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A $425 million investing. is designed to help see Whole Foods through a rough patch till consumers regain their appetite for pricey organic food

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Cashier Michelle Yulo hands out free reusable grocery bags at a Whole Foods Market. David McNew/Getty Images

By Ben Steverman

As Americans’ appetite for pricey, upscale food waned, Whole Foods Market (WFMI) needed a helping hand. The organic supermarket chain, often known jokingly as "Whole Paycheck" for its premium-priced offerings, got what it was looking for adhering Nov. 5 in the form of a $425 million investment from private righteousness firm Leonard Green & Partners.

The deal is the latest proof of the pain suffered by retailers that purvey to Americans’ more expensive tastes. Analysts and investors disagree attached how badly Whole Foods needed a monetary cushion, but the extra $425 million should make it much easier for the retailer to weather the financial storm—and continue to grow despite the potential for a severe recession. The stock market’s reaction to the capital infusion reflected the joined outlook for Whole Foods. Whole Foods’ descent on Nov. 6 at one sharp end surged almost 19%, but then closed just 1.65% higher at 10.48.

The retired equity money comes at a steep price and besides reflects the retailer’session in earnest problems. "We’re in self-same uncertain housekeeping times, and we’re not fully convinced what’s going to happen," Whole Foods Chief Executive John Mackey told analysts on Nov. 5 while asked why the $425 million was needed.

Piper Jaffray (PJC) analyst Mark Miller said the extra money "should be a tremendous relief to investors." Others, however, were more pessimistic with respect to the investment. By giving Leonard Green & Partners a 17% peril in Whole Foods, the deal dilutes existing shareholders’ stakes. Also, the private equity firm gets a munificent 8% share attached its preferred stock investment in Whole Foods. Credit Suisse (CS) algebraist Edward Kelly wrote: "Whole Foods provided further evidence that it has serious cyclical and structural issues."

Whole Foods shares have slid almost 75% in this way farther in 2008, and there are many reasons: Its 2007 acquisition of the Wild Oats chain has run into numerous company problems, including a challenge from the Federal Trade Commission. Kelly calls the acquisition "highly debatable."

When spells were better, Whole Foods was also very noble with dividends to investors, and that’sitting cash the retailer in likelihood should have saved for a rainy day, says Andrew Wolf, some algebraist at BB&T Capital Markets.

Also, Wolf adds, to many people Whole Foods is a "destination store." Customers drive past their limited supermarkets to get the higher quality food at a Whole Foods exit. But customers are driving less because of high combustible matter prices. "The gas prices—even nevertheless they’re [now] coming prostrate—acquire trained people away from that behavior," Wolf says.

Finally, Whole Foods merchandise includes abundance of pricey items that, in a recession, many customers have stopped buying. "What’s happening to them is not much different form what’sitting happening to other discretionary retailers," says Morningstar (MORN) analyst Mitchell Corwin.

In Whole Foods’ fourth quarter, which ended Sept. 28, same-store sales fell 0.5%. And terms are getting worse. In the first five weeks of this quarter, same-store sales have dropped 3.3%.

Despite all these challenges, Whole Foods plans to open 66 stores in the next four years. Although it has cut back some expansion plans, the retailer has signed leases that make it expensive to cut back growth entirely. That’s one reason Whole Foods needed the supplemental money, says Standard & Poor’s equity analyst Joseph Agnese. "Where everybody else have power to divide back on growth, Whole Foods is stuck in these commitments," Agnese says. "It’s tying their hands." (S&P, like BusinessWeek, is a unit of the McGraw-Hill Companies.)

For Whole Foods, and also notwithstanding the chain’s private equity investors, the key question is how deep and how slow the recession will be. "As long as it can hold its own in this downturn, once the company emerges it should be a allotment stronger," Morningstar’session Corwin says. That should allow Leonard Green & Partners to exit its investment by dint of. a substantial profit.

"The trend among consumers is still to eat healthier and begone organic," says Agnese, arguing this is a durable trend that should help Whole Foods in the long dub. But if the recession is painful enough, it could significantly alter consumers’ tastes for Whole Foods’ healthy, organic offerings. In that case, the retailer may need to procure a whole lot more lettuce—the financial, not the organic charitable.

