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Whole Foods Market is introducing a new different chain store, quality food at  lower prices

Whole Foods Market is introducing a new different chain store, quality food at lower prices

Whole Foods Market Inc. said it plans to start a different  chain of smaller stores aimed at younger shoppers, a move designed to fend off growing competition which fueled investor concern about the natural-foods grocer’s outlook. The concept emerged from  the  need to stop the companies slowing  financial growth and looking at ways to beat out its imitators. Because Whole Foods has set the precedence, the competition has grown. More and more stores are pursuing the Whole Foods model.  Despite its convenience, focus on sustainably-raised and GMO-free foods, and comfortable design, whole swaths of grocery store customers avoid Whole Foods for one reason: its high prices.  In mid May, the company announced it would appeal to those customers by introducing a new brand of less expensive stores.

In a release, Walter Robb, co-CEO wrote, “We are excited to announce the launch of a new, uniquely-branded store concept unlike anything that currently exists in the marketplace. Offering our industry leading standards at value prices, this new format will feature a modern, streamlined design, innovative technology and a curated selection. It will deliver a convenient, transparent, and values-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high-quality fresh food at great prices.”

“Our results reflect another quarter of record sales and healthy returns on invested capital,” said John Mackey, co-founder and co-chief executive officer of Whole Foods Market. “Our Whole Foods Market brand has helped lead the shift in consciousness toward fresh, healthy foods by offering the highest quality, broadest selection, and best customer service, and we believe we can triple the number of Whole Foods Market stores in the United States. At the same time, we also see an opportunity to leverage our long history of retail innovation and extend our reach in the marketplace.”

The Company is building a team to focus exclusively on this new concept and is currently negotiating leases. The plan is to begin opening stores next year, and given the more standardized design and product assortment, the Company expects a fairly rapid expansion from there. “We believe the growth potential for this new and complementary brand to be as great as it is for our highly successful Whole Foods Market brand,” added Robb. “We look forward to sharing more details about this exciting new venture sometime before Labor Day.”

Late last year, the Austin-based company began struggling with less-than-stellar sales. (see stats below) To combat the decline, Whole Foods announced that it would begin to offer discount codes. While coupons and discounts are de rigueur in the grocery business, this was the first time in Whole Foods’ 35-year history that it saw the need to offer its customers a deal.

The company has not revealed what it will call the new Whole Foods offshoot. Whole Foods 4 Less?  WFB/Whole Foods Bargains? We’ll just have to wait until Labor Day weekend  2015. It was stated but the new Whole Foods store  could be a play to target  Trader Joe’s business, though their model is quite different.

Fortune notes that the news comes along with more signs that Whole Foods’ bottom line is struggling, “The grocer reported same-store sales rose 3.6% in the 12 weeks ended April 12, below Wall Street expectations for 5.3% growth

John Mackey addressed the doubt investors might be feeling, “You have to be willing to evolve with the marketplace. You can’t not do that because it might possibly take sales from your existing flagship brand.” And on staying ahead of the competition, Mackey noted  “We’re doing all we can, but the reality is, there’s more competition. Everybody is jumping kind of on the natural- and organic-food bandwagon, and that’s really, frankly due to our success.”

WHOLEFOODS Financials

Whole Foods Market Delivers Record Q2 Sales and EPS Sales Increase 10% to Record $3.6 billion; EPS Increase 14% to Record $0.44; Company Reaffirms Targets for Fiscal Year 2015 and Announces New Uniquely-Branded Store Concept Geared Toward Millennials May 6, 2015. Whole Foods Market, Inc. (NASDAQ: WFM) today reported results for the 12-week second quarter ended April 12, 2015. For the quarter, total sales increased 10% to a record $3.6 billion. Comparable store sales on a constant currency basis increased 3.6%, including an estimated 50 basis point positive impact from Easter shifting from the third quarter last year to the second quarter this year. Earnings before interest, taxes, depreciation and amortization were $355 million, or 9.7% of sales. Diluted earnings per share were $0.44, a 14% increase over the prior year. Results include a non-routine supplier credit of $7 million, or $0.01 in diluted earnings per share. During the quarter, the Company produced $322 million in cash flow from operations and invested $206 million in capital expenditures, resulting in free cash flow of $116 million. In addition, the Company returned $47 million in quarterly dividends to shareholders and repurchased $47 million of common stock, or 0.9 million shares. The Company ended the quarter with total cash and cash equivalents, restricted cash, and investments of approximately $1.1 billion. Return on invested capital increased 68 basis points to 15%.

 “Offering our industryleading standards at value prices, this new format will feature a modern, streamlined design, innovative technology and a curated selection. It will deliver a convenient, transparent, and values-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high-quality fresh food at great prices.” The Company is building a team to focus exclusively on this new concept and is currently negotiating leases. The plan is to begin opening stores next year, and given the more standardized design and product assortment, the Company expects a fairly rapid expansion from there. “We believe the growth potential for this new and complementary brand to be as great as it is for our highly successful Whole Foods Market brand,” added Robb. “We look forward to sharing more details about this exciting new venture sometime before Labor Day.”

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