Posts for Ticker ‘OATS’

A Lot to Chew for Organic Investors (HAIN, UNFI, WFMI, OATS)

This week may be less active in shares traded because of the pre-Labor Day absence of many Wall Street pundits.  But it is a very important week for organic food and health(ier) food companies.  Whole Foods (NASDAQ:WFMI) has closed the Wild Oats (NASDAQ:OATS) transaction, and the stocks should trade as one after this week.  Whole Foods has surprisingly seen its shares rise more than 20% off of the post-Mackey SNAFU lows from just a few weeks ago, and that has been during a time that the market hasn’t been all that hot.

Hain Celestial (NASDAQ:HAIN) is also reporting earnings after today’s close.  Analysts are looking for $0.28 EPS and revenues of just under $227 million.  For the coming quarter estimates are $0.28 EPS and $239 million in revenues.  Hain Celestial shares are in the mid-point of its 52-week trading range.

United Natural Foods (NASDAQ:UNFI) is in the spotlight ahead of its earnings this Friday.  United Natural Foods has seen its stock under pressure since the Whole Foods and Wild Oats merger was announced as two key customers were consolidating into one. Analysts expect United Natural Foods to post earnings of $0.34 EPS on revenues of $723.3 million, and next quarter is expected to show $0.34 EPS on revenues of just under $744 million.  This report will also mark the year-end for United Natural.  If it offers fiscal July 2008 estimates, those estimates are $1.46 EPS and $3.141 Billion in revenues.  The best thing about this report is that the forward guidance may clear up much of the uncertainty that has surrounded this stock, and this stock is only about 10% above a key support level that has been in place for about two and a half years.  This one has been overly punished, as shares are down $11.00 from the $38.40 highs over the last year.

Jon C. Ogg
August 29, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: August 29, 2007 – 10:44 am in Food, , , , , ,

TD Ameritrade And E*Trade: Another Deal For The Government To Block

Word from The Wall Street Journal is that discount broker giants TD Ameritrade (ATMD) and E*Trade (ETFC) are working on a merger that would create a company with 11 million accounts. According to the paper "E*Trade and TD Ameritrade have been in serious discussions for weeks."

Putting the two companies together could result in large savings in public company, management, and back-office costs.

ETFC is trading well down from its 52-week high of over $26. It now sits well below $16. AMTD trades at $16.35, well down from its high of $21.31. The costs of getting customers in a competitive market are rising, and discount brokers are under pressure to cut the costs of trades to keep the customers they have from going to lower-cost providers.

And, there’s the rub with the deal. Just as the government has looked hard at the Sirius (SIRI) merger with XM (XMSR) and the Whole Foods (WMFI) and Wild Oat (OATS) mergers, it may simply nix the AMTD deal with ETFC. A number of smaller brokers could find that they are squeezed out as two of the three largest firms in the industry become one. Operators like Fidelity, Zecco, Trade King, and Options Express will probably raise fair objections.

When it appeared that the Whole Foods merger would go through, Wild Oats’ shares soared. Investors know just how much these mergers mean to price leverage.

Douglas A. McIntyre

Posted on: August 22, 2007 – 5:18 am in Mergers and Buy Outs, , , , , ,

Media Digest 8/20/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, the spotlight in an investigation of Dell’s (DELL) accounting practices will fall on whether company founder and CEO Michael Dell had any role in the restatement of numbers.

Reuters writes that the Whole Foods (WFMI) merger with Wild Oats (OATS) could pave the way for other mergers that are pending.

The Wall Street Journal writes that Countrywide (CFC) has begun to lay off employees involved in originating loans.

The Wall Street Journal writes that crude prices should stay high this year as a strong supply will an abundant supply begins to drop.

The New York Times writes that a slowdown in advertising growth at AOL may hurt the chances for turning around the Time Warner (TWX) unit.

The New York Times writes that Hewlett-Packard (HPQ) has introduced a feature that allows PCs to print documents on almost any printer.

The New York Times writes that business and political interest in Europe are waiting for a September ruling on the EU’s huge antitrust suit against Microsoft (MSFT).

According to the FT, AOL says its slow ad growth is a "hiccup".

Barron’s writes that Sony (SNE) PS3 could face more sales problems due to poor sales of Electronic Arts (ERTS) new Madden NFL .08 for the game platform.

