After years of blithely brushing off the nickname “Whole Paycheck” as it counted its profits, Whole Foods Market is making a concerted effort to overcome its image as an overpriced destination store, marketing value as vigorously as it has always marketed health in hopes of turning around a significant downturn in profits. “Sure, at Whole Foods Market you can buy a rare $39.99 bottle of certified organic, estate-bottled Tuscan extra-virgin olive oil that costs more than a bottle of fine perfume, but you can also buy every day low-priced groceries, natural meats, seafood, cheeses and produce,” wrote Ben Friedland, Whole Foods spokesman for the Rocky Mountain region, in a letter to the media this summer.
Friedland’s spiel was part of a national campaign in which the historically sale-averse retailer rolled out discounts, coupons and sale flyers; enlisted “value gurus” to help shoppers buy organic and natural items on the cheap; and provided consumer “value tours,” leading sticker-shocked customers to items with price tags rivaling or bettering those found at conventional supermarkets.
The campaign comes at a tough time for the natural foods giant, which runs 271 stores in the United States, Canada and the United Kingdom. In August, Whole Foods reported third-quarter profits of $33.9 million, which were down 31% from the previous year. It also reported that sales growth at stores open one year or more had slowed to 2.6%, from 6.7% the previous quarter, and that its new stores in Britain have lost $18.4 million in the past year.
Whole Foods now intends to reduce its number of new store openings to 15, down from the 25 to 30 it predicted earlier. Company officials also told investors that Whole Foods intends to slash its capital spending for fiscal year 2009 to $400 million to $450 million (down from $550 million), suspend its quarterly cash dividend and reduce the size of stores in development by an average of 9,000 square feet. “They got on a large store kick that turned out to be a mistake,” Andrew Wolf, managing director of equity research for BB and T Capital Markets, told Nutrition Business Journal earlier this month.
NBJ takes an in-depth look at how the economy is affecting Whole Foods and other healthy foods retailers in our upcoming Healthy Foods issue, which publishes in October. To order your copy of the issue or to subscribe to NBJ, go to www.nutritionbusinessjournal.com