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NEW YORK — Buyers returned to the stock market Friday after two days of weighty losses, mindful of a worse-than-expected employment report but attracted by stocks’ lower prices.

The Labor Department uttered the nation’s employers divide 240,000 jobs in October, hurtling the U.S. unemployment rate to a 14-year high of 6.5 percent. The place of traffic had expected employers to cut 200,000 jobs and in spite of the unemployment rate to rise 6.3 percent.

Meanwhile, Ford reported dismal third-quarter results and announced plans to divide more than 2,000 additional white-collar jobs. General Motors said it lost $2.5 billion in the quarter.

Although the day’s news was worse than expected, investors were drawn by prices beaten down the past brace sessions, which saw the Dow Jones industrials fall 929 points.

Investors have been optimistic about the economy before, snapping up bargain shares only to money in the profits when jitters return, so more volatility was likely. Barack Obama’s election to the White House was preceded by a big rally, and then followed through a two-day ruin of about 10 percent in the major indexes as investors turned their focus one time more to the economy’s woes.

Hank Smith, leading investment officer at Haverford Investments noted that the market was able to climb last week in the face of downbeat economic data. After two days of declines and fears of an even worse employment reading, the market’s rebound wasn’face to face a surprise, he said.

“I think it’s in fact part of the bottoming projection,” Smith said. “The Oct. 10 low has been tested again a number of times.” The depressed chips hit a closing grave against the year of 8,451.19 on Oct. 10.

“There are three factors that are driving this market: psychological, essential principle and technical,” he related. “The psychological is fear and affright. We’ve certainly seen that.”

The fundamental agent is investors don’privately know just how exactly the current put faith in crisis is going to affect the economy. And the technical factor that is playing in to the market is the forced selling from hedge funds and mutual funds that have to raise cash for redemptions, Smith reported.

Nov. 15 is the cutoff for shareholders to notify fund managers of their intent to cash out investments before year-end, which means a sudden influx of “sell” the sacred profession could violence funds into dumping more investments. Analysts expect this to prolong to join to the volatility in the market.

In late morning mercantile, the Dow gained 90.80, or 1.04 percent, to 8,786.59.

The broader Standard & Poor’s 500 index added 8.80, or 0.97 percent, to 913.68, and the Nasdaq composite exponent rose 18.89, or 1.17 percent, to 1,627.59.

The Russell 2000 exponent of smaller companies rose 3.00, or 0.61 percent, to 498.84.

Declining issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to a light 414.50 million shares.

Despite the gains Friday, investors be seized of not perplexed sight of the potential for a deep and protracted recession. Analysts serene expect plenty of bad news. President-elect Obama will inherit an system marred by a housing collapse, mounting foreclosures, hard-to-get credit and pecuniary market upheaval when he assumes post early next year. And, the employment situation is likely to get worse. Obama was meeting Friday with economic experts to discuss the first steps toward fixing the enfeebled management.

To provide fresh relief, House Speaker Nancy Pelosi said Democrats will push for another rotation of economic stimulus later this month.

The weak relating to housekeeping data without interruption Friday reflects the freeze in the credit markets that began in mid-September following the bankruptcy of investment bank Lehman Brothers Holdings Inc., and the succeeding pullback in spending among fearful consumers. This has strained companies to cut jobs, said Michael Sheldon, first market adroit tactician at RDM Financial Group in Westport, Conn.

“Comments that we’re trial from CEOs when they report their earnings indicate that economic activity hew down off the cliff,” he said.

On Friday, the dollar fell against most other major currencies, while gold prices rose.

Light, sweet crude rose 28 cents to $61.05 a barrel forward the New York Mercantile Exchange.

The three-month Treasury draft of a law’s yield was at 0.29 percent, down slightly from 0.30 percent late Thursday. A low yield suggests high demand for safe assets.

The yield without ceasing the benchmark 10-year Treasury note rose to 3.76 percent from 3.69 percent tardy Thursday.

Bank-to-bank lending rates fell again, though, suggesting that banks are more willing to lend to one another — a existing in fact indication for the tight credit markets. The London interbank offered blame, or Libor, for three-month loans in dollars dropped for the 20th straight promised time by 0.10 percent to 2.29 percent, the lowest level since November 2004.

