Why I Love Whole Foods, by Rahodeb

Following are a handful of posts excerpted from the Yahoo! stocks message board for Whole Foods Market that were authored by “rahodeb,” a pseudonym used by John Mackey, chairman and chief executive officer of Whole Foods.

Although some other users of the message board guessed that it was Mackey who was making the posts, he did not verify that it was him until earlier this month, nearly a year after be stopped posting on the board.

From early 1999 until August 2006, rahodeb, which is an anagram of Deborah, Mackey's wife's name, authored 1,245 messages on the board. Many of the messages praised Whole Foods' financial performance (using the stock symbol WFMI) and took issue with the “shorts,” or investors who bet that the stock price would decline. Often the posts appeared to be seeking to correct misinformation or negative opinions posted by other users of the message board.

The postings also veered into discussions of other related topics, such as union labor, veganism and the performance of Whole Foods' competitors, especially Trader Joe's, Wild Oats (stock symbol: OATS) and conventional supermarkets.

The posts are the subject of an informal inquiry by the Securities and Exchange Commission, and the Whole Foods board has also launched an internal investigation.

July 13, 1999 [rahodeb's first post]:

There actually has been very little insider selling at Whole Foods the last several months. When the stock fell a couple of months ago down to $32 several executives exercised options at the low price because this minimizes their alternative minimum taxes. Exercising options, however, is not the same as selling them. Last executive to sell any stock at this company appears to be Richard Cundiff who did it last August — probably for personal reasons.

Aug. 17, 1999:

The real reason WFMI stock price has dropped so much the last few weeks after a strong 3rd quarter announcement, is due to the comments Mackey made on the conference call about a “more aggressive internet strategy” and a promise to hold another conference call in 6 weeks to give more details. The market is worried that the more aggressive internet strategy is going to hurt earnings and the shorts are piling on. This coming conference call will likely have a major impact on the stock price. If the market likes the strategy outlined on the call the stock is likely to trade up strongly. If they don't like it the stock may show further weakness. We will just have to wait and see what happens on the call.

April 28, 2000:

I like Mackey's haircut. I think he looks cute! If his hair bothers you now you should have seen what it looked like 10 years ago! The guy was/is clearly into alternative lifestyles and is one of Paul Ray's Cultural Creatives I outlined in my 2 posts to Hedge. You must not patronize any of WFMI's stores. Tatoos, piercings, unusual dress, and interesting haircuts are everywhere in the stores. In comparison, Mackey looks like a model for Brooks Brothers!

July 9, 2000:

While I admire Trader Joe's, they are not WFMI's main competitor — OATS is. 1. Trader Joe's only competes with WFMI in a limited # of states. 2. Trader Joe's has a limited product mix — very limited selection of perishables which is Whole Foods' main competitive positioning. 3. WFMI co-exists very well with Trader Joe's in Los Angeles, San Francisco, Boston, & New York. 4. Trader Joe's caused WFMI to develop their 365 private label brand which has helped make WFMI price competitive with them. How do you know if the Trader Joe's business model is better than WFMI's? Have you ever seen financial statements for Trader Joe's? Do you work for Trader Joe's?

Sept. 1, 2001:

I seriously doubt Whole Foods has any interest whatsoever in acquiring OATS. Their strategy seems pretty clear — they are going after OATS' markets. They've announced openings in the following OATS markets over the next 12 months — Ft. Lauderdale, Santa Monica, Portland, Kansas City, St. Louis, Chicago, South Denver, Las Vegas and Phoenix. It seems unlikely to me that WFMI will stop at these markets either. I anticipate announcements in other OATS markets over the next few quarters. It appears to me that WFMI believes that they can overpower OATS everywhere and isn't going to give this company a chance to get back on its competitive feet. It will be interesting to watch what happens to OATS over the next year or so. I predict either bankruptcy or a sale of selected assets of the company. OATS will not recover as a viable #2 in this industry. Whole Foods isn't going to let that happen.

July 22, 2002:

I find most of these posts from Whole Foods Market employees (if they really are) laughable. They complain about not making enough money and the benefits are poor but never explain why they took the job with the company in the first place and why they don't take a better job somewhere else that pays better. They apparently prefer being victims blaming others for their problems instead of taking responsibility for their own lives.

Oct. 11, 2002:

Am I an insider at Whole Foods as you seem to believe? I don't think my analysis of Trader Joe's qualifies me as one. After all you seem to know Trader's pretty well and you aren't an insider with them (are you?). dcc7 is convinced that I'm John Mackey himself. I guess until the real John Mackey shows up on this board, having such a reputation probably gives my arguments more credibility than they deserve!

Jan. 31, 2004:

Why don't you think Whole Foods has any stores doing above $900 per sq. ft.? My guess is that they probably have many stores that do well above this figure. I also expect Whole Foods will open stores larger than 20,000 in the U.K. Their 2 new New York stores are both over 50,000. Don't know about the currency value thing. I expect Whole Foods locked the price in through a currency hedge. That's what most companies do with international acquisitions. We'll have to wait until they publish their SEC disclosure documents to see for sure.

Feb. 8, 2004:

I used to shop at Whole Foods when I was the Governor of Texas and lived in Austin. Owned the stock since the IPO. I find the grocery business quite interesting. A lot simpler to understand than international politics.

April 1, 2005

OATS has been in business for 18 years and has never made a dime over those collective 18 years. Their [price-to-earnings] multiple is therefore infinite. They lost money in 2004. They are going to lose money in 2005. They have negative comps. They are getting crushed by the competition. Whole Foods has announced the opening of 25 stores over the next 2 years that will directly compete with OATS. OATS has no future. They are hardly a value play since they are currently radically overvalued.