Whole Foods Q1 2015: Sales jump as WFM prices fall and customers return.

Whole Foods Cut Its Prices. You’ll Never, Ever Guess What Happened Next.

Whole Foods Cut Its Prices. You’ll Never, Ever Guess What Happened Next.

Moneybox
A blog about business and economics.
Feb. 11 2015 6:08 PM

Whole Foods Cut Its Prices. You’ll Never, Ever Guess What Happened Next.

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Look, a sale!

Photo by Justin Sullivan/Getty Images

For the second time in a row, it’s a good quarter for Whole Foods. The company said Wednesday that it did a record $4.7 billion in total sales in the first part of fiscal 2015 and that traffic to stores picked up. Sales at stores open at least 57 weeks increased by 4.5 percent. Earnings came in at $0.46 per share, a slight beat on the $0.45 target analysts had set. Shares added about 3 percent from their closing price of $53.51 in after-hours trading.

While all companies want good earnings reports, Whole Foods seriously needs them. Between October 2013 and July 2014, Whole Foods stock lost nearly half its value as the chain hit one stumbling block after another—customers tiring of high “whole paycheck” prices, mainstream groceries stocking once-elusive foods like quinoa, mega-store Walmart debuting a line of cheap organics, etc. At the end of last July, Whole Foods was the second-worst performer in the S&P 500 of 2014.

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The point is, a good quarter for Whole Foods is a good quarter, and a reassuring sign that the comprehensive rebranding campaign it rolled out late last year is actually working. Under its new “values matter” slogan, Whole Foods has tried to remind shoppers of what separates it from competitors—sustainability, locally grown produce—but it’s also committed to being more pragmatic. Whole Food has lowered prices to bring them more in line with competition.

“Our value focus is on perishables, where we see opportunities to broaden our selection of products at entry-level price points,” Whole Foods co-CEO John Mackey said on the earnings call. “We are encouraged by the pricing experiments we are running in several markets, and if results continue to be positive, we expect to expand our test to more markets during the year.”

Of course, price cuts come at a cost. Whole Foods says it expects its gross margin will decline in fiscal year 2015, but trusts that “this is the right strategy to drive sales growth over the longer term.” Walter Robb, the company’s other co-CEO, said that based on the last quarter, Whole Foods is “finding a nice balance” between keeping up gross profit margins and bringing back customers. “It’s more of an art than a science,” he said.

Alison Griswold is a Slate staff writer covering business and economics.