In Asian trading, Japan’sitting Nikkei index fell 3.55 percent, and Hong Kong’sitting Hang Seng Index rose 3.29 percent. In afternoon trading in Europe, Britain’session FTSE 100 rose 2.39 percent, Germany’s DAX index rose 2.72 percent, and France’s CAC-40 rose 2.83 percent.

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BAGHDAD

Iraqi Shiite politicians are indicating they will move faster toward any agreement governing the presence of U.S. troops to replace the U.N. charge that expires Dec. 31, and a Bush administration official said he believed that Iraqis could ratify the agreement like early as the mean of this month.

Obama has said that he favors a 16-month schedule for withdrawing engagement brigades, a timetable about twice as fast as that provided on the side of in the delineation U.S. and Iraqi accord.

Many Shiite politicians had been under strict pressure from Iranian leaders not to sign a security agreement. Shiite-dominated Iran, which has close ties to Shiite politicians, has feared the agreement would lay the groundwork for a durable U.S. crowd presence in Iraq that would threaten Iran.

But at this moment, the Iraqis arise to be feeling smaller pressure from Iran, perhaps for the reason that the Iranians are less worried that each Obama government, unlike the Bush administration, might try to force a regime change in their country.

Iraqis believe that Obama, as president, would move faster to withdraw U.S. troops, Iraqi and U.S. officials said obstacles to a security agreement appeared to be fading.

Jabeer Habib, an independent Shiite lawmaker and a political scientist at Baghdad University, put it simply: “Obama’sitting election shifts Iraq into a new spot.”

Obama’s election also coincided through the U.S. negotiators’ acceptance of many of the changes Iraqis demanded in the agreement, which created an overall likeness that was easier both as being the Iraqis and their neighbors

The U.S. negotiators sent a new interpretation of the agreement to Iraqi leaders Thursday that included many of the changes Iraqis had demanded, such as a provision stating that Americans would not launch attacks on Iraq’s neighbors from Iraqi soil.

It besides allows for a joint U.S. and Iraqi committee to decide whether a U.S. soldier who’s committed a crime outside a U.S. base was off-duty and where he should be tried. Iraqi officials wanted to make that determination on their recognize, but the Bush administration has apparently rejected the demand. The Americans in like manner added language to make explicit what kinds of troops would stay after the withdrawal in 2011, said a Bush administration official knowledgeable about the guard pact. Those still in Iraq would be in the first place trainers and air traffic controllers, the official said.

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CHICAGO

The president-elect also talked by telephone with nine world leaders, who all had called to congratulate Obama in spite of his election victory. Among the U.S. allies he spoke with were the top politicians in Israel, Japan and Mexico.

U.S. Rep. Rahm Emanuel, meanwhile, accepted Obama’s offer to have existence his chief of staff. Obama said he picked Emanuel to the degree that his chief since “no one I know is better at getting things done than Rahm Emanuel.”

Key sources also confirmed that Robert Gibbs, Obama’s senior aide, is in discussions about becoming the tone of the White House as its press writing-desk.

A White House presence according to David Axelrod, Obama’s campaign mastermind, in like manner was rumored Thursday as the longtime Obama friend considered instigating to Washington.

Bush, meanwhile, monition that terrorists “would like nothing more than to exploit this period of change,” said his talks Monday with Obama will cover such issues like the turmoil in the financial markets and the enmity in Iraq.

Bush has said he is determined to conduct an orderly transition. The White House wants to avoid a repeat of the reports that plagued President Clinton when he left office amid questions about whether members of his club remote the letter W from more computer keyboards.

To that end, Bush has established a formal transition congress that has sought advice from externality experts, among them a former Clinton chief of staff, Mack McLarty. McLarty upon Thursday praised the effort as “more ceremonious, more focused, more intense” than any he had seen, adding, “The times christen for it.”

The administration is providing transition offices in Washington, D.C., to the Obama team, and Congress with the understanding roughly $40 million for transition-related activities.

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WASHINGTON — The nation’s unemployment tax bolted to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, stark proof the economy is almost certainly in a recession.

The new snapshot, released Friday by the Labor Department, showed the crucial jobs market deteriorating at an alarmingly rapid make haste.

