What Whole Foods Learned From Navigating the Great Recession

Over the past five years, Whole Foods Market's (NYS: WFM) stock is up more than 150%. Yet last month, founder and co-CEO John Mackey told Motley Fool CEO Tom Gardner that the Great Recession was a "nightmare" for him.

In the video below, Mackey shares his thoughts on his one big lesson from the downturn: preparing for another rainy day. (A transcript is provided below; running time: 2:52.)

Tom Gardner: What was it like to be you or to be your leadership team 2006-2008. Many, many people that are members of The Motley Fool are entrepreneurs. We skew wildly toward business executives, small business founders, so what was it like to be here? This is a company that has gone up 20% per year in value since going public in 1992, and then to see nearly 90% of that, of the valuation of the business evaporate over a two-year period.

John Mackey: It was a nightmare, and it was; metaphors that come up for me are it was a like an earthquake in slow motion. It just seemed to go on and on and on, or it was like being in a riptide, and you're being pulled out to sea and you know you need to swim parallel to it, so you can begin to get out, but we just couldn't seem to get, escape from the riptide. It was very unpleasant. It was by far the most unpleasant period in my business career. I think fundamentally the company was the same company, and we did see our same-store sales erode, but we did watch our stock price just fall apart until we got down to where we were trading at the most unbelievable rate of just two times our actual cash flow. It was the greatest bargain. I just didn't have any cash or I'd have been buying stock. One of the disadvantages of not taking a salary and when we suspended dividends, I was like...

Gardner: Illiquid.

Mackey: I was illiquid and I needed to have some cash to live on, so to speak, so I had to sell some other assets, also at unfavorable prices, I might add. Big learning for me on that is don't ever be in that situation again. My father told me before he passed on...

Gardner: Your father was an accountant.

Mackey: He was an accounting professor at Rice for 19 years, but he ended up running a public company, a hospital management company called Life Mark before that was merged out of existence in 1984. But he told me that he would have made a lot more money in his life, just towards the end of his life. He said, "You know, John, I never forgot about the Depression." "Dad, there's never going to be another Depression." Because he always was very conservative, always kept a lot of money and cash and he just never wanted to be caught in some kind of liquidity crisis, and I always poked fun at him. I said, "That's never going to happen again. You've just let go of amazing upside and you could have made so much more money." I can tell you though, when that happened in 2008, when our stock got down to seven or eight dollars, my dad's words were ringing in my head, which was, "Oh my God, he was right."

We should learn our lessons. Whole Foods has $1.3 billion in cash right now, and I got asked, what are you going to do about extra cash? Part of my answer was, I'm going to pile it up.

For more from Tom's interview with John Mackey:

At the time thisarticle was published The Motley Fool owns shares of Whole Foods Market, and Motley Fool newsletter services recommend Whole Foods as well. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.