Whole Foods to Sell 31 Stores in FTC Deal [WSJ]
By TIMOTHY W. MARTIN
Whole Foods Market Inc. agreed Friday to disgorge many of the Wild Oats Markets Inc. stores it purchased in 2007, settling with the Federal Trade Commission a long-running case over the $565 million deal.
The settlement is a win for the government, but it remains questionable whether it will have much impact on competition in the market for organic and natural foods -- the original basis of the suit.
A lot has changed since 2007, when the FTC said the merger would "mean higher prices, reduced quality and fewer choices for consumers." In the past year, Whole Foods has seen its profits battered by the economic recession and stiffer competition from traditional food retailers like Safeway Inc. and Supervalu Inc.
Whole Foods Chief Executive John Mackey expressed regrets in December about the Wild Oats acquisition. "We would be better off today if we hadn't done this deal -- taking on all this debt right before the economy collapsed," Mr. Mackey said.
The settlement calls for the upscale grocer to sell 31 Wild Oats stores in 12 states, including 19 that already have been closed. Whole Foods also agreed to relinquish the rights to the Wild Oats brand, which could be sold to a potential competitor. In exchange, the FTC has agreed to drop its bid to undo the merger.
The active stores Whole Foods must sell had combined sales of $31 million in the first quarter of fiscal 2009, about 1.3% of Whole Foods' total sales of $2.5 billion, the company said.
"These stores are for all intents and purposes not the shining stars," said Ed Aaron, an analyst for RBC Capital Markets.
Under the terms of the agreement, a trustee will be in charge of selling the stores. If the stores aren't sold within 12 months, Whole Foods can retain them. If the stores are sold, Whole Foods will be left with 42 operating Wild Oats locations, most of which have been converted to the Whole Foods brand. Whole Foods, based in Austin, Texas, currently has 278 stores. |
