BOULDER, Colo. — Wild Oats Markets here kicks off the new year without both a chief executive officer and a chief financial officer, after former CFO Bob Dimond last week left the No. 2 natural food retailer to return to his previous job as CFO of Minneapolis-based wholesaler Nash Finch Co.
His departure followed by just two months the exit of former CEO Perry Odak, who left Wild Oats after failing to come to terms on a new contract.
Analysts pointed out that the vacancies come at a critical time for the company, which has long languished behind its faster-growing rival Whole Foods Market, Austin, Texas.
“I think the next management team will have an opportunity to upgrade the store base and the execution, and try to be a decent second player in natural foods retailing,” said Andrew Wolf, a Richmond, Va.-based analyst with BB&T Capital Markets.
Analysts said they had confidence for the near term in the ability of the interim managers, who include acting CEO Gregory Mays — now overseeing finance — who is also chairman, and the recently hired Roger Davidson, senior vice president, merchandising and marketing, who analysts said could be a CEO candidate. Mays, a 33-year industry veteran who previously had been CFO at Ralphs Grocery Co., Los Angeles, himself is relatively new to Wild Oats, having come aboard as chairman last year after the departure of Robert Miller, who left to run the Cerberus-owned Albertsons stores.
Wild Oats has engaged Los Angeles-based Korn/Ferry International to lead the search for a new CEO but has not yet hired a firm for the CFO search, Wild Oats spokeswoman Sonja Tuitele told SN last week. The recruiting firm is expected to meet with current management in Boulder as soon as this week after the Dec. 21 Denver snowstorm delayed a previously scheduled meeting.
Tuitele said the chain could hire a CFO before selecting a CEO if the right candidate appears.
“In terms of timing, I don't think one is predicated on the other in terms of candidates,” she said. “Greg Mays has a strong financial background and is quite confident he knows what to look for in a good CFO. If that person happens to come to us sooner than the CEO, we would get that person on board. But if it looks like we are getting close to hiring a CEO, and we have a few candidates as CFO finalists, we would want the CEO to obviously have a say in that final decision.”
Bill Reffett, managing partner in the Bellevue, Wash., office of executive search firm Preston-Reffett, which is not involved in the search, said letting the new CEO select a CFO was the better option.
“We would recommend that the search committee bring a slate of three to four solid candidates to the new CEO to make the final call,” he told SN. “The new CEO should have a chance to visit with all of the final contenders before being asked to weigh in and cast their vote.”
He said that given Wild Oats' current challenges, the company needs an experienced CFO.
“This is not a role for a someone who is in the No. 2 [financial] position with another company today,” he said.
In terms of the CEO search, observers pointed out that the company needs someone with both a strong retailing background and a familiarity with the natural/organic culture. Wolf of BB&T Capital Markets said the experience in natural/organics is crucial.
“Wild Oats kept bringing in people with conventional food retailing experience, and there's been a big track record of failure by conventional retail managers in natural food,” he said. “The vendor relationships are different, the employees are different — it's just a different channel. It's getting more mainstream, but it's coming at the mainstream from a different side.”
Tuitele said the company's range of candidates is not that limited.
“It would be preferable if this person had maybe not specifically natural and organic, but specialty food experience,” she said. “What's most important is retail operations experience, having a proven track record, and someone who can fit in culturally with the lifestyle brand that Wild Oats is — so specialty food or specialty retail would probably be preferable, but it's not a deal-breaker.”
Gary Preston, the Philadelphia-based managing partner at Preston-Reffett, said the new CEO “could come from a number of places inside or outside of traditional retailing,” noting that Davidson, a Supervalu veteran, would be a good candidate.
“While a background in retailing makes the transition a bit easier, at the end of the day it's all about leadership and the ability to drive the execution of a well-thought-out strategy,” he said.
At Nash Finch, Dimond succeeds LeAnne Stewart as executive vice president, CFO and treasurer. She said several months ago that she planned to step down as soon as a successor was named. Dimond had held those positions at Nash Finch from 2001-2004 before leaving to join Penn Traffic Co., Syracuse, N.Y., briefly before joining Wild Oats.
Scott Van Winkle, an analyst at Canaccord Adams, Boston, said he was not concerned about the departure of Dimond. He pointed out, however, that if Dimond had a financial incentive to remain with Wild Oats in the event of an acquisition of the chain, his departure could evidence that a long-rumored takeover or merger is not imminent.
“It's probably an indication that there's no sale of the company in the near term, because I doubt he would leave before that would happen,” Van Winkle told SN.
John Heinbockel, an analyst at Goldman Sachs, New York, said in a report that Dimond was likely lured away by “a much richer financial package at Nash Finch” and added that “the successful hiring of a new, dynamic CEO is a much more important development.”
In a filing with the Securities and Exchange Commission last month, Nash Finch said it would pay Dimond an annual salary of $375,000, plus a signing bonus of $187,500 and an opportunity to receive an additional annual bonus of up to 60% of his base salary, plus long-term incentive bonuses. His contract also calls for him to receive 75,000 shares of restricted stock over time.
Like Mays, Dimond had connections with Yucaipa Cos., the Los Angeles investment firm that is Wild Oats' largest shareholder. Dimond had been CFO at Kroger's Western Division and vice president and controller at Smith's, both of which came to Kroger via Yucaipa.
Although analysts were divided about how much say Yucaipa might have in the selection of the new officers, Tuitele said the firm would not have undue influence.
“[Yucaipa] would be like any other large investor that has strong contacts,” she said. “If they were to refer a strong CFO or CEO candidate, we would definitely pass that along to Korn/Ferry or whoever ends up doing the search for the CFO, but we are not going to listen to recommendations only from Yucaipa. The management team and the board will reach out to all of their networks to identify good candidates.”
She said Mays is “very optimistic that we are going to have some really good candidates” because of the growth in the space and because the company has what she described as a strong foundation.
“The board sees this as an opportunity to bring in a CEO who can take it to the next level,” she said.