Whole Foods 3Q15 Earnings Call Notes

We have to move faster in a dynamic and competitive marketplace

“Our partners at United Natural Foods estimated over 70,000 new points of retail for natural and organic products over the last three years. In this dynamic and increasingly competitive marketplace, we recognize we need to move faster and go deeper in creating a solid foundation for our long-term profitable growth.”

Food retailing is rapidly evolving

“At the same time, food retailing is rapidly evolving in new ways – from online delivery in one hour, to click and collect, to personal shoppers. Some now estimate online sales could grow from 2.5% of total food retail sales to 8%, or $100 billion, by the year 2025.”

Push differentiation with exclusive brands and prepared food

“we will innovate faster to further differentiate the Whole Foods Market shopping experience, with a focus on our exclusive brands and prepared foods. We are operating some of the highest volume restaurants in the country, and no house brand comes close to the quality standards of our exclusive brand products”

Continue to invest in digital strategies

“we will invest in digital strategies to convert the strong traffic we generate online into sales.’

Expecting $1.50 EPS in FY 2016

“Excluding an estimated $0.05 to $0.07 per share in net accretion related to these debt-financed buybacks, we expect EPS for the fiscal year of $1.50 or greater.”

Buying back shares because WFM is a compelling buy at these prices

“We think Whole Foods is a compelling buy at these prices. Stock buybacks are going to be accretive in the short-term and the long-term. And it doesn’t preclude us from making further stock buybacks in the future if necessary.”

It’s a perfect situation with interest rates being what they are

“It’s sort of a perfect situation, Rupesh, this is Glenda, with interest rates being what they are and the long-term debt market being what it is and our trading metrics – stock price trading metrics, relative to history being what they are. And we have very strong cash flow and are very confident in our ability to service the debt and to continue to fund our growth out of our own cash flow.”

If we had a magic bullet to increase sales we’ve already shot it

“If we had a magic bullet we’ve already shot it. We don’t think there’s anything we can do immediately except increase promotional activity to drive sales. We think it’s basic blocking and tackling. We’re going to get back to basics at Whole Foods. ”

We have some stores with 15% of sales on instacart

“David, also I would say anecdotally we’ve had stores up to 15% of store sales are closing in on $100 basket size for Instacart. So those are individual stores, but it shows a path to where we can get to.”

Retail is detail

“by basics what I meant on blocking and tackling, I mean retail ultimately always comes down to how satisfied the customer is. So it’s about retail is detail is the cliché, and it’s a very appropriate one. Things like the level of customer service, the level of in-stocks that we have in our products, how the stores look, the overall feeling they have when they’re in the stores, the cleanliness of the stores.”

Highlighting technology investments

“these three platform decisions we’ve made, whether it’s Workday on the TMS or HR side, the One POS on the front end side, and then also the Infor on the supply and merchandising side, all three of those things are going to make work a lot easier to do with more transparency.”

People are copying our look and feel but not our quality standards

“first thing I would say is that a lot of the folks that are copying Whole Foods at this point, they are not copying our quality standards, they are copying our look and feel and our marketing. And so far, that’s a good strategy; it’s working. Many customers are not looking beneath the hood; they’re not seeing the differences.”

We don’t want to have a race to the bottom

“we don’t want to have a race to the bottom; we don’t want to compromise our quality and start cutting our quality to make us more competitive on price. Sure, if you’re in the center store and if they have exactly the same items then you’re absolutely right, we have to be price-relevant, we have to be very close or matched on those items, and we’re working on that.”

It’s harder to comp when you’re at $1k per sqft

“One of the challenges we’ve got, to be honest, is that it’s hard to comp when you’re $1,000 a square foot. It’s a lot harder to build a high comp on that than it is to build a 4% or 5% comp at $500 a square foot. Just have a lot more running room, stores are less congested, it’s just easier to do. And while we do think we can increase our comps and we do think we can increase our sales per square foot, it’s just our success has become a higher hurdle for us to jump over.”