Washington – The head of Whole Foods Market Inc. tried Monday to calm shareholder concerns that the natural-foods grocer is rapidly expanding as a strategy for meeting its long- term sales target.
At a shareholder meeting in Washington, chairman and chief executive John Mackey said he would not “do anything stupid” to meet the company’s stated objective of reaching $12 billion in sales by 2010.
“We’re not going to destroy shareholder wealth or value to hit some arbitrary goal we made up,” Mackey said.
He was responding to an investment adviser at the meeting who said he was “baffled” by the objective.
“It is almost as if you are saying, ‘We need to get big,”‘ said Tim Medley, who owns Whole Foods stock and said he represents clients who own about 8,000 shares.
Last week, Mackey announced that Whole Foods would acquire an additional 110 stores in a proposed merger with Boulder- based Wild Oats Markets Inc., a smaller natural-foods grocer, for $565 million as well as $106 million of debt.
Mackey said the deal would give Whole Foods greater reach in the Pacific Northwest region, the Rocky Mountain region and Florida – markets where it has fewer stores and struggles to compete with similar chains, such as Trader Joe’s.
Since opening its first store in Austin, Texas, in 1980, Whole Foods has expanded to 193 stores across the country.
In a recent letter to shareholders, Mackey said the chain is well positioned to more than double last year’s sales of $5.6 billion over the next four years.
But Medley said there are many companies with high sales growth that don’t translate into profits for shareholders.
“I’m worried that you may influence 10 or 20 (executives) who are saying, ‘We need to add more sites because Mr. Mackey wants to get to $12 billion in sales by 2010,”‘ Medley said.
Another shareholder pressed Mackey on how he would handle Wild Oats’ recent initiative to sell its private-label goods in traditional grocery stores. Mackey said he did not know the terms of Wild Oats’ contracts with grocers but added: “We really don’t want to see our product available in other supermarkets.”
