Wall Street is very down on Whole Foods at the moment. The natural and organics grocer saw its share price drop 18.8 percent earlier this week as investors questioned whether the chain has a strategy for dealing with increased competition in the marketplace.
Whole Foods cut its outlook for same-store sales and earnings for the third time this year even as the company reported that its comp sales were up five percent and that it was achieving what co-CEO John Mackey called "healthy market share gains."
Analysts on the company's most recent earnings calls were particularly interested in how Whole Foods was dealing with increased competition from conventional grocers as well as others in the natural and organics space.
"I'm not really hearing anything that's suggesting management is taking this situation as seriously as some investors want you to," said Ken Goldman, an analyst with J.P. Morgan, in an exchange with Mr. Mackey. "There's a lot of talk about what's going, not a lot to talk about what it takes to win the change market. I'm really just curious what are you doing differently versus a year ago other than taking your cost down which I think the market's telling you may not be enough anymore?"
Mr. Mackey said the chain has gotten more aggressive in lowering prices and was cutting expenses to protect margins.
Later, during the earnings call question and answer period, Mr. Mackey's co-CEO Walter Robb addressed how the company intends to respond to increased competition. He said that, in addition to lowering prices, Whole Foods was making investments in technology and continuing to innovate in the store and with the customer experience.
"We're increasing our square footage growth quicker than any time we have in the history of the company," said Mr. Robb. "And we are pushing hard on the digital side and the innovative side to continue to differentiate ourselves from the competitors."
- Whole Foods' (WFM) CEO John Mackey on Q2 2014 Results (Earnings Call Transcript) - Seeking Alpha
- Whole Foos suffers as organic niche goes mainstream - Financial Times (tiered sub.)
- Slow to Cut Prices, Whole Foods Is Punished - The Wall Street Journal (sub. required)
- Whole Foods Shares Tumble as Rivals Stall Profit Growth - Bloomberg News
- Whole Foods is Losing Its Grip on the Organic Market - Slate