items, earnings of 37 cents per share in
the second quarter ended April 9 were in line with the analysts'
The company trimmed its 2017 earnings forecast to $1.30 per
share, from the previous forecast of $1.33.
(Reporting by Michael Flaherty and Lauren Hirsh in New York;
Additional reporting by Gayathree Ganesan in Bengaluru; Editing
by Meredith Mazzilli and Richard Chang)