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Should Whole Foods be worried?

Written by George Anderson

With retailers from Aldi to Wegmans selling organic foods and other products, Whole Foods has never faced so much competition. The evidence is clear in the company's third quarter results and its decision to cut its annual forecast.

Whole Foods' comp store sales were up 1.3 percent during the quarter and the company now says it expects low-single-digit growth for the year compared to its previous projection of a low- to mid-single-digit increase.

Aside from increased competition, Whole Foods has also taken hits of the self-inflicted variety. Last month, the grocer was accused by New York City's Department of Consumer Affairs of overcharging customers with items labeled in stores. The chain, which first vehemently denied the charges, later offered a mea culpa including its co-CEOs, Walter Robb and John Mackey, appearing in a video to tell its customers how the company planned to fix the problem.

In a conference call with analysts, Mr. Robb said the chain's problems in New York had a "significant impact" on Whole Foods' third-quarter sales. On the same call, CFO Glenda Flanagan said, "The impact was really felt across the whole country" and not just in New York.

Whole Foods delivery=
Photo: RetailWire

In the past, Whole Foods has announced pricing initiatives to address its "Whole Paycheck" reputation, launched a national advertising campaign and has begun testing a loyalty program to address its competitive challenges.

The chain also recently announced plans to open a new concept, 365 by Whole Foods, that will concentrate on the sale of its private label in smaller footprint stores, similarly to Trader Joe's, in an effort to attract Millennials. A recent study by Bloomberg Intelligence (via Bloomberg) found that a market basket of 35 private label products at Whole Foods was $88.86 compared to $86.75 at Trader Joe's.

Yesterday, Whole Foods announced it has signed the first of five leases for the new concept in Bellevue, WA; Houston, TX; Portland, OR; as well as Santa Monica, CA and the Silver Lake neighborhood of Los Angeles.

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