Grocery Tracker: Who Gets Whole Foods?

Good Friday meant the markets closed on just four days of trading this week, though some grocery stocks may have wished for another day to round out gains.

Kroger stock (KR) continues to make modest gains in April following its value dive at the beginning of March. KR closed up for the week, seeing a bit more movement in after-hours trading. At the time of writing, KR was worth $30 even with a market cap of over $27.6 billion.

International food retail group Ahold Delhaize (AD) finished out last week on an upswing after seeing downward movement for most of the second week of April trading. AD closed out Thursday up 1.2 percent from the previous close, hitting €19.39 for a market cap of €24.8 billion.

Costco (COST) also finished this week on a down note, though still shows decent gains for the year to date. Thursday trading brought COST down 0.78 percent from the previous close to finish out the week at $168.84 and a market cap of some $73.9 billion.

Last up, Whole Foods stock (WFM) rode on a year high last week on news that an activist investor was putting pressure on the company to accelerate its turnaround and explore options for a possible sale. For the week, WFM closed out up at $33.96, though down 0.47 percent from the previous close.

Still, that sudden bump in value has got to have Whole Foods talking. Even among its competitors, who have also felt the pressure of food price deflation, Whole Foods hasn’t had the best luck lately in the supermarket space.

But Jana Partners LLC, which has reportedly built up an 8.8 percent share in the company, is egging Whole Foods on, urging the chain to improve its store technology and operations.

Jana Partners has already lined up a select group of people who could serve as possible directors, including former Gap CEO Glenn Murphy, former Harris Teeter Supermarkets CEO Tad Dickson and former Barclay’s analyst Meredith Adler. A former CMO of Safeway and a food writer are also reportedly working with Jana.

Investors have noted that Whole Foods isn’t moving quickly enough to catch up to its industry rivals, namely Kroger, with in-store tech and consumer management offerings.

This is clearest in the foot traffic loss to Kroger, as it and other stores have rolled out more organic options at lower prices to meet consumer demand. On average, Whole Foods products retail at 13 percent higher than Kroger.

Same-store sales for Whole Foods fell 2.5 percent in the company’s fiscal year that ended September 2016, and the company revised down its forecast for the coming year back in February.

Whole Foods has had to pull out a number of cost-cutting efforts in the past few months, including ditching its commercial kitchens, leaving behind expansion plans and cutting back to a single CEO.

Last fall, Amazon considered a Whole Foods Market takeover as an option to bolster its grocery business. The online retail giant ultimately decided not to pursue.

Whole Foods would have been a massive purchase, nearly ten times larger than Amazon’s $1.2 billion acquisition of Zappos in 2009. Whole Food’s market valuation, despite recent woes, sits at around $11 billion.

But the prospect of an Amazon sale may not be out of the realm of possibility.

In urging Whole Foods to consider a sale, Jana Partners has also compiled a list of potential bidders. This list includes Amazon, along with Kroger and Albertsons. Some also believe that a private equity player could help Whole Foods do what it needs to do without public market pressure.

Whoever gets Whole Foods in this hypothetical sale would get a chance to take out a piece of online grocery delivery startup Instacart’s market share. Instacart delivers groceries from Whole Foods in over 20 U.S. states.

With Amazon looking to dominate online groceries in the realms of in-store, pick-up and delivery, attenuating Instacart’s reach might eventually prove to be too good an opportunity for the online retail giant to pass up.