Whole Foods Market on Wednesday announced a slate of dramatic changes ranging from new board and executive appointments to an accelerated plan to slash costs and regain sales and earnings momentum.
The Austin, Texas-based natural foods retailer, whose slumping results and lagging stock price last month attracted the attention of activist investors — and rumors of strategic partnerships — said its goal was to deliver better returns for shareholders while setting the stage for positive comparable-store sales and earnings growth by the end of its 2018 fiscal year in September 2018.
“Today’s announcement is a powerful combination of accelerated initiatives and new cost savings with clear timelines to deliver,” said CEO John Mackey in the release. “We are on a path to return to positive comparable store sales and earnings growth next year. Our increased dividend and new share repurchase authorization demonstrate our board’s confidence in our long-term growth strategy and continued ability to generate strong cash flow. The board will continue its comprehensive review of all opportunities to create value. We look forward to continuing our dialogue with shareholders and providing future updates on our progress.”
Initiatives include accelerating an affinity loyalty rollout to all U.S. stores and completing a restructure of its purchasing program by the end of the 2017 calendar year. The company said it would implement category management chainwide by the end of the 2018 fiscal year.
Whole Foods said it would also slash costs by $300 million by the end of the 2020 fiscal year behind store labor transformation including standardization of in-store processes and labor allocation; support function efficiencies; and supply chain optimization through an accelerated order-to-shelf rollout. Those savings are in addition to the $270 million already realized as part of the company’s prior cost reduction plan, which is on track to reach $300 million by the end of this fiscal year.
Separately Whole Foods announced the appointment of five new independent directors, and named existing board member Gabrielle Sulzberger the new chair of the board and Mary Ellen Coe the new chair of the nominating and governance committee, effective immediately. The company also announced the appointment of former Kohl’s executive Keith Manbeck as its new CFO.
Manbeck, who begins May 17, will succeed Glenda Flanagan, who previously announced plans to retire.
Most recently Manbeck served as SVP of digital finance, strategy management and business transformation at Kohl’s Corp. During his tenure at Kohl’s, Manbeck helped lead key transformation initiatives, including the company’s development of its digital commerce business. This resulted in three years of double-digit comp growth that outperformed industry peers, along with more than 20% annual sales growth and over 25% annual profitability growth.
Prior to joining Kohl’s, Manbeck served as VP and CFO for Nike’s Direct to Consumer business, which under his stewardship grew to more than $5 billion in sales with double-digit comp growth each year and profits increasing by more than 30% each year, Whole Foods said.
“Keith’s proven experience will be a great addition to our team,” Mackey said. “Keith has a track record of success at leading retail companies, including Kohl’s and Nike, where he led key transformation initiatives with great results. He is a proven leader who knows how to drive strategic change, while maintaining the culture and values that make a company great. We are confident Keith’s financial and operational expertise will allow him to hit the ground running as we move forward with our plan to improve financial and operational performance.”
The new board appointees, effective immediately, are Ken Hicks, Joe Mansueto, Sharon McCollam, Scott Powers and Ron Shaich.
Sulzberger, the new board chair, has served as an independent director of the company since 2003 and succeeds John Elstrott as chair. Sulzberger has served as a principal of a diversified investment fund, Rustic Canyon/Fontis Partners LP, since its inception in October 2005.
Those announcements came as Whole Foods said sales for its 12-week second quarter ending April 9 increased by 1.1% to $3.7 billion and comps declined by 2.8%, including a 30 basis-point impact of the Easter holiday falling outside of the quarter this year. Those figures were slightly above consensus analyst estimates. Net earnings of $99 million fell by 30.3%.