Douglas A. McIntyre

Posted on: August 20, 2007 – 3:12 am in Press Digest, , , , , , , ,

Sirius Is Not Whole Foods Market

There have been a couple of media articles about shares of Sirius Satellite Radio (SIRI) rising because progress of the Whole Foods (WFMI) buyout of Wild Oats (OATS) is a signal that government antitrust watch dogs are going easy on mergers. Late last week a court ruled against the Federal Trade Commission by denying the agency’s request to block the transaction. The FTC has appealed the ruling.

The news move Wild Oats shares up 18% to $18, near their 52-week high. Whole Foods jumped 8% to almost $45.

Rumors are for fools. For starters, over the course of last week, shares in SIRI were down 7%. The stock of its potential merger partner XM Satellite Radio (XMSR) was down 5%. The S&P was down only 1%. The progress of the Whole Foods merger hardly helped the satellite radio combination.

And, the FTC is not the FCC. Nor is it Congress. The objections to the SIRI merger come from the fact that the government licensed the companies the airwaves that allow them to send their signals from the satellite to the customer receivers. It is a monopoly created by the FCC, not by hippies who want to buy organic chow.

The SIRI  merger is still unlikely. Congress has a problem with it because it believes that the price for satellite radio to the consumer will eventually go up due to lost competition. The FCC’s problem is that they hate Howard Stern and will do what they can to hurt him now that they can no longer regulate his content.

All mergers are not created equal.

Douglas A. McIntyre

Posted on: August 18, 2007 – 5:01 pm in Uncategorized, , , ,

Whole Foods Ruling Good News For Google/DoubleClick, Sirius/XM. Really.

(WFMI)(OATS)(SIRI)(XMSR)(GOOG)

From Silicon Alley Insider

What do organic grocery stores, online ad giants, and satellite radio companies have in common? Just a bunch of regulators who decide whether to approve mega-mergers like Google’s takeover of DoubleClick, XM’s merger with Sirius, and Whole Foods’ acquisition of Wild Oats…continued here

Posted on: August 17, 2007 – 11:21 am in Uncategorized, , , , ,

Media Digest 8/17/2007 Reuters, WSJ, NYTimes, FT, Barron’s

According to Reuters, Dell (DELL) will restate four years of results after an audit that lasted over a year.

Reuters writes that Bear Steans (BSC) will cut 240 jobs in its sub-prime operations.

Reuters writes that Nokia (NOK) has filed a complaint against Qualcomm (QCOM)  with the ITC asking for more bans on the import of QCOM chips.

Reuters reports that Wall St. still has doubts about Amgen’s (AMGN) future, even after the biotech cut 12% of its workforce.

The Wall Street Journal reports that Whole Foods (WFMI) won a round in its merger with Wild Oats (OATS) when a judge refused to issue an injuction to stop the deal.

The Wall Street Journal writes that IBM (IBM) will start to sell the Sun (SUNW) operating system.

The Wall Street Journal writes that Wal-Mart (WMT) is considering opening smaller high-end stores.

The Wall Street Journal reports that Sprint (S) may spend $5 billion on its WiMax initiative.

The New York Times writes that Boston Scientific (BSX) will put two more units on the market to bring in cash to pay down debt.

FT reports that buy-out firms are still in the market for deal despite credit problems.

Barron’s reports that Ebay’s (EBAY) Skype VoIP unit was down for a day due to software problems.

Douglas A. McIntyre

Posted on: August 17, 2007 – 3:17 am in Uncategorized, , , , , , , , , , , , ,

Whole Foods (WFMI) Wins In OT

The issue of Whole Foods (WFMI) purchase of Wild Oats (OATS) moved over a huge hurdle today. The FTC has objected to the merger on the basis that the combination would allow the companies to raise prices. A federal judge blocked the agency’s effort to get an injunction against putting the firms together.

According to The Wall Street Journal: John Mackey, chairman and chief executive of Whole Foods, hailed the decision in a statement, saying a combination of the grocery chains "will create long-term value for customers, vendors and shareholders." 

The decision may help embattled Whole Foods CEO Mackey keep his job.

Whole Foods shares hit a 52-week high nine months ago. After reaching $66.25 in October, the stock has been driven down to $41 on mediocre earnings and problems with the merger. After hours, the stock moved up 8%.

