|Whole Foods is experimenting with lower prices for produce in select markets.
AUSTIN, TEXAS — Coming to Whole Foods Market next year are faster checkout times and cheaper produce. The Austin-based retailer is investing in initiatives to lower prices and improve customer experience as part of efforts to maintain strong momentum in a competitive marketplace.
For the year ended Sept. 28, Whole Foods Market earned $579 million, equal to $1.57 per share on the common stock, up 5.1% from $551 million, or $1.48 per share, in the prior year. Sales for the fiscal year totaled $14,194 million, an increase of 9.9% over $12,917 million in fiscal 2013.
“We are particularly proud of our operating results, given 2014 was a challenging year on many fronts,” said John Mackey, co-chief executive officer, during a Nov. 5 earnings call with financial analysts. “We faced a dynamic competitive landscape, a lukewarm economy, and headwinds from our own growth and value initiatives. In our journey over the past 36 years, we have always viewed challenges as opportunities to learn and evolve, and believe we emerged from this past year as an even stronger company.”
On the value front, Whole Foods plans to expand its selection of products at entry-level price points, increase promotions and narrow price gaps on certain value items. The company is testing reduced pricing for perishable products with a focus on produce in select markets.
“We are encouraged by the pricing experiments we are running in several markets,” Mr. Mackey said. “And if results continue to be positive, we expect to expand our test to more markets during the year.”
In stores where Whole Foods has launched the effort, the grocery chain has tracked a lift in purchases. Executives said the value strategy will evolve based on competitive activity and marketplace dynamics.
“I mean, what exactly is the right produce strategy?” said Walter Robb, co-c.e.o. “Should we be the leader? Should we just be a little bit off? Or should we be way off? It’s really kind of hard to say. Because we’re going to try all of the above. And whatever works the best, we’ll do more of it; and whatever doesn’t work very well, we’ll do less of it.”
Also on tap is a new mobile app with a personalized rewards program that is designed to improve customers’ experience before, during and after shopping at a Whole Foods store. The program is available in 11 stores with plans to expand to the majority of units by the end of next year. Additionally, the company is working to create a unified point-of-sale system that will integrate e-commerce and brick-and-mortar for seamless shopping.
“Over the longer term, this will increase efficiencies in P.O.S. management and maintenance, create opportunities for enhanced global and personalized promotional offers, and provide deeper digital integration in the purchase experience,” Mr. Mackey said.
Finally, a new labor scheduling solution is set to roll out next year, resulting in faster checkout times, he added.
These efforts are underpinned by a new marketing campaign highlighting Whole Foods’ positioning on transparency and differences in standards from competitors.
“We launched our first national brand campaign focusing on a ‘values matter’ theme to communicate our deeper purpose and reinforce our unique position as America’s healthiest grocery store,” Mr. Mackey said. “The campaign calls out what makes Whole Foods Market special, our food different and our quality superior, reaffirming our unwavering commitment to our core values, which are at the heart of everything that we do.”
The company opened a record 13 new stores during the fourth quarter, expanding into 7 new markets, for a total of 38 new stores, including 4 acquired stores, in the fiscal year. With 401 locations currently, Whole Foods expects to reach 500 stores in 2017 with a long-term goal of 1,200 stores in the United States.
Comparable sales grew 3.1% in the fourth quarter and 4.3% for the fiscal year.
Fourth-quarter net income advanced 5.8% to $128 million, or 35c a share, from $121 million, or 33c a share, in the comparable period. Sales for the quarter climbed to $3,256 million, up 9.4% from $2,976 million in the fourth quarter of the previous year.Looking ahead, Whole Foods projects achieving sales growth of over 9% and comparable store sales growth in the low to middle single digits in fiscal 2015. The company intends to open 38 to 42 new stores, including 5 to 6 relocations, over the coming year.