This is viewed as a vote of confidence?
The news came as the company announced a huge drop in fourth-quarter earnings amid sputtering sales.
Under the terms of the agreement, Green Equity Investors, an affiliate of Los Angeles-based Leonard Green & Partners, will invest $425 million in the company.
“We view it as a strong vote of confidence in our business model and our long-term growth prospects despite the tough current economic environment,” said John P. Mackey, co-founder and chief executive of Whole Foods, in a call with investors on Wednesday. “This equity infusion, combined with our strong cash flow from operations, gives us the financial flexibility to manage through these difficult economic times.”
The announcement, made after the close of trading Wednesday, sent Whole Foods stock up nearly 20 per cent in after-hours trading to more than $12. The company’s stock is down by more than 70 per cent since the first of the year.
It was not too long ago that Whole Foods, based in Austin, Tex., was a darling of Wall Street and routinely registered double-digit growth in comparable store sales, a common industry measure of the health of stores.
But the company has been battered by competition from traditional grocery stores that have expanded their offerings of organic and natural foods. It is also offering more discounts and private-label merchandise. At the same time, consumers are trading down to cheaper products and discount stores.
See also “Economic Dowtown Threatens Whole Foods”>
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