NEW YORK (AP) — Whole Foods Market Inc. said its profit rose
by 21 percent in the latest quarter, as the organic grocery store operator
worked on making its prices more competitive for a broader audience of shoppers.
The company, based in Austin, Texas, said sales at stores
open at least one year — a key metric because it strips the impact from newly
opened or closed locations — rose 7.5 percent.
That’s slower than the 8.2-percent increase in the year-ago
quarter. In the current quarter, the company also noted the figure was up just
5.8 percent so far.
Shares fell 3 percent in after-market trading to $53.70.
Whole Foods is among the many players changing the way
people shop for groceries. In addition to traditional supermarket chains such as
Kroger and Safeway, people are increasingly getting their food at big-box
retailers such as Target, drugstores and even dollar stores that have expanded
their grocery sections.
Whole Foods, which has more than 350 locations, is popular
because its health glow fits with people’s growing desire to eat better. But
stores such as Kroger and others are increasingly tapping into that trend, as
well, and rolling out more products or sections labeled as natural or organic.
To reach a broader audience and gain market share, Whole
Foods co-CEO John Mackey said in a conference call with analysts that the
company is working to ensure that its prices stay competitive.
That has led to a significant expansion in its store-brand
offerings, many of which fall under the 365 label. But the push also includes
stepping up promotional activities and “old retailer tricks” such as one- and
three-day sales, co-CEO Walter Robb said in an interview.
Whole Foods also is tailoring its strategy for different
regions. In its recently opened Detroit store, for example, Robb said there’s a
higher percentage of non-organic fruits and vegetables, which helps keep prices
The company has also made “price investments,” meaning it
sacrifices some profit margin to keep prices lower and attract shoppers.
“I think that the perception is that Whole Foods is far more
affordable than it was a few years ago,” Robb said.
The company said that the strategy it is deploying in
Detroit can be applied to other markets, which will help it open in different
types of neighborhoods. If and when that push to make prices more affordable
impacts margin is unclear.
“I sometimes feel like the boy who cried wolf,” Mackey said,
noting that he had been warning for a few quarters that margins might be
Thus far, he pointed out it hasn’t had a significant impact
because of measures the company has taken to improve efficiencies in other
For the period ended July 7, Whole Foods said it earned $142
million, or 38 cents per share. That’s a penny more than analysts expected,
according to FactSet. A year ago, it earned $117 million, or 31 cents per share.
Revenue rose 12 percent to $3.06 billion, but was short of
the $3.09 billion Wall Street expected.
Looking ahead, Whole Foods raised its earnings per share
guidance for the year slightly to $1.45 to $1.46, up from $1.43 to $1.45.
Over the long term, the company said it sees potential for
up to 1,000 stores in the U.S. as demand for natural and organic products
continues to rise.
Copyright 2013 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.