LETTER TO THE EDITOR: Whole Foods is a good buy
by For the MBJ
Published: February 7,2014
Ahead of the pending opening of Whole Foods Market in Jackson, Ted Carter wrote in a column that John Mackey, founder and co-chief executive officer of Whole Foods, has put his “ego ahead of shareholders” due to Mackey’s statements in opposition to the Affordable Care Act. Mr. Carter’s piece had many statements about Mr. Mackey and Whole Foods which I found less than accurate. (Full Disclosure: My daughter works for Whole Foods.)
John Mackey did an op-ed in The Wall Street Journal in 2009 in which he was critical of the Affordable Care Act put forth by the Democrats and President Obama. Then last January, Mr. Mackey appeared on National Public Radio and referred to President Obama’s health care plan as “fascism.” The next day, Mackey appeared on MSNBC’s “Morning Joe” and said “that was a bad choice of words on my part.” A year later, Mr. Carter is staying with the “fascism” comment (Are we piling on, Mr. Carter?) and says Mr. Mackey is “hammering dents” in the “Whole Foods brand.” Let’s look at the Whole Foods numbers because since Mr. Mackey’s original editorial in 2009, I am unable to find any “dents” in the brand. The calendar quarter after Mr. Mackey’s editorial in 2009, Whole Foods had total revenues of $1.8 billion and in the most recent quarter, $3 billion of revenues, or sales growth of around 12 percent annually. Stockholders have also been happy with the company as the common shares have moved during this period from a split-adjusted $14 to a recent $51.
Early last year, Whole Foods split their stock and Mr. Carter thinks this “won the hearts and minds of investors.” Oh, come on now. In the long run, stock splits are a non-event to stockholder returns. In the 1983 annual report for his company, Berkshire Hathaway, Warren Buffett likened stock splits to one desiring ten $10 bills instead of one $100 bill. Whole Foods management should know that investors respond to financial performance and evidence of value creation, not cosmetic non-economic events like stock splits, that have zero impact on value.
“Today, the entire healthy foods sector appears headed for sick bay, though Whole Foods less so. . .” I’m not so sure. Our healthy food friends in Ridgeland, Fresh Market, said in its most recent quarterly report that “sales are up 13% year over year,” while Kroger announced that its quarterly sales were up 3.2 percent over the same period last year. In their last quarterly report, Whole Foods said quarterly sales were up 13.7 percent for a comparable 12 week period the previous year. I would not want to be short the healthy foods segment of the food business over the next five years.
And at the end of your editorial, you suggest that Mr. Mackey should “shut up.” John Mackey is an extraordinary businessman, and as is often the case with strong-willed individuals, outspoken. Many bright, rational and good Americans have disagreed on how our country should address its health care problems, and to be sure, we have a problem. Health care costs in our country consume 17 percent of our gross domestic product while most other developed countries put the number at less than 11 percent of GDP. Accordingly, I welcome John Mackey’s observations in the national conversation on this important topic. And no, it’s not gonna dent the Whole Foods brand.
Tim C. Medley
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