What is in this article?:
The supernatural chain opens smaller boxes in quest for the 1,000-store threshold.
“I’m confident we can achieve our 1,000-store goal. The question will be how quickly can we go?"
— Walter E. Robb, co-CEO
Sidebar: Smaller Stores Allow Price Investment
WHOLE FOODS MARKET has been an industry leader in terms of financial results, thanks in part to investments in its price image.
“In an economic environment that is proving difficult for many retailers, we are thriving,” Walter E. Robb, co-chief executive officer, said during an industry presentation in July.
Net earnings rose 32% to $116.8 million in the third quarter that ended July 1, while sales were up 14% to $2.7 billion, and identical-store sales increased 8% — the 10th consecutive quarter of comps of at least 8%.
In addition, transaction counts are up over 7%; basket size is up around 1%, with “meaningful” increases in baskets of $50 and more; and store productivity has improved to close to $1,000 per square foot at mature stores, “some of which is because we’ve tailored the store size down a little bit,” Robb said.
For the fiscal year that ended Sept. 30 — whose results are scheduled to be released Nov. 7 — the company is forecasting earnings growth of 16% to 17%, with earnings per share of $2.51 to $2.52 and sales up 13% to 14%; and for 2013 it expects EPS of $2.83 to $2.87, with comps up between 6.5% and 8.5%.
Part of Whole Foods’ success in the last few years has come from the decision to improve its pricing position, chain executives explained.
In a speech in June, John Mackey, co-CEO, said, “We’re going to continue to try to make ourselves more and more competitive on a price basis, and that’s the great thing about leveraging occupancy costs [with smaller stores] — it gives us more wiggle room to be more aggressive on price.
“So hopefully we’re going to be able to get investments in price and leverage on operating expenses while being able to use our scale to purchase and get better margins on the buy side.”
According to Robb, “We’ve recognized more than ever that people are concerned about bang for their buck, so we have focused relentlessly over the last three years on our relative value positioning, and we now have an internal team that tracks 1,000 SKU’s at 36 competitors in 12 markets every 30 days, so we know exactly how each market is pricing like items.
“Our strategic intention is to continue to price-invest because we think that’s the key to continue to grow the sales and the comps. Fortunately, we’ve been able to hit a kind of golden triangle that balances unit growth, price investment and gross margin.
Read more: Whole Foods Prices Get Competitive
“In addition we are focused on reducing our shrink and doing a better job on scheduling labor.”
He said Whole Foods sees its role growing within the general supermarket industry. “We see ourselves in somewhat of a leadership role in the industry, and one of the ways we’ve been able to continue to create some separation from the competition has been to continue to set standards of transparency, accountability and responsibility around the food supply.
“There is no shortage of issues that continue to surface about how food is raised, where it’s raised and who’s raising it, and our efforts around seafood and meat and household products continue to set standards.”
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