Whole Foods Market named a new chief financial officer and five independent directors who were not on activist investor Jana Partners’ slate, in a dramatic shakeup as the high-end grocer seeks to boost dwindling profits and a sagging stock.
Shares of Whole Foods rose more than 2% to $37.25 in after-hours trading on Wednesday, as it named former Kohl’s (KSS) executive Keith Manbeck as chief financial officer, effective May 17.
Whole Foods (WFM), which posted its seventh straight quarterly same-store sales decline, also appointed Gabrielle Sulzberger as chairman.
The new independent directors are former Footlocker Chief Executive Ken Hicks, Morningstar founder and Executive Chairman Joe Mansueto, former Best Buy (BBY) Chief Financial Officer Sharon McCollam, Panera Bread (PNRA) founder and Chief Executive Ron Shaich, and State Street Global Advisors CEO Scott Powers.
The shakeup came after Jana Partners took an 8.3% stake in the company and nominated four directors for the board. Mutual fund firm Neuberger Berman, which owns a 2.7% stake, has also pressured Whole Foods to take steps to improve its stock price, which has fallen steadily since peaking in 2013.
Reuters earlier on Wednesday reported that Whole Foods planned to remove more than half its board, citing a person familiar with the matter. The board, with 12 directors, is expected to remove another two directors by year-end, said the source, who was not authorized to speak publicly about the matter and requested anonymity.
Whole Foods has been losing shoppers to rivals as the natural and organic category it pioneered has gone mainstream at retailers including Kroger (KR) and Wal-Mart Stores (WMT) , as well as newer competitors like Amazon (AMZN) and meal kit provider Blue Apron.
The grocer has not struck a standstill agreement with Jana, the source said, meaning the hedge fund can continue to pressure it to improve performance. Standstill agreements usually offer an activist hedge fund representation on the company’s board in exchange for support and silence for at least the next year.
Jana and a spokesman for Whole Foods were not immediately available for comment.
In a filing in April, Jana said it was frustrated with Whole Foods’ lack of engagement regarding its strategic review, noting its “apparent unwillingness to engage in discussions with third parties regarding such alternatives.”
Jana has nominated four directors for Whole Foods’ board, including former Gap CEO Glenn Murphy, former Harris Teeter Supermarkets CEO Thomas “Tad” Dickson and former Barclays stock analyst Meredith Adler.
Jana can still nominate that slate at the next Whole Foods annual meeting, which is expected in February.
Late last year, Whole Foods returned co-founder John Mackey to the role of solo CEO after six years of splitting the job with Walter Robb, who focused on operations, betting that Mackey would be best to lead a turnaround.
After Jana disclosed its stake, acquisition speculation swirled around the company, though a suitor has yet to emerge.
Whole Foods posted quarterly sales of $3.74 billion, edging past analysts’ average estimate of $3.73 billion according to Thomson Reuters I/B/E/S.
The Austin, Texas-based company reported a 2.8% fall in sales at stores open at least 13 months, less than the 3.1% drop expected by analysts polled by Consensus Metrix.
Net income declined to $99 million, or 31 cents per share, from $142 million, or 44 cents per share, a year earlier.
Excluding certain items, earnings of 37 cents per share in the second quarter ended April 9 were in line with the analysts’ average estimate.
The company trimmed its 2017 earnings forecast to $1.30 per share, from the previous forecast of $1.33.