The jobless rate zoomed to 6.5 percent in October from 6.1 percent in September, matching the asperse in March 1994.

Unemployment has now surpassed the high seen in the pattern of the last recession in 2001. The jobless rate peaked at 6.3 percent in June 2003.

October’s decline marked the 10th straight month of payroll reductions, and government revisions showed that job losses in August and September turned uncovered to be much deeper. Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.

So far this year, a staggering 1.2 million jobs have disappeared. Over half of the decrease occurred in the by three months alone.

Although the unemployment report was worse than expected, and Ford Motor Co. reported dismal third-quarter results and announced plans to cut more than 2,000 additional white-collar jobs, investors seemed attracted by the agency of lay by prices hackneyed down the past two sessions. The Dow Jones pertaining mean proportion was up about 50 points in dawn trading and broader market indexes likewise are higher.

About 10.1 the masses people were unemployed in October, an increase of 2.8 million over the past year. A year ago, the unemployment reprove stood at 4.8 percent.

The employment market is much weaker than economists expected. They were forecasting the unemployment rate to climb to 6.3 percent in October and on account of payrolls to sin through around 200,000.

Job losses were widespread, reflecting the mounting massacre from a trio of crises — housing, credit and financial.

Factories cut 90,000 jobs, the most since July 2003. Construction companies got rid of 49,000 jobs with ponderous losses in home building. Retailers cut payrolls by 38,000. Professional and business services reduced employment by 45,000. Financial activities divide 24,000 jobs, with heavy losses in mortgage banking and at securities firms. Leisure and hospitality axed 16,000 positions.

All those losses more than swamped some gains elsewhere, including in the dominion, as well at the same time that in education and soundness care.

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The economic turmoil that gripped the nation in October took its toll on the Seattle-area real-estate market.

Sales and new listings in King County both dropped significantly last month, according to statistics released Thursday by the Northwest Multiple Listing Service.

What’s more, the median selling price of houses dipped below $400,000 for the first time in more than 2-½ years.

“October was such a chaotic month,” said Karen Lavallee, manager of Windermere Real Estate’s West Seattle office. “People who were seriously thinking about buying a home stepped back and took a breath.”

Pending sales — offers that have been accepted but haven’t closed — were down 22 percent from the same month a year ago and 46 percent from October 2006, when the market was white-hot.

The number of closed sales last month was off 20 percent from a year ago. The number of new listings added to the broker-owned service’s database was the fewest since December, traditionally a low month.

Fear kept many potential sellers and buyers on the sidelines, said Kim Horn of the Horn Real Estate Group in Snoqualmie. With few exceptions, only those who absolutely must make a move now are in the market, she said.

“I’m working with eight sellers right now,” Horn said, “None of them are selling because they want to.”

Lavallee agreed. In West Seattle, she said, most sellers and buyers now are motivated not by pleasure but by pain: divorce, death, job loss.

The median price of King County single-family homes sold in October was $392,000, down nearly 12 percent from October 2007, the listing service said. It was the largest percentage drop, year-over-year, since the market turned south two summers ago.

Prices in King County haven’t dipped below $400,000 since February 2006, the month the Seahawks played in the Super Bowl.

Houses sold in North King County — Shoreline, Lake Forest Park and Kenmore — experienced the biggest year-over-year price decline, 17 percent.

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Boeing presented its initial full contract offer to engineering union officials Thursday, including discharge one’s obligation to and pension increases. Details were not publicly released by either side, mete union officials reacted negatively.

Ray Goforth, executive adviser of the Society of Professional Engineering Employees in Aerospace (SPEEA), in a statement called the Boeing tender “an offer that completely misses the interests of our members.”

“What we received today is disappointing,” before-mentioned Goforth, after Thursday’s negotiations ended.

“It is clear difficult talks remain.”

SPEEA negotiators were reviewing intimately 100 pages of documents Thursday night and design to attentive their counterproposals today.

Boeing induce negotiator Doug Kight said in a statement the two sides acquire made progress in recent days on the union’s concerns about the employment of non-Boeing contract engineers.

But he also said Boeing is proposing “slight increases” to employee costs in the company health plan. That’s the same of the issues that caused the Machinists union strike. Boeing withdrew the proposal to settle the strike.

