Will Publix buy its crunchy, more pricey competitor, Whole Foods Market? That was the rumor swirling on Wall Street Thursday and Friday when Whole Foods' stock rose and option activity surged.
“We see rumors like these 20 to 30 times a day and very few of them end up coming to fruition,'' said Gavin Maguire, a senior analyst at Briefing.com, which provides financial commentary and analysis.
Briefing.com posted Thursday "hearing chatter that privately held Publix is interested in WFM.'' By day's end, Whole Foods' stock was up 4.7 percent in heavy trading and option activity was high. Friday, the stock closed at 40.93, up 2.12 percent for the day.
Maguire suspects the speculation is rooted in Whole Foods' recent performance. Whole Foods, while a market leader in a growing segment, got clobbered on a poor earnings report in May, sending stock prices tumbling 20 percent and forcing the company to ratchet down its 2014 forecast. Traders still bullish on Whole Foods started buying stock and options at the low price, drawing analysts' attention. To explain the furor, talk surfaced about a potential buyout. And who was in a good position to buy Whole Foods' 383 stores? None other than Publix, a privately held chain that did $7.8 billion in sales during first quarter of the year, up 4 percent over last year.
"All the clues are there that this would kind of make sense, but you see this kind of activity all over the market, especially in a stock that got crushed,'' Maguire said.
Both Publix and Whole Foods had no comment about the rumor. Jeremy Jones, Florida's spokesman for Austin, Texas-based Whole Foods said it had “no merit.''