Management Shake-Ups Accompany Whole Foods Q4 Earnings: Jefferies Weighs In

Whole Foods Market, Inc. WFM reported a top and bottom line beat for its Q4 and hiked its quarterly dividend.

The company also eliminated its co-CEO structure, appointing John Mackey as the sole CEO. Co-CEO Walter Robb will be stepping down from his spot by the end of the calendar year, but will continue to serve as a Board Director.

Whole Foods said CFO Glenda Flanagan is planning to retire at the end of fiscal 2017. The search for a replacement will start in January of 2017, about nine months ahead of her departure.

Following the news, Jefferies analysts Christopher Mandeville and Aaron Eisenberg reiterated a Hold rating and $31 price target on shares, arguing that their subdued long-term earnings projections are “appropriately reflected in [the stock’s] current valuation.”

The experts noted that:

• Q4 EPS beat consensus estimates on solid gross margins
• 2017 guidance came in above analysts fears.
• Quarter-to-date trends showed shy improvements in basket/traffic
• Cost reductions are running ahead of management plans.

“While all encouraging, ROIC is still set to decline again in 2017 and comps continue to lack good visibility,” they added. Shares are likely to react open trading up on Thursday, “but gains may prove fleeting if momentum stalls,” Jefferies’ note concluded.