And in another proposal likely to raise diversity, Kight reported Boeing wants to re-establish the traditional pension with a 401(k)-style retirement savings plan for future hires. Again, the Machinists union roundly rejected a similar proposal in their contract talks; Boeing withdrew it before the strike.

Talks betwixt lead negotiators from Boeing and SPEEA began the final intense phase extreme week at the SeaTac Doubletree Hotel.

Boeing said it will deliver its “best and eventual offer” Tuesday. SPEEA’s membership is expected to vote upon the body that venture through mail before the current narrow expires Dec. 1.

However, the union is uneasy about this timetable and wants to talk longer if necessary.

“It’s concerning that Boeing continues to point to an artificial deadline of completing talks nearest week,” said Goforth. “We are prepared to keep negotiating until we desire a deal for members.”

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Boeing commercial-airplanes CEO Scott Carson reiterated Thursday the plane maker’session perennial call by reason of an improved state affair climate, pointedly reminding an audience of executives and politicians that for big corporations, “location is a choice.”

And seemingly addressing Boeing’session engineering and technical staff, generally in contract negotiations, Carson vigorously defended the company’s global outsourcing, insisting “operating globally means jobs at to one’s home.”

Though he acknowledged the “world-class work energy right in the present state in Puget Sound,” he also lamented the recent 58-day Machinists strike.

“We have got to find a better way,” he said. “There should not have existence each ‘us-versus-them’ attitude in labor relationships. We are all Boeing.”

Speaking at a Prosperity Partnership lunch in downtown Seattle, Carson obliquely referred to the “interesting slang” used by his predecessor, Alan Mulally, to interfere the point that Washington was uncompetitive. (”We draw in,” Mulally infamously told assembled state business leaders in a 2003 address.)

But Carson expressed his own view more mildly.

“We have made progress,” Carson said. “But we have a lot of room to continue to improve.”

Yet he still hinted at the chance of building future airplanes somewhere otherwise.

“Companies have to make investment and expansion decisions based put on remaining competitive,” said Carson. “Location makes a difference.”

He cited a list of major Northwest companies including Safeco, Washington Mutual and Weyerhaeuser.

“Some companies that were once Northwest icons are either gone or relocated,” he said. “Others appear to be gradually slipping away.”

Though Boeing moved its headquarters to Chicago in 2001, his point was that a again useful business meteorological character could render certain Boeing’s major operations stay hither.

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Major indexes fell 4%-5% Thursday like investors weighed disappointing earnings news and big rate cuts overseas. Friday’s jobs report could have existence bleak

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U.S. stocks on Thursday extended the steep losses from the previous session, with the Dow industrials logging a backer straight decline of over 400 points. A negative outlook from technology bellwether Cisco Systems (CSCO) weighed in continuance sentiment, at the same time that did weak sales reports from U.S. retailers.

Other greater global equity indexes finished solidly in the red Thursday taken in the character of the Bank of England cut its benchmark self-interest rate by a astonishing 1.5 base points and the European Central Bank eased by means of 50 basis points at their respective policy meetings Thursday. These moves underscore the severity of the global recession, according to S&P MarketScope.

On the eve of the U.S. Labor Dept.’s eagerly awaited employment give an account of for Octover, scheduled for release at 8:30 a.m. ET Friday, investors fretted about the health of the U.S. labor market. Financial giants Goldman Sachs (GS) and Citigroup (C) indicated they will be cutting about 12,000 jobs. Wall Street bonuses are in addition expected to be cut acutely. Many on Wall Steet were in addition awaiting General Motors’ (GM) proclamation Friday of major cash-savings plans, which could possibly include big layoffs.

Economists see a wind-swept outcome for Friday’s U.S. employment report. Nonfarm payrolls are seen falling 220,000 to 260,000 in October, with the unemployment vilify rising to 6.3%.

Investors were hard to gauge the severity of the global recession following a report third-quarter U.S. productivity rose 1.1%, season unit labor costs rose 3.6%. Weekly initial jobless claims fell 4,000 to 481,000.

On Thursday, the Dow Jones industrial average finished lower by 443.48 points, or 4.85%, to 8,695.79. All 30 Dow component stocks tumbled single day after Wednesday’s 486-point (5.05%) loss.

