Burkle's sowing of Wild Oats hints at potential turnaround.

In disclosing that he had a 9.2 percent share of Wild Oats Markets Inc., L.A. billionaire Ron Burkle cast a vote of confidence for the natural food chain that has straggled in a segment dominated by Whole Foods Market Inc.

Burkle, who has made a career of buying and selling major supermarkets, is being watched closely in the industry because many suspect that he will not stay a sideline investor.

"There is no question that Mr. Burkle has a storied history of doing successful deals in the supermarket industry," said Ed Aaron, an analyst with RBC Capital Markets. "I think his ownership gives at least some endorsement of his view of Wild Oats as a potentially successful turnaround story."

In a filing with the Securities and Exchange Commission, Burkle's investment firm, Yucaipa Cos., called the shares "undervalued by the market at the present time." The stock has swung widely in the last year from lows of around $6 in October 2004 to a high of $15.37 on April 12, 2004. In the last month, shares have jumped 52 percent to around $10.50.

The filing came in the same week that he announced the purchase of a 40 percent stake in Carteret, N.J.-based Pathmark Stores Inc. for $150 million. Pathmark has 142 stores in the northeast.

Major supermarket chains are interested in the natural food grocery sector because it generally isn't subject to the same discount-induced price pressures that have squeezed mainstream supermarket profit margins. Last year, Albertsons Inc. acquired Bristol Farms, the high-end Southern California chain.

"People are willing to pay more for getting hormone-free beef," said Lloyd Greif, an investment banker who represented Oaktree Capital Management LLC in its sale of Bristol Farms. "It is a totally different customer that you are appealing to, and it is a customer that, frankly, isn't shopping at Wal-Mart."

Analysts downplay the prospects of an immediate Wild Oats sale, suggesting that Burkle will focus on extending his influence over Wild Oats management. In December, supermarket executive Robert Miller, whom Burkle has worked with in the past, was named chairman--a development that Yucaipa noted in the recent SEC filing was a "positive development."

A Burkle spokesman declined to comment.

The Boulder, Colo.-based company, which has around 100 stores, 28 in Southern California, lost $7.1 million in 2004 and same-store sales were up just 1.4 percent. By comparison, Whole Foods same-store sales climbed 14.9 percent. The going has been especially tough in the fiercely competitive L.A. region.

"Wild Oats has tried to follow the same path as Whole Foods, but they haven't pulled it off," said Bert Hambleton, a marketing strategy consultant with Issaquah, Wash.-based Hambleton Resources Inc.

Wild Oats' problems range from unappealing displays to poor store locations. Analysts say the chain can only improve because it is positioned as one of the nation's two major natural food grocers in a growing market segment.

From 2003 to 2004, the Natural Marketing Institute reported that organic food and beverage sales jumped 18 percent, to nearly $11 billion, as shoppers purchase more and more staples at the stores.

"At first, it was a little bit unusual and uncomfortable," said Hambleton. "They found out that they could make the substitution, and now, all of a sudden, they can make this their grocery store."

Industry speculation was divided last week on whether Burkle might guide the chain to the mainstream or sharpen its organic edge.

Hambleton insists that the real growth is found in the mainstream arena. "All bets are off in respects to what is the merchandise," he said. "I don't think there will be any sacred cows in terms of what has to go, and what has to come in."

Sonja Tuitele, a spokeswoman for Wild Oats, said that more widely available products are being introduced, such as Oroweat breads, V8 juice and Starbuck's packaged coffee.

Bill Bishop, president of retail consulting firm Willard Bishop Consulting in Barrington, Ill., said there is a risk of alienating customers by offering items that can be found at the traditional stores. Going mainstream, he said, "is a conventional thought process that would probably generate short-term sales, but long term it is not going to achieve the strategic repositioning, of the assets.