Douglas A. McIntyre

Posted on: August 16, 2007 – 7:25 pm in Uncategorized, ,

Whole Foods Posts Whole Earnings (WFMI, OATS)

Whole Foods Market, Inc. (Nasdaq:WFMI) has posted $0.35 EPS diluted on sales of $1.51 billion.  The organic food grocer saw 14% ending square footage growth and a 7.0% increase in comparable store sales on top of a 9.9% increase in the prior year. The negative impact on comparable store sales growth of Easter shifting from the third quarter last year to the second quarter this year was approximately 76 basis points in the quarter. Identical store sales (excluding four relocated stores and two major expansions) increased 5.8%.

The short version is that consensus estimates are $0.33 EPS on $1.54 Billion in revenues.  The company also said it spent $100 million in share buybacks and still has another $100 million that can be spent for repurchases.  The Company also expanded its existing $100 million revolving credit line to $200 million during the quarter.  Whole Foods plans 18 to 20 new store completions this year.

For fiscal year 2007, on a 52-week to 52-week basis, the Company expects total sales growth of 13% to 17% and comparable store sales growth of 6% to 8%.  For fiscal year 2007, the Company expects operating income before pre- opening and relocation costs as a percentage of sales to be in line with its 5.9% results year to date.  Longer term, the Company’s goal is to reach $12 billion in sales in fiscal year 2010.

Shares are now trading up 9% in after-hours trading, and you can bet there is some short covering.  The Mackey blogging issues mostly came up after the cut-off date here on these results, although that is still being deemed more of a stock and corporate issue rather than a brand issue.  The company has said it  expects to receive a court ruling bythe middle of August regarding its proposed buyout of Wild Oats (NASDAQ:OATS).  John Mackey is also the one giving the quotes in the press release, so it doesn’t look like he’s planning on going away any time soon.  So far this report is being very well received despite the ongoing issues over the last month. 

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: July 31, 2007 – 3:27 pm in Earnings, Food, , , , ,

Whole Foods Ready For Earnings As FTC Hearing Begins (WFMI, OATS)

Whole Foods Market, Inc. (NASDAQ:WFMI) and Wild Oats Markets, Inc. (NASDAQ:OATS) today are in a preliminary injunction hearing to begin today that will end tomorrow to decide whether to approve the U.S. Federal Trade Commission’s application for an injunction to block the proposed merger between the two companies. Whole Foods Market and Wild Oats Markets have consented to a temporary restraining order pending the hearing.  On last look Whole Foods received 58% of Wild Oats shares in tender at the $18.50 per share buyout.  The FTC complaint and attempt to block the merger was filed on June 7, 2007.  Both Whole Foods and Wild Oats are challenging the FTC’s opposition to the merger.

Also, today after the close will be the earnings report for Whole Foods.  Here is our full preview from yesterday.  The short version is that consensus estimates are $0.33 EPS on $1.54 Billion in revenues.  We also had another article yesterday noting how Wild Oats may need to restructure its entire cost structure if the company is not acquired.

Jon C. Ogg
July 31, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: July 31, 2007 – 7:50 am in Earnings, Food, Mergers and Buy Outs, Regulation, , , , , ,

Weighing Earnings & FTC Review At Whole Foods (WFMI, OATS, KR, SWY)

Whole Foods Market Inc. (NASDAQ:NASDAQ) has much more than just earnings to deal with this week.  The company is expected to report earnings and revenues on Tuesday at $0.33 EPS and $1.54 Billion, according to First Call.  The company is also meeting the FTC over the challenge of its acquisition of Wild Oats (NASDAQ:OATS).  That two day hearing starts tomorrow and we’ll likely have the earnings before we have a clear decision that further blocks or unblocks the $18.50 per share buyout of Wild Oats.

There is another key issue.  We haven’t really heard a peep out of the company in roughly two weeks, and we have ourselves called for at least a partial or temporary resignation or withdrawal of Chairman & CEO John Mackey.  The issue is that he doesn’t really need to leave entirely.  He can maintain his Chairman position as the company’s founder, but this will signal he is at least willing to let the company have a more removed face to deal with regulators over the deal and to deal with the SEC inquiries over the "RAHODEB" message board posts.  After all, he even went on a massive rant and tirade on the Whole Foods Blogs.  What Mackey did was foolish and dumb, but the truth is that the business cycle has changed (thanks to many of his efforts) and the company may need a less-eccentric leader to help it fend off competition from lower-price competitors that sell the same products.

