Less focus on square-footage growth and more focus on improving the shopping experience for loyal core customers is what Whole Foods Market leaders think will help lift the retailer after several quarters of declining same-store sales.
In his first earnings call since the departure of former co-CEO Walter Robb, Whole Foods CEO John Mackey announced that the retail chain would close nine stores in the second quarter and no longer work toward a goal of having 1,200-plus stores. Instead, it will continue initiatives to reduce operating expenses and accelerate its category management work. “We’re basically examining every aspect of our retail operations and asking, ‘What are we doing here that’s not creating value?’” Mackey said.
What Whole Foods thinks will create value is leveraging data to create a more personalized and seamless experience for loyal shoppers, in partnership with customer science company dunnhumby. “We know that our core customers represent our largest customer segment and account for a majority of our sales,” Mackey said. “If these customers add just one more item per trip, the sales potential is significantly greater than with any other segment. Going forward, Whole Foods Market will focus on serving this growing niche of customers better than ever before.”
It’s also been testing an affinity program and a smaller store format, 365 by Whole Foods Market. Mackey said he's optimistic about future growth potential of the new format but wants to see how the next round of stores perform before getting more aggressive.
Highlights from the first quarter include:
- Total sales were up 1.9 percent to $4.9 billion.
- Comparable store sales decreased 2.4 percent.
- Diluted earnings per share were 30 cents.
- Gross margin declined 43 basis points to 33.6 percent.
- Thirteen new stores opened, including two relocations.
Whole Foods lowered its outlook for the year to reflect lower expected sales growth and new costs associated with accelerating category management. It now expects sales growth of 1.5 percent or greater and comps of negative 2.5 percent or better.