Moneybox

Can Whole Foods Escape Its “Whole Paycheck” Image?

You no longer need Whole Foods to make an ace quinoa salad.

Photo by Asha Pagdiwalla via Flickr

It’s hard to feel bad for a store whose nickname is “Whole Paycheck,” but this has been a particularly rough year for Whole Foods. Once the king of organic, Whole Foods has recently come under attack on all fronts. After the company announced its second-quarter results in May, shares fell nearly 20 percent overnight on fears that the chain was losing its hold on the organic market. Heading into Wednesday’s earnings report, Whole Foods’ stock was the second-worst performer in the S&P 500 after losing 30-some percent of its value since January.

Now once again, shares of Whole Foods are slipping in after-hours trading on Q3 earnings that failed to reassure Wall Street. Whole Foods missed on same-store sales and lowered its outlook for the fourth consecutive quarter. Profit came in above expectations and revenue in line, but investors are less concerned with those figures than seeing whether Whole Foods can keep customers coming to its stores amid increased competition for healthy and organic shoppers.

Whole Foods’ effort to ditch its “Whole Paycheck” image has become increasingly urgent as big-name competitors like Walmart and Kroger Co. have stepped into the organic market. Many niche products that were once tough to track down outside of a Whole Foods or boutique market are now available at mainstream groceries. In an effort to bring traffic back to its stores, the company will be launching its first-ever national marketing and branding campaign this fall to focus on the “real and substantive differences” that Whole Foods offers consumers.

“We’re trying to advertise who we are. We’re trying to change what we think is a negative narrative about our company. And we’re trying to be very clear what makes Whole Foods a unique, special company,” co-CEO John Mackey said on the call. “What we are absolutely convinced of is that in the long term this is going to create great value for our investors.”

The chain will continue to work on cutting its prices—an effort that hurts in the short term but is likely to bring back some customers. It also plans to make cosmetic touch-ups to some of its older stores. But until it can match the steep 25 percent discounts offered at Walmart and the convenience of getting organic kale from a neighborhood supermarket, Whole Foods might be fighting a losing battle.