Whole Foods on a results basis is in somewhat of a Catch-22.  Very few are expecting great upside or great guidance.  After all, Kroger (NYSE:KR) and Safeway (NYSE:SWY) are able to offer many of the same exact goods now and for prices at much lower levels.  Don’t take this too much against the company, because the truth is that the company will continue to be profitable and it has already established itself as THE premium brand for healthy and organic foods out of any nationwide chain grocer. 

Regardless of what traditional grocery stores do, its status will remain as the leader and the premium brand.  It boils down to what premium Wall Street is willing to accept, and right now Whole Foods still has roughly a 50% premium to the earnings multiples of Kroger and Safeway.  That may act as a ceiling while either the "E catches up to the P" or while the street determines a fair ‘multiple premium’ for the stock. 

Lastly, the short selling has increased from 19.1+ million in June up to more than 24.4 million shares in July.  That can’t be a surprise considering the latest shenanigans out of Mackey.  But that could also create a major wave of short covering if the company can convey that things are going to be better than OK.  Wild Oats still trades at more than a $3.00 discount to its $18.50 per share buyout price, and Whole Foods is only about 3% above its most recent 52-week lows.

Jon C. Ogg
July 30, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: July 30, 2007 – 1:17 pm in Earnings, Food, Mergers and Buy Outs, Regulation, , , , , ,

Wild Oats Markets (OATS) May Have To Fix Itself

The FTC may block Whole Foods Market (WFMI) from buying Wild Oats Markets (OATS). Both companies are in the organic grocery business, and the government will argue this week that the combination would eliminate price competition between the two chains.

If the deal is blocked, Wild Oats has a lot of work to do.

In the last quarter, OATS had a very modest increase in revenue from $298 million in the first quarter last year to $309.9 million. Operating income fell from $4.4 million to $3.2 million.

The full year 2006 was not any better, Revenue rose to $1.183 billion from $1.124 billion. Operating loss for 2006 was $11.2 million, but the company had $28.2 million restructuring charge. Operating income in 2005 was $10.6 million.

The latter-day hippie crowd must be on a diet.

Wild Oats has a cost problem that might be solved if it is bought. Right now it has a crummy business. In May 2006, its shares were over $20. They now trade at $14.50.

It the deal with Whole Foods is killed, OATS shares may not fall much. But, the cost structure of the entire company will have to be revamped if the shares are going to move up again.

Douglas A. McIntyre

Posted on: July 29, 2007 – 6:30 pm in Uncategorized, ,

CEO’s Who Need to Go: John Mackey of Whole Foods (WFMI, OATS, KR)

Calling for a CEO to leave a company or to be fired is not an easy task, and many market pundits demand a management change far too soon and far too frequently.  After reviewing all the data, one final outcome is becoming more and more clear: John Mackey of Whole Foods (NASDAQ:WFMI)needs to step down.  If he doesn’t resign completely, he needs to at least turn over his CEO badge pending the SEC investigation and internal review.  This would allow him to remain as non-executive Chairman, would allow him to remain somewhat in control, and would send a better message to shareholders.

First and foremost, this anonymous message board posting issue is not the sole reason.  But it certainly is the final reason.  ‘Rahodeb’ was his online alias, but it might as well have ‘toidiel’ and there is the full 1394 or however many posts it really was.  When this story first broke last week Mackey’s position as an ‘effective leader’ was questionable.  Now it is probably set.  Online stock message boards are no place for officers of public companies to make anonymous commentary, particularly when criticizing competitors or trying to pump their own public company.

Read More »

Posted on: July 18, 2007 – 2:59 pm in Food, Management Change, SEC, , ,

Whole Foods’ Board of Directors Gets Some Gumption (WFMI, OATS)

After the close, Whole Foods Market’s (NASDAQ:WFMI) issued three press releases, all of which were expected.  This board has not been a very strong board as far as its control and dominance over management, and this is the first formality the company has made in actually having some power over the company.

The Board of Directors announced it has formed a Special Committee to conduct an independent internal investigation into online financial message board postings related to Whole Foods Market and Wild Oats Markets. The Special Committee has retained the firm of Munger, Tolles & Olson LLP to advise it during its investigation.  The Board will refrain from comment until the internal investigation is completed.

