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Whole Foods outlines strategy to differentiate customer experience, improve price perception

Whole Foods outlines strategy to differentiate customer experience, improve price perception

Amid press negativity, co-CEOs John Mackey and Walter Robb presented investors and analysts with strategies for differentiating, improving value perception and improving the shopping experience during an earnings call Wednesday.

Whole Foods Market fell short of analysts’ expectations again last quarter, but its executive leadership wants everyone to know that they’re not standing still.

“In this dynamic and increasingly competitive marketplace, we recognize we need to move faster and go deeper in creating a solid foundation for our long-term profitable growth,” said co-CEO John Mackey in scripted remarks delivered on the company’s financial results call on Wednesday.

The retailer opened 10 new stores and posted sales of $3.4 billion in the fourth quarter of fiscal year 2015—a 6 percent increase year-over-year. But comparable store sales decreased by .2 percent, and diluted earnings per share of $0.16 missed expectations, which Mackey attributed to weaker-than-expected sales.

Initiatives for growth include improving efficiency throughout its business and efforts to differentiate the customer experience, such as:

  • Looking at every aspect of the business to eliminate costs that do not produce value for shoppers. Whole Foods announced a plan to reduce expenses by a $300 million run rate by fiscal year 2017. Already, they have eliminated more than 2,000 positions this year and have introduced a new labor scheduling tool that should help in this effort.
  • Innovating through exclusive brands and prepared and bakery foods. Whole Foods does almost one-third of its sales in these categories, and they’re parts of the store that are becoming increasingly important as a differentiator, Mackey said. A global vice president of culinary and hospitality position was recently created and will be filled in the coming months.
  • Improving value perception through strategic price reductions and promotions, as well as external marketing efforts. While Mackey acknowledged that price is a critical part of the conversation, he noted that Whole Foods is “not participating in a race to the bottom.”
  • Investing in digital strategies to convert website traffic into sales. Last quarter, the retailer integrated Instacart into its app. In the near future, it plans to launch a national sales flyer and continue testing its loyalty program pilot.
  • Launching a new growth vehicle, 365 by Whole Foods. Three new leases were signed last quarter for locations in San Francisco, Cincinnati and Cedar Park, Texas. Simultaneously, the retailer plans to grow its square footage at a more moderate pace in 2016.

Separately, Whole Foods also announced Wednesday a $1 billion stock buyback plan.

“We are taking aggressive, smart and strategic steps,” co-CEO Walter Robb said.

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