Los Angeles billionaire and supermarket mogul Ronald Burkle has gone shopping at Whole Foods Markets Inc., picking up 7% of the company's shares over the past two months, according to a filing this morning with the Securities and Exchange Commission.
Shares of Whole Foods jumped $1.08, or almost 11%, to $11.09 on news of the investment by Burkle and various entities controlled by his Yucaipa Cos. investment arm. The supermarket chain's stock plunged 77% in 2008.
In the filing, Burkle said that he believed shares of the natural and organic foods grocery chain are undervalued and "that there are substantial opportunities for the company to improve operations and its pricing image while maintaining its high-quality product offering."
Whole Foods is sometimes nicknamed "Whole Paycheck" because of the perception by some consumers that the chain's organic products and wide selection of prepared foods and wines make it an expensive place to shop compared to traditional grocery stores.
Its position as a luxury retailer has hurt the company as the recession has deepened.
During its fourth quarter, which ended Sept. 28, identical-store sales, excluding eight relocated stores and two major expansions, decreased 0.5% compared to a 6% increase in the same period a year earlier.
At the same time, the company's net income plunged to $1.5 million from $34 million in the same period a year earlier. Part of the decrease resulted from expenses related to its 2007 acquisition of the Wild Oats Markets Inc. chain. Burkle also was a major Wild Oats shareholder.
In November, the grocer sold $425 million worth of preferred stock -- convertible into a 17% stake in Whole Foods -- to an affiliate of retail investment firm Leonard Green & Partners to shore up its cash position as the economy worsened.
Burkle said in the filing that for now, he will keep the Whole Foods shares as an investment.
However, Burkle said he will "closely monitor the company's performance" and could modify his plans depending on his investment company's evaluation of Whole Foods' "business prospects and financial position, other developments" and "opportunities."
"Ultimately, what Yucaipa has done with other companies is acquire, merge and then sell. Look at Wild Oats where they acquired stock, put in management and sold the company," said Andrew Wolf, an analyst at BB&T Capital Markets in Richmond, Va.
Burkle built his fortune, which before the recent financial markets meltdown was estimated to be about $3 billion, buying and selling supermarket chains such as Ralphs, Alpha Beta, Fred Meyer Inc. and Food4Less.
He purchased the Whole Foods shares at prices ranging from $8.94 to $10.55 from Nov. 24 through Jan. 7, well below today's price.
Last week, Burkle also disclosed that he had acquired an 8.3% stake in the Barnes & Noble Inc. book chain, also because he believed the shares were undervalued.
The Whole Foods investment comes at a time when the grocer is caught up in a legal battle with the Federal Trade Commission, which is seeking to undo the Wild Oats purchase, charging that it violated antitrust rules.
jerry.hirsch@latimes.com