John Mackey, Chairman & CEO has issued a formal statement: "I sincerely apologize to all Whole Foods Market stakeholders for my error in judgment in anonymously participating on online financial message boards. I am very sorry and I ask our stakeholders to please forgive me." 

The company has also noted that has been contacted by the staff of the SEC late yesterday, although that can’t be any surprise.  Whole Foods said it intends to fully cooperate with the SEC and does not anticipate commenting further while the inquiry is pending.

You can be that Wild Oats (NASDAQ:OATS) is trying to figure out if it wants to sue Mackey and Whole Foods for abuse and for causing extra damage or if they just bite the bullet and try to wait out to see if the merger can go through.

We laid out some general expectations last week, and this is probably just the first part.  There was also the full chain of his posting history from the Yahoo! Message Boards.

Jon C. Ogg
July 17, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: July 17, 2007 – 4:02 pm in Food, SEC, Shareholder Issues, ,

What To Expect After Mackey’s Blunder (WFMI, OATS)

We have covered Mackey’s gaff a couple times already, but this situation is going to go far beyond mackey himself.  After Whole Foods (NASDAQ:WFMI) CEO John Mackey was busted for using the Yahoo! Message Boards as a part time job from 1999 to 2006, there have been many such questions about the how this will affect message boards in general. This is going to affect POLICY rather than the mechanism, and it will probably affect Whole Foods (NASDAQ:WFMI) and its leader John Mackey personally.  It would be easy to see Wild Oats (NASDAQ:OATS) file all sorts of lawsuits against Whole Foods, and it is hard to imagine that there is not a strong case here.

Read More »

Posted on: July 12, 2007 – 5:50 pm in Food, SEC, Shareholder Issues, ,

Whole Foods, Mackey, & ‘rahodeb’: Full 7 Year History of Message Board Posts (WFMI, OATS)

We wanted to look farther into what John Mackey of Whole Foods (NASDAQ:WFMI) really said on his Yahoo! message boards.  The truth is that when you look through the links here under the full mode there are some 1394 posts with the final post being August 12, 2006 titled "Congratulations to hubris and goodbye"…..

It appears Mr. Mackey spent more than quite a bit of time attacking and trying to rebuff any criticism posted in the Yahoo! message board universe.  It even looks like this was his part-time job.  If you are not familiar with message boards, you should know that many online posts are spiteful and attacking in nature and these are rarely moderated.

The reporting of this issue is new, but the actions of this are nearly one-year old and were all in the past.  That doesn’t make it right or justifiable in any sense of the imagination, but is at least a little perspective.  It would be hard to imagine that a board of directors would allow this to knowingly happen.  You can probably also bet that boards across the country are creating new policies banning future activities such as this if no such ban had been put in place.  We commented on this earlier today, and still feel there will be more policies banning such corporate officer activities in the future.

Mackey is almost certainly not alone in this sort of behavior, but when you go in and look at the length of the posts and the fact that there were 1394 posts from him you have to wonder how many more hours Mackey would have had to run the company if he wasn’t paying attention to hostile message boards.

Mackey has always stood out from the crowd as far as an unorthadox CEO, but now it might be fair to wonder if he changed his name from Wacky.  The stock had been down close to 3% earlier and shares are only down about 1.7% at $38.75 now.  Once again, the reporting of this is new but the actions are basically one-year old and much farther back than that.

Jon C. Ogg
July 12, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: July 12, 2007 – 10:18 am in Food, ,

What Is Whole Foods Going To Do About CEO Mackey Using Online Alias Postings? (WFMI, OATS)

Whole Foods (NASDAQ:WFMI) is seeing shares indicated down about 1.5% after an interesting development where its CEO John Mackey used an online handle of "rahodeb" to attack rival Wild Oats (NASDAQ:OATS) from 1999 to 2006.  The online message board statements predicted the company would fall into bankruptcy and then be sold after its stock fell below $5 per share.

The company acknowledged that the postings by "rahodeb" were written by CEO John Mackey after the FTC made this known in a lawsuit trying to block Whole Foods from acquiring Wild Oats.  Supposedly the company defended Mackey’s postings, saying they were being taken out of context years later.

Mackey has also used the blog on his company’s Web site recently to challenge the FTC’s reasoning that it needed to stop Whole Foods from eliminating a competitor.  You should see how long his post his, because you’ll wonder how he had time during that post to run the company.

