Jana's 9% Stake In Whole Foods Doesn't Guarantee Success

With the intention of pressuring a potential sale and hastening the company’s turnaround, activist investor Jana Partners LLC seized an 8.3-percent stake in Whole Foods Market, Inc. WFM Monday and prompted a subsequent 10.5-percent spike in stock value.

Jana Partners, whose members include former New York Times Co NYT food writer Mark Bittman, is now Whole Foods’ second-largest shareholder and will seek a board shake-up and technology upgrade.

The stake comes at a time when the health-focused grocery chain suffers heightened competition from Trader Joe’s, Kroger Co KR and Sprouts Farmers Market Inc SFM, as well as critical evaluations from the likes of UBS. The analyst firm initiated coverage of Whole Foods with a Sell rating in March to bring the company’s ratio to six Sells, 12 Holds and five Buys.

As it is, Whole Foods is addressing critiques with a shift in strategy and refocus on “core customers.”

Jana’s Track Record

The activist firm has mixed history with corporate interventions.

While it can boast successful positions in Conagra Brands Inc CAG, McGraw-Hill and energy company El Paso, each of which succumbed to pressure to spin off heavy segments, Jana has encountered difficulty steering QUALCOMM, Inc. QCOM. In fact, the firm has reduced its investment in the latter since taking its original position.

Whole Foods shares were trading around $34.31 at the time of publication, possibly bolstered or reinforced by two options calls announced Monday.

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Posted In: Jana PartnersMark BittmanTrader Joe'sUBSAnalyst ColorLong IdeasNewsShort IdeasInitiationAnalyst RatingsMoversTrading Ideas

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