Whole Foods momentum slips in third quarter

Whole Food’s said it gained market share during the third quarter, but the 5.9% same store sales increase the company reported fell short of expectations and the company tempered its outlook for 2014.
Whole Foods cited strategic price matching as one determining factor for the deceleration in same-store sales. Despite the impact price matching had on sales this quarter, the company believes the strategy will drive sales growth in the long-term and enhance its competitive position relative to companies such as Kroger, Publix and Safeway. Whole Foods continues to battle the “Whole Paycheck” price perception among some shoppers and price matching is one tactic to address the issue.

“We remain committed to expanding our value offerings across the store, increasing our promotional activity and improving our relative price positioning, and with our latest round of strategic price matches, we have significantly closed the gap against a major competitor,” said co-CEO John Mackey, “Our sales momentum and operating disciplines, along with moderating inflation, helped generate record gross margin performance for Q4, with occupancy leverage, shrink reduction and buyside initiatives more than offsetting the impact of our value initiatives.”

Mackey also highlighted other positives.

“Our sales approached $13 billion, translating to sales per gross square foot of $972. We opened 32 new stores, expanding into 10 new markets and increasing our ending square footage 8% to 13.8 million,” he said.

Given the lower-than-expected comps for the quarter, the company is staying conservative in its sales and earnings outlook for fiscal 2014. The company anticipates sales growth of 11 to 13%, comparable-store sales growth of 5.5 to 7%, identical store sales growth of 5 to 6.5%, and diluted earnings per share of $1.65 to $1.69, an increase of 12 to 15%.

Despite lowering its guidance, Whole Foods is not hitting the breaks on its growth initiative. The company sees demand for 1,000 locations in the U.S. alone, and has 94 stores in its development pipeline already, in addition to the 47 new leases the company signed in the last 12 months.

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