|New unit development figures into Whole Foods Market's plans to drive long-term growth.|
AUSTIN, TEXAS — Whole Foods Market, Inc. is counting on five strategic priorities to drive long-term growth as competition heightens among traditional grocery stores and new natural food players.
“While the current environment is very dynamic and competitive, we are managing and growing our business for the long term with five primary strategic initiatives now under way to build momentum,” said Walter Robb, co-chief executive officer, during a July 30 call with financial analysts to discuss third-quarter earnings.
Whole Foods’ first priority is unit development. With 38 new stores set to open this year, the company expects to add its 500th store in 2017, with a long-term goal of 1,200 stores in the United States.
“We see every new store opening as an opportunity to innovate, and with 33 openings over the last four quarters, we are evolving and differentiating our shopping experience faster than ever before,” Mr. Robb said. “We believe our leadership and retail innovation is a key driver of our continued market share gains.”
Second, Whole Foods is refreshing older stores. Over the next year, Whole Foods plans to update or remodel 70% of its stores over 10 years old.
“These refreshes will range in scale from decor updates, to adding and remodeling venues, to full store remodels,” Mr. Robb said. “Based on the success of similar refreshes this past year, we expect these refreshed stores to see an immediate boost in comps, with the benefit to our overall comps more fully realized in fiscal year ‘16 and beyond.”
The third strategy is value, which has become a key element in driving sales growth for the retailer.
“Last year, for the first time, we implemented a significant competitive price match on hundreds of grocery items at the national level,” Mr. Robb said. “Our focus going forward is primarily in perishables, where we see opportunities to narrow price gaps on select known value items, broaden our selection of products at entry-level price points and increase promotions.”
With these efforts in place, Whole Foods expects gross margins to return to its historical range of 34% to 35% in the coming years from its current level at 35.7% year to date.
“We are not suggesting a race to the bottom, but rather a thoughtful, strategic, surgical approach to improve our relative value positioning,” Mr. Robb said.
|Whole Foods is launching a new rating standard for produce and flowers this fall.|
ourth, Whole Foods plans to launch its first-ever national marketing and brand campaign this fall, coupled with a new rating standard for produce and flowers.
“These standards will allow customers to make informed buying choices regarding important sustainable farming practices, including pest management, farm worker welfare and pollinator protection,” Mr. Robb said.
Whole Foods’ fifth priority focuses on digital initiatives to drive engagement in its stores and on-line. Through strategic partnerships, the company will offer home delivery and customer pickup in more than a dozen major markets and an on-line subscription club by the end of the year. Also launching soon is a new mobile app designed to improve customer experience before, during and after a shopping trip at Whole Foods.
“We are committed to offsetting these investments in growth, value, marketing and technology with our improvements in our cost structure,” Mr. Robb said. “As we grow, there are additional opportunities to streamline our business to make it more productive.”
For the third quarter ended July 6, Whole Foods earned $151 million, equal to 41c per share on the common stock, up 6% from $142 million, or 38c per share, in the comparable quarter.The company achieved record sales of $3,377 million during the period, up 10% from $3,058 million.