You can bet that Mackey is not alone in corporate America in using Blogs and ‘online aliases’ to either boost their views and attack competitors.  And you can bet that Mr. Mackey is going to have more explaining to do before this is anywhere from being water under the bridge.  The company noted that these were Mackey’s comments and not that of the company, but that would make one wonder if the company is hinting that it would make its founder stay at arm’s length or worse in the future.  We’ll see, but this one is probably going to be a future case study about what not to do.

This definitely falls under "WHAT WAS HE THINKING?"…….. 

Jon C. Ogg
July 12, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: July 12, 2007 – 7:35 am in Food, ,

TOP 7 ISSUES THIS WEEK (JUNE 8, 2007)

This Week’s Top Seven Issues (June 8, 2007)

1) THE ROLLER-COASTER MARKET
Thanks a lot Bill Gross.  You’re sounding more like Greenspan now that you have him on your advisory board at PIMCO.  Depending on how you look atthe sell-off, Gross either was an exacerbation or just noise.  The market recovered late Friday on rumors that US Steel (X) was in-play.  Technicians had an identity crisis because today should have needed a big gap down before the "Ah-Ha Epiphany."  If you are a bull, a chicken-bull, or a real bear, we came up with a revised list of stocks to look at depending on your flavor.

2) FOUR NEW TECH PICKS, LIKE YOU DIDN’T KNOW THEM
Cramer actually came out with a NEW FOUR HORSEMEN OF TECHNOLOGY, albeit this could have been done much sooner and Amazon.com (AMZN) was the only one that was a bit of a surprise.

3) MERGERS & PRESSURES 
Biomet (BMET) is done, deal accepted. Bye-bye.  TD AMERITRADE (AMTD) needs to tell S.A.C. & JANA Partners to take their shares and put them somewhere else.  The FTC is actually trying to stop Whole Foods (WFMI) from buying Wild Oats (OATS), amazingly enough a deal is under scrutiny.  Amgen (AMGN) tries diversifying via acquisition, but at what cost?

4) TWO BEST CULT STOCKS WITH MAJOR NEWS
CMGI, Inc. (CMGI) took a bit of a hammering this week after earnings.  If you believed it in it before earnings, then nothing has really changed and the glass may be more half-full than half-empty.  Dendreon (DNDN) priced its $75 million offering.  Since their back was against the wall and they really needed money, the terms that could have been much more expensive actually look like they got the cash for close to nothing.

5) KEY OFFERINGS
Limelight Networks (LLNW) came public, priced more share at a higher price, and still went up almost 50% on the debut date. Einstein Noah (BAGL)…it’s back, no more NWRG-PINKSHEET ticker  It wasn’t an IPO, but sort of a Re-PO.  This one will be interesting.  SIRIUS Satellite Radio (SIRI) received a $250 million term loan

6) OPEC CRIES WOLF
OPEC actually threatened that it would stop spending money for new technology and on exploration if we keep pushing for more and more biofuels.  Sounds to me like they are feeling pinched.  Oddly enough, ethanol names were looking horrible yesterday.

7) RETAIL IS SOFT, BUT SOME WINNERS
There were actually some winners in retail.  If Bed Bath & eyond (BBBY) had to stupe down to an earnings warning, you knew it was going to be a messy retail report since its buyers are supposed to be insulated from soft economics.

Have a great weekend!

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 8, 2007 – 4:16 pm in Uncategorized, , , , , , , , , , , , , , ,

Reasoning Behind Borders Group ‘Cut to Sell’ at Goldman Sachs (BGP)

When a bulge bracket firm issues a ‘Sell’ rating on a stock, you always have to consider the reasoning.  ‘Sell’ recommendations can cause many more backlashes historically than other downgrade and ratings changes, particularly since the description leaves such little leeway in the interpretation.

Goldman Sachs downgraded Borders Group (BGP-NYSE) this morning from a ‘Neutral’ to a "sell’ rating. and BGP shares are down more than 6% as a result.  Technically an analyst downgrade based on indirect news is technically not a game-changer, but there are instances where this is not the case.

The reasoning behind the downgrade actually has some ties to the Federal Trade Commission trying to block the proposed merger between Whole Foods (WFMI-NASDAQ) and Wild Oats (OATS).  Goldman notes that the market has been expecting a more permissive merger environment, even though the proposed XM Satellite Radio (XMSR-NASDAQ) and SIRIUS Satellite Radio (SIRI-NASDAQ) is under fire by the FCC.

