(PT) In a Q3 earnings call, Whole Foods Market leadership shared insights on the first two 365 stores and the tactics they hope can help the retailer regain momentum.

Deanna Pogorelc, Senior content producer

July 28, 2016

2 Min Read
Whole Foods Market continues to fight falling comps

Whole Foods Market just saw its fourth consecutive quarterly decline in comparable store sales as it continues to fight off competition from everyone from meal kit companies to fast casual restaurants to mainstream retailers who are upping their natural and organic offerings.

Same-store sales fell 2.6 percent in the third quarter of 2016 ending July 3, while sales grew 2 percent to $3.7 billion.

To stay competitive, Whole Foods has been testing a number of promotion-based tactics. Co-CEO Walter Robb told investors and analysts on an earnings call Wednesday that the chain has been running weekly deep discount promotions supported by a national ad campaign in certain categories. It has also seen good uptake of its app, which includes digital coupons, and plans to continue rolling out its loyalty program throughout the country next year, he added.

While price promotions ate into gross margins and comparable store sales, Robb said Whole Foods has been encouraged by a lift in basket size and traffic trends in certain departments, particularly in produce.

Much of the retailer’s ability to turn things around hinges on its new store concept, 365 by Whole Foods Market, which features a more curated mix of products at lower prices. The first two stores opened earlier this summer—in Los Angeles and Portland—and Robb said they’re attracting a broader customer base than traditional Whole Foods Market stores. Learnings from the first six weeks of those new stores are guiding changes for the entire company, he added.

“We’re finding that customers are readily accepting items that are full-service at Whole Foods, in a self-service environment at much lower prices in the 365,” said David Lannon, executive vice president, operations. “We’re seeing our meat and seafood percentage of sales being very similar to what they are at Whole Foods even though they’re 100 percent self-service.”

Company leadership expressed great interest in meal kits and further developing what it called its “meal solutions spectrum,” suggesting we might see something new in the way of meal kits or foodservice soon.

Shares of Whole Foods fell more than 5 percent in after-hours trading Wednesday.

Goldman Sachs analysts had downgraded the stock to “sell” on Tuesday, remarking that “wellness has gone mass” and that Whole Foods Market is “losing share in its core natural and organic business to a variety of players including Costco, Kroger and, to a lesser extent, Sprouts Farmers Market.”

About the Author(s)

Deanna Pogorelc

Senior content producer, New Hope Network

Deanna oversees day-to-day production of digital content, newsletters and social media for newhope.com. She especially enjoys writing about packaging and mission-driven brands. Prior to joining New Hope Network, Deanna reported on healthcare innovation for MedCity News. She has a bachelor's degree in journalism from Ball State University.

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