Ready for a 'refresh,' Whole Foods Market calls in experts

The struggling natural retail chain hopes to return to positive same-store sales and earnings growth by the end of fiscal year 2018, with help from key initiatives, five new board members and a new CFO.

Deanna Pogorelc, Senior content producer

May 11, 2017

3 Min Read
Ready for a 'refresh,' Whole Foods Market calls in experts

Whole Foods Market CEO John Mackey announced a shake-up of the board of directors that includes a new chairwoman and outlined what he called "an accelerated plan to enhance shareholder value” on an earnings call with investors and analysts Wednesday.

Seven straight quarters of declining same-store sales has put pressure on the retailer's top leadership and prompted calls from investors to explore a sale. In the second quarter ended April 9, 2017, Whole Foods sales increased 1.1 percent to $3.7 billion, but comparable store sales were down 2.8 percent. Year to date, comp sales are down 2.6 percent.

In his comments, Mackey said he wanted shareholders to know that company leadership isn't standing still. “We understand that significant change is required at an accelerated pace,” he said in opening the call.

The plan to get back on the path to positive comparable store sales and earnings growth builds on the strategy that Mackey and former co-CEO Walter Robb outlined at the end of 2015. Key initiatives include:

  • An accelerated rollout of its affinity program to all stores by the end of 2017. Whole Foods says that three pilot programs have driven increased trips and bigger baskets.

  • Implementation of a unified purchasing structure by the end of 2017 and category management across all U.S. stores by the end of fiscal year 2018. All savings from category management will be re-invested in lower prices, Mackey said. As a result of that, Whole Foods expects transactions to increase and basket size to grow.

  • An additional $300 million in cost savings by the end of fiscal year 2020 through transformation of store labor processes and allocation, functional efficiencies and supply chain optimization. The cost reduction initiative launched in 2015 has already realized $270 million in savings, Mackey said.

  • A commitment to return capital to shareholders that includes a 29 percent increase in quarterly dividend and new authorization of a $1.25 billion share repurchase program.

  • Five new board members with a wealth of expertise in retail, e-commerce, creating value for shareholders and, importantly, transforming struggling businesses: former Foot Locker CEO Ken Hicks, Morningstar Founder and Executive Chairman Joe Mansueto, former Best Buy CFO Sharon McCollam, former State Street Global Advisors CEO Scott Powers and Panera CEO Ron Shaich.

Five directors on Whole Foods’ board voluntarily stepped down to make room for the new directors, chairwoman Gaby Sulzberger said: former chairman John Elstrott, Mo Siegel, Jonathan Sokoloff, Ralph Sorenson and Kip Tindell.

Also new to the team is Keith Manbeck, who will take over the chief financial officer role as longtime CFO Glenda Flanagan is set to retire. Manbeck was most recently senior vice president of digital finance, strategy management and business transformation at Kohl’s and has additional retail experience from Nike and Victoria’s Secret.

Chairwoman Sulzberger briefly touched on recent headlines related to activist investor Jana Partners, explaining that Whole Foods had an initial meeting with Jana after learning about its share acquisition in April, and then interviewed its proposed board candidates. “As part of those discussions we identified two of Jana’s nominees that we were prepared to add to the board, in return for a customary 18-month standstill or cooperation agreement to enable the board to focus on the tasks at hand,” she said.  “Jana indicated that they were pleasantly surprised by the changes, but they currently didn’t want to ‘tie their hands’ with an agreement. Both sides suggested that we would continue the dialogue. We are disappointed that our confidential discussions have been provided by Jana to the press.”

About the Author(s)

Deanna Pogorelc

Senior content producer, New Hope Network

Deanna oversees day-to-day production of digital content, newsletters and social media for She especially enjoys writing about packaging and mission-driven brands. Prior to joining New Hope Network, Deanna reported on healthcare innovation for MedCity News. She has a bachelor's degree in journalism from Ball State University.

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