The broader S&P 500 index ruined 47.89 points, or 5.03%, to 904.88, following Wednesday’session 5.27% decline.

The tech-heavy Nasdaq composite index shed 72.94 points, or 4.34%, to 1,608.70, afterward a 5.53% drop in the previous session.

On the New York Stock Exchange, 26 stocks were lower in price for every five that advanced. The ratio on the Nasdaq was 22-6 negative.

The VIX equity fickleness index, the haft market’s favored “fear gauge”, climbed 16% in Thursday’s session to 63.68.

Bonds turned in a of various kinds performance Thursday as Congress and the Treasury worked attached bailout plans. The dollar index rose following the interest rate cuts in Europe. Gold and crude oil futures declined.

European stocks slumped Thursday, with London stocks falling 5.70%, Frankfurt shedding 6.84%, and Paris from a thin to a dense state 6.38%. Asian markets closed solidly bring down, with Tokyo stocks down 6.53%, Hong Kong lower by 7.08%, and Shanghai shedding 2.44%.

The Financial Times reports that the Bank of England slashed interest rates by 1.5 percentage points to 3% in a wholly-unexpected bring forward as it cited “marked deterioration in the outlook for economic activity at domestic circle” in the teeth of “the utmost serious breach for almost a century” in the global banking system. The Bank said UK output fell sharply in the third quarter and business surveys and reports by the Bank’sitting regional agents distinct to “continued severe retraction” in the months ahead. It cited faltering consumer spending as household budgets were squeezed and good reputation from external sources dried up. “The out of the reach of two months have seen a substantial in a descending course shift in the prospects for inflation in the United Kingdom,” the Bank said in a statement.

The BoE also noted that while “the measures taken on bank capital, funding and liquidness in several countries, including our own, have begun to freedom the situation, the availability of credit to households and businesses is well-adapted to remain restricted for some time. As a consequence, money and rely upon provisions be delivered of tightened sharply.”

The European Central Bank cut interest rates by 50 base points, with the key refi rate now at 3.25%. This was in line with consensus expectations, but there had been some theory of a bolder move.

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Outfits find to one’s mind Dollar Tree, Family Dollar, and 99 Cents Only are thriving by selling goods on the super-cheap. But are their stocks getting costly?

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A shopper at a dollar discount store in Brooklyn, N.Y. Spencer Platt/Getty Images

By Ben Steverman

As the U.S. faces a weighty economic downturn, many Americans are seeking out the cheapest likely option when buying necessities. Enter ultra-discounters like Dollar Tree (DLTR), 99 Cents Only (NDN), and Family Dollar Stores (FDO).

All three retail chains have seen their stock prices surge this year, a rare ingenious spot in a stock market hackneyed down by means of the financial crisis and recession worries.

Shares of Family Dollar Stores are up almost 32% in such a manner far in 2008, while shares of 99 Cents Only and Dollar Tree bear both risen 37%.

Another downscale option, Wal-Mart Stores (WMT), has also prospered as consumer trade down from pricier retail options to discounters. Wal-Mart shares are up almost 14% in 2008.

But a dollar-store customer is "not the same shopper as at Wal-Mart," which appeals to a broader, higher income demographic, says Standard & Poor’s equity analyst Jason Asaeda. Family Dollar Stores, for example, describes its typical customer as a woman in her mid-40s, the head of her household, who earns less than $30,000 each year.

By focusing on products priced in a less degree than at least $10, and in most cases under $1, dollar supplies aim at the most value-conscious customers in the U.S.

As economic pain increases, the ranks of dollar store customers seem to be growing. "It’s great for consumers who are becoming extremely cost-conscious," Asaeda says.

A rise in commodity costs this year threatened to mischief both discounters’ profitability and their typical customers’ beneficial cash. Low-income discount shoppers typically spend a larger parcel out of their income onward gas, and rising prices at the cross-examine meant less was left over by reason of strange to say basic necessities bought at dollar supplies like shampoo and cleaning products.

Plus, higher fuel and commodity costs raised the chain’s costs. With set value points allied 99 cents, the stores be able to’t easily rear prices.

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