Goldman believes that the prior share price of Borders (BGP) was pricing in the possibility of a transaction, and the new merger climate might be less permissive to such a deal.  It also states that shares are overvalued on a purely fundamental basis and trimmed its 12-month target by $1.00 to $19.00.  Shares are down more than 6% to $20.35 so far, and the 52-week trading range is $16.20 to $24.19.  Its key competitor, Barnes & Noble (BKS-NYSE), is trading down 0.8% at$41.85 on the day. 

It will be interesting to see if Goldman takes the air out of other ‘potential merger candidates’ in the coming days and weeks.  These are actually small businesses in the grand scheme of things:  Borders Group has a $1.2 Billion market cap, and Barnes & Noble has a $2.7 Billion market cap.

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.

Posted on: June 6, 2007 – 9:51 am in Analyst Calls, Consumer Goods, Mergers and Buy Outs, Regulation, Retail, , , , , ,

Whole Foods (WFMI) may prove today it isn’t just for hippies (WFMI)

Whole Foods Market, Inc. (WFMI) reports Q2 earnings today after the market close.  They have not provided any guidance for the quarter and   Thomson Financial is expecting earnings of 36 cents per share on revenue of $1.49   billion. Back in February Whole Foods announced it would buy its smaller rival Wild Oats Markets Inc. for$565 million, or $18.50 in cash per share. So after the market close,it’s game on.

       

Many of us lump Whole Foods Market, Inc. (WFMI)into that category of PCC, Co-Ops, Natural Foods stores and that imageof hippies flowing the aisles shopping with smiles and hemp re-usablegrocery bags. That’s how the company started, a bunch of dreamers inthe 70’s who wanted to sell fresh and natural foods to other hippies sothey all could just keep Rockin’ in the Free World. They wanted to makeshopping for groceries a positive experience that was meaningful andhappy, a place where you could go and wear your tie-dye and not besnubbed. They created a paradise for vegans and in the process ofcreating good vibes, the made some heavy money, man… and dude, havethey ever made money.
            Whole Foods - Because Hippies need groceries too.
CEO John Mackey has created an empire at what started out being a Co-Ophas grown into a major corporation bringing in $5.6Bin revenue last year with $203M in net income. Those of you that haveshopped at a Whole Foods know that it’s not just your neighborhoodhippy hot spot, it’s a state of the art grocery experience every timeyou walk in one of their stores. They truly are the world’s leadingnatural and organic foods supermarket, they’ve even gone so far asaddressing the "Humane Treatment of Live Lobsters". Back in 2005 Mackey said:
"Weare viewing the lobster as a live creature rather than a commodity thatdeserves no concern. Just because we sell lobsters and have customerswho will buy them is not a compelling argument to maintain status quo." I didn’t think you could hug a tree harder but that’s pretty much standard for Whole Foods, Mackey eMuppets - The Rainbow Connectionarlierthis year said: "eating animals causes pain and suffering to theanimals", I guess he doesn’t eat too many chicken McNuggets does he?Just for fun, click around on their website,after about 3 minutes you feel like John Denver is about to come out ofyour screen with the muppets and start singing the "RainbowConnection". This is no slam on Whole Foods, I guess I didn’t have asmuch compasion for my McRib sandwich and how they got it to have those artificial rib like grooves in it – damn those were tasty.

       

Evenif you are a McRib guy like me or a vegan like Mackey, Whole Foods haseverything you ever wanted in a grocery store plus more. So aftertoday’s call, we will find out if investing in Whole Foods is a goodidea for the average carnivore or leaf eater. Over the past year sharesof Whole Foods have dropped 35%.They pay out a 18 Cent dividend every quarter but can they prove toWall Street they are worthy of a higher share price today? This wouldbe perfect timing for WFMI to turn things around, maybe if they startselling the McRib they could bring in added revenue?

       

Tellyou what, if the call goes bad today, I’ll personally put in a call CEOJohn Mackey and let him know about my "McRib Revenue" idea. I’m surehe’ll be all over it.

       

          Frank Lara Jr.       

Frank Lara Jr.  can be reached at franklara@247wallst.com; he does not own securities in   the companies he covers.       

Posted on: May 9, 2007 – 1:40 pm in Earnings, Food, ,