Whole Foods (WFM) Fiscal Q2 2016 Earnings

posted in: Earnings Call, Notes | 0

Whole Foods (WFM) Co-CEO John Mackey said the company’s grocery delivery partnership with Instacart makes them one of the largest grocery delivery companies that delivers to the home in the US

“Instacart has recently expanded to Orange County, Baltimore, Charlotte, and San Antonio, with additional markets coming soon. Collectively, Whole Foods and Instacart deliver fresh groceries to more households in the United States than anyone else.”

Whole Foods (WFM) CEO John Mackey said their new 365 store offering is focused on lower prices but still maintaining the high quality of food

“Created to complement our Whole Foods Market stores, our new 365 format will offer our same industry-leading standards and dedication to food transparency, delivered in a new way. The streamlined format is designed around affordability and convenience and will be supported by enhanced digital experiences. We believe there is customer demand for both formats, and as a second growth vehicle, 365 allows us to attack the value-quality proposition in a new way, while maintaining the integrity the Whole Foods Market brand represents in the marketplace. We are excited to get our first three stores open and to learn and evolve from there.”

Comparable store sales continue to decline

“Turning now to our updated outlook, we expect to be at or below the low end of our prior sales and earnings per share ranges. While we beat our bottom line expectations in the first half of the year, primarily through better and projected leverage in salaries and benefits, our comp trends have yet to stabilize. We’re hopeful that comps will improve over the course of the year as our sales building initiatives gain traction and our comparisons get easier.”

Saw continued user engagement with their app

“We’ve significantly increased the number of users for our app, so in addition to both using the coupons, we have a more engaged customer is now leveraging our app for the other utilities that we’re providing. Our intention at this point is to continue to add features to our app, inclusive of the digital coupons leading up to our affinity rollout, which we will be piloting our next city up in Dallas, and then doing our national rollout following that test.”

Whole Foods (WFM) Co-CEO Walter Robb said they are trying to reimagine the story experience from beginning to end

“I think if we look at our business, we say we were the ones that put a lot of energy and time into the customer experience, into the retail experience, into the store experience. And we had such a pretty strong regional structure and I think were, as a result of this crossroads and transformation we’re going through, we’re looking at all the systems that supports the processes on how we do work and how we’re structured, everything from soup to nuts, really, looking at everything in terms of how we can simplify, eliminate redundancies, do work differently, find more savings through just streamlining the organization.”

They believe their commitment to the culinary experience is a competitive differentiator

“I also want to share the fact that our commitment around culinary is really what separates us compared to the competition, and so we have the leadership now in the company to bring that focus and that commitment to really developing new programs. We have the friends of Whole Foods Market, which are bringing really great restaurant concepts into our stores. And having these partnerships that create a unique experience from a culinary standpoint. That really is, by far, above anything that we’re competing against right now. So we really feel like the renewed focus on culinary in our stores is a big, big differentiator for us as a company.  Our stores are very different than our competitors, and we’re not standing still.”

Think their core customer remains loyal to the brand

“I would say very pleased that the core shoppers continues to stay with us, and is staying pretty consistent frequency and also basket. Where the erosion has happened, it simply has, and the comeback will happen, is also what we more broadly call the occasional shoppers who come in at different frequencies and for different amounts. And that’s where I think folks may be perhaps where we’ve seen a little bit more inconsistency. So that’s the answer.”