In defense of Whole Foods

The headlines are screaming these past few weeks proclaiming a “troubled” Whole Foods Market. And to be sure, the news of late has not been good. From a consumer issue of overweighing products to a Wall Street issue of declining comp store sales and a subsequent large decline in the stock price, there are certainly signs that this is a company with some significant issues ahead.

However, when the Supermarket News headline is “Analysts concerned about Whole Foods future,” I think we are taking things just a bit too far. Whole Foods is facing significantly more headwinds than they have in the past but largely they are a victim of extraordinarily heightened expectations rather than a company who has seen better days:

• There is more competition than ever for the natural and organics space and mainstream grocers have embraced the trend. Yet, the market continues to grow and there should be room for everyone, albeit at potentially lower margins.

• Their comps are indeed slowing and this is cause for concern in what is an extremely expensive business to operate. As we saw back in 2008, the wheels can come off the Whole Foods bus in a negative comp environment when the stock plummeted to $4 a share and the company needed an outside capital infusion. Today, I believe they are a victim of high expectations after stacking extraordinary comps on top of great comps and industry leading sales productivity.

• Analysts are quick to question and criticize the “new” format. Perhaps they are right but we haven’t even seen the effort yet! They have been continually innovative and we might see a few new wrinkles.

As an industry (and not a financial) analyst, I’m continually blown away by the innovation, attention to detail and customer experience that Whole Foods is able to deliver on a national basis. When we look at the positives of Whole Foods, they are almost too numerous to mention:

• They get local and do it better than almost anyone. Local products in the store. Micro-loans to foster small businesses. “Forager” roles in their regions to actively seek out product. They are all over this key trend.

• They continue to lead in organics. Great and deep product selections in areas where it matters most to consumers.

• Foodservice. They execute foodservice extraordinarily well and are on-trend and relevant in their offers on a store by store basis.

• Communications. Great store design and best in class at delivering messaging to the customer at the right time.

Yes, they will be faced with challenges. But, I would expect Whole Foods to come through in a very positive place after weathering this short-term storm.

What do you think — is the recent criticism of Whole Foods justified?