Whole Foods Market Inc. (Austin, Texas) and Wild Oats Markets Inc. (Boulder, Colo.) have announced a definitive merger agreement under which Whole Foods will acquire Wild Oats for approximately $565 million.
Whole Foods is the industry leader in the burgeoning natural and organic food retailing marketplace with 191 stores in the U.S., Canada and U.K. and sales of $5.6 billion in 2006. Wild Oats has annual sales of approximately $1.2 billion and 110 stores in 24 states and British Columbia under the Wild Oats Marketplace, Henry's Farmers Market, Sun Harvest and Capers Community Markets nameplates.
Whole Foods said it will be evaluating each banner, as well as each store, to see how it fits into its overall brand and real estate strategy. Wild Oats has been shedding underperforming stores over the last several years, but Whole Foods said some additional store closures are expected, as well as the relocation of some stores that overlap with stores Whole Foods Market currently has in development.
Whole Foods said it expects to make significant investments in remodeling Wild Oats stores before eventually re-branding them as Whole Foods Market stores.
“Wild Oats Markets will be our largest acquisition and is a great geographical fit,” said Whole Foods chairman, ceo and co-founder John Mackey, “as all of our 11 operating regions will gain stores and three of our smallest regions — our Pacific Northwest, Rocky Mountain and Florida regions — will gain critical mass. We will also gain immediate access into a significant number of new markets.
“Wild Oats Markets and Whole Foods Market have both had a large and positive impact on the natural and organic foods movement throughout the United States, helping lead the industry to nationwide acceptance and to becoming one of the fastest growing segments in food retailing today. Our companies have similar missions and core values, and we believe the synergies gained from this combination will create long-term value for our customers, vendors and shareholders as well as exciting opportunities for our new and existing team members.”
Mackey said that the companies would save money by eliminating corporate duplication and that Whole Foods would gain access to markets where it is now weak.
The announcement came at the same time that Whole Foods announced its quarterly earnings were below analysts’ expectations. Net income dropped 7.7 percent. And while same-store sales rose 7 percent, they had gained 13 percent in the same quarter a year ago. Whole Foods’ stock has tumbled by nearly 40 percent in the last year because of increased competition and the chain’s inability to keep pace with its lofty financial goals. And more traditional food retailers, like Kroger and Wal-Mart, are entering the organic foods market.