On a day it reported positive earnings, Austin-based Whole Foods Market said it is embarking on a series of changes at its highest levels, doing away with its longstanding tradition of two co-CEOs and now on the hunt for a new chief financial officer.
Co-founder John Mackey will now become sole chief executive officer, while former cohort Walter Robb will now transition to his new, primary role on the company’s board of directors, among other responsibilities.
The leadership makeover comes, as the company’s longtime CFO Glenda Flanagan will retire from her role by the end of 2017, spurring a hunt for her replacement starting in January.
Robb, who has been with Whole Foods for 25 years, shared the co-CEO title with Mackey for the last six years.
“Under Walter’s leadership, Whole Foods Market has grown from 12 to 464 stores in three countries. He has been instrumental in accelerating investment in our digital strategy and technology transformation to meet the ever-changing retail landscape,” John Elstrott, chairman of Whole Foods Market’s board of directors, said in a statement. “In the past year Walter and John have hired five new senior executives, and have adopted and made significant progress on their nine point strategic plan, putting the company in a strong foundational position for winning.”
Mackey lauded both Robb and Flanagan for their roles with the company during a call with investors.
“The significance of their countless contributions cannot be overstated, and we are grateful that both will continue to be involved in shaping our future,” Mackey said.
Robb, for his part, said it was time for the move.
“As a team we have really worked hard the last year to work through the changes … in retail,” Robb told investors. “The board … has decided to move to a more streamline structure” is what is needed now, and “I will be here to cheer that on.”
Meanwhile, Whole Foods Market beat forecasts with its fourth-quarter earnings report on Wednesday, posting earnings per share figures above Wall Street predictions and triggering a rise in the retailer’s stock in after-hours trading. However, the retailer barely missed on some revenue forecasts.
Whole Foods said it had record revenue for the quarter of nearly $3.5 billion with earnings per share of 28 cents. Thomson Reuters analysts had projected revenues of $3.5 billion with earnings per share of 24 cents.
In the same quarter a year ago, Whole Foods posted earnings per share of 16 cents and $3.4 billion in revenue.
After years as the organic foods leader, Whole Foods has seen traditional supermarkets, big-box stores and online retailers chip away at its market share. The company is one of Austin’s highest-profile companies, with 87,000 workers in 464 stores worldwide and about 2,500 employees in Central Texas.
Ahead of Wednesday’s report, shares in Whole Foods closed down 15 cents or about one-half percent to $28.51. In after-hours trading, the stock was up nearly $1 or 3.5 percent to $29.50.
The stock has a 52-week range of $27.67 to $35.58.
The retailer also said on Wednesday that same-store sales fell 2.6 percent in the quarter that ended Sept. 25. Analysts had projected same-store sales — a key metric in the grocery industry — would fall 2 percent.
However, the company said that those same-store sales declines were easing in the in first quarter, posting a 1.6 percent decrease in the first month so far.
For the fiscal year, Whole Foods posted sales of $15.7 billion, up 2.2 percent from $15.4 billion in the previous year. Earnings per share were $1.55 versus $1.49 a year earlier.
This, as same-store sales was down 2.5 percent, below growth of 2.5 percent in 2015.
“Food retailing is evolving at an incredibly fast pace, and consumers have many more options for how and where they buy their food than ever before,” Mackey said in an investor call after the earnings release. “At the same time, the market opportunity is expanding as the consciousness about fresh, healthy foods continues to awaken. Our company mission, commitment to transparency, and culture of innovation are more relevant and timely than ever, and where our company is today is just a shadow of where we think we will be in the future.”
The retailer is coming off a challenging couple years, where the organic foods giant saw its stock fall more than 40 percent after it issued a difficult earnings report in May 2014 and missed earnings expectations several times since. The May 2014 report triggered a reckoning with Wall Street and sent Whole Foods into one of its most challenging periods in its 30-plus year history.
This year, the retailer installed a new nine-point plan that entailed the launch new line of smaller, value-driven stores, 365 by Whole Foods Market. It has since opened two locations of the new store brand to positive reviews: A first store opened in the Los Angeles suburb of Silver Lake, California, May 25 followed by a second store in the Portland, Oregon, suburb of Lake Oswego July 14 and a third location in Bellevue, Washington, outside Seattle on Sept. 14.
In 2017, as many as 10 of the 365 stores could open, including a Cedar Park, Texas, location near New Hope Drive and the 183-A Tollway.
The 25,000- to 35,000-square-foot stores compete with Trader Joe’s, Sprouts and other smaller format, value-focused brands.
Also as part of Whole Foods’ nine-point plan, the retailer said it would lower prices, trim its workforce, cut $300 million in expenses by 2017, boost its digital reach with consumers and moderate growth.
“We have made measurable progress this year on our nine-point plan to position Whole Foods Market for continued success in an increasingly competitive marketplace,” Mackey said. “This includes one of our most important initiatives, which is to reduce expenses by a $300 million run rate by the end of FY17 (fiscal year 2017). We are pleased to report that as of year end, we were more than 50 percent of the way toward our goal.”
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