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Whole Foods Whisper

Whole Foods Whisper
 

Research Question: Will Whole Foods overcome its perception and reality problems related to high prices and overcharging on weight in 2015?

Report Available: August 20, 2015

 

Blueshift’s initial research shows that slowing comps, share loss, and public image still plague WFM. In response, the company launched the 365 store, a new chain that will target value shoppers who buy fresh and organic. Recently, the company’s image was further tarnished after New York’s Department of Consumer Affairs commissioner accused the store of the worst case of overcharging it had ever seen.

 

Observations

  1. WFM has let investors down in its last quarters. Same store sales rose just 2.2% during its third quarter, with a 0.5% increase in transactions and a 1.7% increase in basket size. Attention from the overcharging fiasco led to a precipitous drop in national performance, as same-store sales grew only 0.4% in the last two weeks of the quarter because of the negative publicity.
  2. WFM admitted to overcharging customerson items priced by weight, though the company claimedemployee error rather than systematic issues caused the inaccuracies. Co-CEO John Mackey stated weight issues were industrywide, that its own weight errors often worked in favor of the customer, and was unsure why WFM was singled out by New York Department of Consumer Affairs since 77% of grocers in the probewere hit with one or more violations.
  3. Shoppers have reported more WFM daily sales and frequent markdownson bulk, produce, meat, seafood, and dairy, but these lower prices have not worked fast enough to jumpstart the company’s growth rate. Inan effort to catalyze growth, WFM’s new 365 store will feature more of its 365 private label brand, and compete directly with grocers like Trader Joe’s on price. WFM contends the 365 format will produce a higher ROIC due to lower capital investments and labor costs.
  4. Blueshift’s Dec 16, 2014 reportfound that WFM would likely overcome competitive threats but was nowhere near shedding its “Whole Paycheck” moniker. Suppliers spoke highly of the company and accepted smaller margins from WFM in order to gain exposure. WFM’s new Retalix POS system was expected to give WFM a competitive edge and better data.

 

Will WFM begin to see a rebound in overall growth rates anytime soon? How much long-term damage is expected from the overcharging problems in NY? What will be the impact on traditional WFM stores with the opening of the 365 store concept? To gain insight into these questions and others for WFM, Blueshift will gather data and issue a market research report from independent sources in the following areas: Suppliers/distributors, Store personnel, Competitors, Customers, and Industry specialists.

 

Companies: Whole Foods Market (WFM), Kroger (KR), Costco (COST), Walmart (WMT), Fairway (FWM), Sprouts (SFM), The Fresh Market (TFM), United Natural Foods (UNFI)