|PURPOSE OF TRANSACTION.|
The Reporting Persons acquired the Shares because they believe the Shares are undervalued and represent an attractive investment opportunity. JANA has substantial experience analyzing and investing in the grocery sector and more broadly across the food and retail sectors, and the other Reporting Persons collectively possess significant operational, financial and nutritional expertise, including, for some of the other Reporting Persons, experience creating significant shareholder value in the food and grocery sectors. JANA, with the assistance of the other Reporting Persons, intends to have discussions with the Issuer’s board of directors and management regarding topics including: (1) addressing the Issuer’s chronic underperformance for shareholders, (2) changing the Issuer’s board and senior management composition and addressing governance, (3) optimizing the Issuer’s real estate and capital allocation strategies, including discussing the Issuer’s “365” small store format and opportunities to improve returns on invested capital, (4) pursuing opportunities to improve performance by advancing its brand development and by addressing core operating deficiencies in areas including customer loyalty and analytics, category management and analytics, technology and digital capabilities, procurement and buying practices, pricing strategies and value proposition communication, and online offerings, (5) improving in-store execution, including labor scheduling and management, management of inventory and shrink levels, stocking practices, product layout, in-store signage, private label program strategy and management, and assessing broader cost structure and operating opportunities, (6) evaluating opportunities to re-engineer the Issuer’s suboptimal and cost-disadvantaged grocery procurement and distribution strategy, such as by internalizing distribution or pursuing other hybrid strategies, in order to diversify away from its existing primary wholesale distribution partner, while in the interim implementing better management and increased auditing of this relationship to reduce costs, improve execution, and limit such distribution partner’s influence, and (7) initiating a review of strategic alternatives particularly in light of the Issuer’s apparent unwillingness to engage in discussions with third parties regarding such alternatives. The Reporting Person expects to have discussions with the Issuer’s management and board of directors, shareholders and other interested parties relating to such matters. JANA is also prepared, if necessary, to nominate individuals for election to the Issuer’s board of directors and to participate in the solicitation of proxies in support of such individuals, and has signed Nomination Agreements with the Reporting Persons named in Item 6.
JANA, potentially with the assistance of the other Reporting Persons, may also take other steps to increase shareholder value as well as pursue other plans or proposals that relate to or would result in any of the matters set forth in subparagraphs (a)-(j) of Item 4 of Schedule 13D, excluding (i) acquiring a control stake in the Issuer’s Shares, or grouping with any other party or parties to do so, (ii) engaging in an extraordinary transaction, such as a merger, with the Issuer, or acquiring a material amount of the Issuer’s assets, or grouping with any other party or parties to do either, or (iii) seeking to exert negative control over the important corporate actions of the Issuer, or grouping with any other party or parties to do so, although the Reporting Persons may seek to influence such actions through customary means including presenting its views for consideration to the Issuer, shareholders and other interested parties, privately or publicly, and, if necessary, through the exercise of its shareholder rights including the right to propose new directors for the Issuer’s board of directors.
Depending on various factors including, without limitation, the Issuer’s financial position and strategic direction, the outcome of the discussions and actions referenced above, actions taken by the Issuer’s board of directors, price levels of the Shares, other investment opportunities available to the Reporting Persons, conditions in the securities market and general economic and industry conditions, the Reporting Persons may in the future take such actions with respect to their investment position in the Issuer as they deem appropriate including, without limitation, purchasing additional Shares or selling some or all of their Shares, and/or engaging in short selling of or hedging or similar transactions with respect to the Shares.