BOULDER, Colo. -- Whole Foods Market Inc. plans aggressive expansion by opening big new stores and capitalizing on cyberspace.
r the nation's largest natural-food supermarket chain.
With the previously reported agreement to acquire Boston-based Nature's Heartland, Whole Foods would have 92 stores in 27 metropolitan areas and should end the year with 100 stores. In fiscal year 2000, growth is to accelerate, with 15 to 20 new stores planned. The company's new goal is to have 200 stores within five years, said John Mackey, Whole Foods chief executive officer. With the number of good acquisition targets dwindling, most of these will be new stores, he said.
The company is venturing into new markets, including Atlanta; Santa Fe., N.M.; and Seattle, where it will open a 50,000-square-foot store -- its biggest to date. Also, there were rumors this week that the company is looking for space in Indianapolis.
In addition to new stores, the company is pursuing other ways to sell its products. As reported, last month the company formally launched WholeFoods.com, an Internet grocery site that could expand the company's market beyond its stores. Mackey believes WholeFoods.com has the potential to be the first profitable Internet grocery site because it can harness the company's national brand name, as well as its buying power. The site, which will be promoted aggressively in the stores, started with 6,000 stockkeeping units, and initial projections are for revenues of $5 million per year.
"Our goal is to be the No. 1 retailer of natural products on-line, just as we are in bricks and mortar," Mackey said. "We think it will be the first profitable Internet supermarket retailer in the country."
He said it doesn't bother him that the site may compete with his stores' sales. Better WholeFoods.com than another competitor, he said.
In addition to acquisitions, Whole Foods is developing strategic partnerships, such as its exclusive contract with Jamba Juice to open 75 juice bars within its stores over the next five years.
Austin, Texas-based Whole Foods celebrated the best year in its history in 1998, with revenues of $1.4 billion and a compounded annual growth rate of 47% since the company went public in 1992. Comp-store sales were up 11%, while net income rose 55% to $45.4 million.
But there were questions at the meeting about the stock's decline over the past year. Since March 1998, the company's stock has plummeted from $70 to about $34 this week, despite the company's growth and rising earnings.
In January, the company announced it would not meet its first-quarter earnings expectations because of high labor expenses, Y2K remediation and the costs of launching WholeFoods.com. Whole Foods executives said they believe they have the expense problem under control.
"It was a tough quarter, but there's nothing wrong with the company," Mackey said. "That will be demonstrated to the investment community over the next few quarters and the next few years."
Whole Foods is one of many "healthy living" stocks that took a hit this year, led by nutritional-supplement companies that saw increased competition from such sources as mass merchants and the Internet. Some conventional supermarkets have ventured into natural and organic foods.
Mackey said the company's stock has been volatile since it went public seven years ago because it hasn't had long-term shareholders. He blamed the stock's recent fall on the slowdown in growth after a record fiscal 1998.
"We've basically got gamblers who want to see what will happen the next quarter or two," Mackey said. "Consistent earnings and growth will provide more stability."
