Whole Foods Market, Inc. (WFM) Stock Takes Off on Albertsons Interest

WFM - Whole Foods Market, Inc. (WFM) Stock Takes Off on Albertsons Interest

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Whole Foods Market, Inc. (NASDAQ:WFM) shares are surging higher on Monday on reports that grocery chain Albertsons is exploring a takeover bid. WFM stock is up roughly 3%, capping a 20%-plus rise out of its March low.

Albertsons is owned by private-equity firm Cerberus Capital Management, who reportedly held preliminary talks with bankers on an offer, according to Financial Times.

This comes just weeks after hedge fund Jana Partners LLC said it had accumulated a 9% stake in WFM and was pressuring management to look at strategic options to boost shareholder value including changes to the board, revising contracts with suppliers, and potentially looking for a buyer.

Bloomberg reported earlier this month that Amazon.com, Inc. (NASDAQ:AMZN) considered making an offer last fall. The news outlet also reported that Albertsons was considering WFM rival Sprouts Farmers Market Inc (NASDAQ:SFM), but it appears nothing has come of that.

WFM stock chart

The reversal higher in WFM stock marks the end of a three-year-long consolidation near the $30-a-share level that followed a 50% decline from the late 2013 high. The stumble was the result of slowing growth, public relations mishaps (asparagus water and oranges in plastic), competitive pressures and a focus on its high prices.

It’s no small statement that Kroger Co (NYSE:KR) and Wal-Mart Stores Inc (NYSE:WMT) are just as much a competitive threat — if not more — than smaller, more organic-focused chains such as Sprouts and Trader Joe’s.

Recent reports have indicated that Whole Foods management could soon take efforts to lower prices by centralizing its distribution chain, at the risk of eroding its focus on small, local brands. That begs the question: At what point does Whole Foods become even less attractive by abandoning the few things that still set it apart?

Wall Street will get a revised picture of Whole Foods’ progress May 10 after the bell, when the company reports its quarterly earnings. Analysts covering WFM stock are expecting profits of 37 cents per share on revenues of $3.7 billion.

Anthony Mirhaydari is founder of the Edge (ETFs) and Edge Pro (Options) investment advisory newsletters. Free two- and four-week trial offers have been extended to InvestorPlace readers.

Article printed from InvestorPlace Media, https://investorplace.com/2017/04/whole-foods-market-inc-wfm-stock-takes-off-on-albertsons-interest/.

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