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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.
| Item 5. | INTEREST IN SECURITIES OF THE COMPANY. |
(a) The aggregate percentage of Shares
reported to be beneficially owned by the Reporting Persons is based upon 318,564,535 Shares outstanding, which is the total number
of Shares outstanding as of February 10, 2017, as reported in the Issuer’s Quarterly Report on Form 10-Q for the quarterly period
ended February 15, 2017, filed with the SEC on February 16, 2017.
As of the close of business on the date
hereof, JANA may be deemed to beneficially own 26,314,367 Shares (including options to purchase 3,535,000 Shares), representing
approximately 8.3% of the Shares outstanding.
As of the close of business on the date
hereof, Mr. Murphy may be deemed to beneficially own 1,457,078 Shares, representing approximately 0.5% of the Shares outstanding.
