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

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Jana's 9% Stake In Whole Foods Doesn't Guarantee Success
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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. (NASDAQ: WFM) Monday and prompted a subsequent 10.5-percent spike in stock value.

Jana Partners, whose members include former New York Times Co (NYSE: 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 (NYSE: KR) and Sprouts Farmers Market Inc (NASDAQ: 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 (NYSE: 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. (NASDAQ: 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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Latest Ratings for CAG

DateFirmActionFromTo
Apr 2017UBSDowngradesNeutralSell
Mar 2017BernsteinDowngradesMarket PerformUnderperform
Feb 2017Deutsche BankInitiates Coverage OnBuy

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