Whole Foods' Amrion Business Future Weighed
This article was originally published in The Tan Sheet
Executive Summary
Amrion may be on the selling block due to a soft supplements market and unfavorable investment results. The supplement manufacturer and direct marketer's parent company, Whole Foods Market, retained the investment banking firm Dain Raushcer Wessels to help it consider "strategic alternatives."
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Amrion may be on the selling block due to a soft supplements market and unfavorable investment results. The supplement manufacturer and direct marketer's parent company, Whole Foods Market, retained the investment banking firm Dain Raushcer Wessels to help it consider "strategic alternatives." During a conference call with analysts Oct. 24, Whole Foods Chairman and CEO John Mackey said although the company believes "Amrion can be brought back to profitability in time," the subsidiary suffered an estimated after-tax operating loss of $4 mil.-$5 mil. for the fourth quarter ended Sept. 24. Austin, Texas-based Whole Foods owns 80% of Amrion. Whole Foods had acknowledged it likely would divest Amrion when it merged most of the firm with e-tailer Gaiam in June (1 (Also see "WholePeople.com, Amrion Web Business Merged With Gaiam.com" - Pink Sheet, 26 Jun, 2000.)). Gaiam announced Oct. 31 its revenues leaped 32% to $13.6 mil. for the third quarter ended Sept. 30, with net income rising 4.7% to $579,000. For the nine months, sales increased 25.8% to $37.9 mil. and net income improved 25.7% to $983,000. Earlier this year, Whole Foods placed Amrion under WholePeople.com, an Internet venture that was discontinued following the deal with Broomfield, Colo.-based Gaiam (2 (Also see "WholePeople.com Launch Aims To Revive Struggling Amrion Business" - Pink Sheet, 28 Feb, 2000.)). WholePeople, including Amrion, subsequently was renamed NatureSmart. Amrion's negative operating results are accompanied by stakes in two entities that also have produced losses. The company's investment in American WholeHealth - a provider of integrative medicine - will carry a $10 mil. charge due to "events and circumstances which indicate that investment has become permanently impaired." Amrion also holds a minority stake in Real Goods Trading, which markets ecologically-friendly products. The investment cost Amrion $2 mil.-$3 mil. in the quarter. Santa Rosa, Calif.-based Real Goods recently announced it was merging with Gaiam; Amrion's stake in Gaiam will increase after the deal closes next year. During the conference call, Mackey stressed Whole Foods' "desire to protect [itself] from results outside of our core retail business," noting core retail sales for FY 2000 improved 23% to $1.84 bil. For the fourth quarter, core retail sales were $438 mil., up 22% from the year-ago period. |