Reuters/Lucy Nicholson
John Mackey
Whole Foods' founder and CEO had harsh words for an activist investor hedge fund that criticized the grocery chain as it struggles to improve its business.CEO John Mackey called activist investor Jana Partners "greedy bastards" in an series of interviews with Texas Monthly. He also referred to them as "Ringwraiths," which are villainous characters from the "Lord of the Rings" series.
"[T]hese guys just want to sell us, because they think they can make forty or fifty percent in a short period of time," Mackey told Texas Monthly's Tom Foster. "They're greedy bastards, and they're putting a bunch of propaganda out there, trying to destroy my reputation and the reputation of Whole Foods, because it's in their self-interest to do so."
Jana Partners announced it had upped its stake in Whole Foods to more than 8 percent in April. The hedge fund is pushing for major changes at the grocery chain, including a board shakeup and a possible sale of the company.
In May, Whole Foods announced it had overhauled its board, replacing five members - some of whom had close ties to Mackey.
Mackey, who opened the first Whole Foods location in 1980, sees the hedge fund's efforts as short-sighted and in direct opposition to the ideals of "conscious capitalism" that he has espoused for decades.
"They're Ringwraiths," or power-obsessed individuals, Mackey said. "The guy behind Jana Partners, for example, who's attacking us [Barry Rosenstein], he bought the most expensive home ever sold in America, for $147 million. And their mantra is basically shareholder value. They don't care about the stakeholders or long-term value."
However, stakeholders say that the power play between Mackey and investors isn't the "morality play" he says it is.
"This isn't the rapacious hedge fund versus the conscious capitalist," an anonymous Whole Foods shareholder told Foster. "That's a straw-man argument. The business is hemorrhaging customers."
In May, Whole Foods reported that same-store sales at stores open at least a year fell 2.8% in the second quarter.
"That Whole Foods can't turn around its fortunes is, in our opinion, the result of several fundamental flaws in its business model," retail consulting firm GlobalData's managing direct Neil Saunders wrote in a note to clients, citing issues including the rise of other organic grocers, uninspired store design, and bland food. "Over the past few years, these cracks have become more pronounced, and the company has done seemingly little to correct them."
If you work at Whole Foods and have a story to tell, email this reporter at ktaylor@businessinsider.com
Read the full Texas Monthly story here.