Whole Foods FY 4Q16 Earnings Call Notes

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Whole Foods Market (WFM) Q4 2016 Results
John Mackey

Expecting EPS of $1.42 in 2017

“Turning to our outlook for fiscal year 2017, we expect sales growth of 2.5% to 4.5% and earnings per share, excluding potential future buybacks of $1.42 or greater.”

365 results have been mixed

“We just still think it’s really too early to give long-term projections on 365. Our results have been a little bit mixed. Some of the results have then absolutely blown us away and others have been a little bit less than we had hoped for. So we’re still incredibly bullish. We’ve got 19 stores in development and we’re evolving the 365 concept. David said we’re in a pause right now, so when we open our fourth store, it’s going to be kind of 365 2.0 and we’re taking the things that have worked better and we’re putting more capital into them. Things that haven’t worked, we’re phasing out and so I think the – our next store opens in Cedar Park, is that correct? We’re opening our next store in Austin.”

It’s a very competitive environment

“yes, maybe a little bit but it’s a very tough market out there. There’s a lot of – I mean if you think about it, you not only have strong conventional supermarkets like Kroger and H-E-B and Wegmans, but you’ve also now got more of the discount natural food operators like Sprouts and Fresh Thyme and Lucky’s and they’re all growing. And then you’ve got more delivery fresh stuff like Amazon, and then you’ve got these meal kit operators like Blue Apron and HelloFresh and Plated. And so it’s a very competitive market out there. And I like Whole Foods’ positioning. I like our positioning frankly better than anybody else’s, but I think everybody’s feeling it. You’ve got this macro environment of deflation that people are trying to deal with plus competition everywhere. Everybody’s feeling that. I’m seeing everybody’s comps go down everywhere. And it’s just a very competitive environment. ”

A little Ulysses S Grant

“Thanks. It makes me remember a famous quote from the Civil War when Ulysses S. Grant took over the Union Army. He was always getting criticized. He was always hearing from his generals about what Robert E. Lee was going to do. Robert E. Lee is doing this. What are you going to do about that? And one day Grant said, you know, I’m so sick and tired of hearing what Lee is going to do. Well, Lee needs to worry about what we’re going to do. And I think that’s how I feel about our competitors. They need to worry about what Whole Foods is going to do.”

Walter Robb – Whole Foods Market, Inc.

Robb stepping down

This is Walter, and how about them earnings. But I would say, I’ve also been here a few years and I think that – I think we have – life’s not a straight line, but I think we have as a team, John and I and the team here that’s around the table, we have really worked hard the last year to work through kind of the changes of the environment, the structural changes in retail. And I think you all know we’ve gone here or we’ve gone there trying to figure out exactly the right places to land. I think you can see in the coherence of the script today how it’s really come together in a very thoughtful and strategic manner in terms of how we go forward.

Glenda Jane Flanagan – Whole Foods Market, Inc.

CFO leaving

This is Glenda. I’ll go first. For me, I’ve been with Whole Foods or I will have been with Whole Foods 29 years next year when I retire. I’ll turn 63 this year, so that’s almost half of my life. It just feels like time for me and excited about the opportunity to be here and assist with the thorough search for a new CFO and have plenty of time for a smooth transition. So we will probably start the search process sometime in January.

A.C. Gallo – Whole Foods Market, Inc.

Going to be more strategic with our price investments

Hi, Kelly, A.C. here. As John just mentioned a few minutes ago, we want to be a lot more strategic with our price investments. We realized two things over this past year. One is that our customers really are – the most important thing for us is to maintaining quality both in our products and our experience. So it’s very clear that we’re not going to lower our quality in order to get lower pricing. The second thing that we realize is that we do a lot better with our promotional activity than just lowering regular pricing. So we have maintained our – as I said earlier, we’re going to continue to really push our promotional activity.