Whole Foods to shrink store count for first time since recession
NEW YORK — Whole Foods Market Inc., facing its worst sales slump in more than a decade, is taking a step that would have been unthinkable in its high-flying days: shrinking the size of the chain.
Though Whole Foods plans to open six stores during the current quarter, including two relocations, the company said Wednesday that it’s shutting down nine. That kind of retrenchment hasn’t happened since the last recession was underway in 2008.
Six straight quarters of declining same-store sales — a closely watched measure — have forced the organic-food grocer to tighten its belt. Whole Foods also gave a forecast for the current year that offered little hope of a quick recovery.
Same-store sales dropped 2.4 percent last quarter, worse than the 1.7 percent decrease predicted by analysts. The company now expects sales on that basis to decline as much as 2.5 percent this year, compared with an earlier forecast that was closer to break-even.
“People were hoping there would be some improvement,” said Jennifer Bartashus, an analyst at Bloomberg Intelligence. “It’s a bit concerning there’s not a reversal happening there.”
Whole Foods has struggled to ward off competition from mainstream supermarkets, including Kroger Co. and Walmart, which began offering more organic fare in recent years. And a bout of food deflation has put additional pressure on the entire industry.
The stock fell 1.7 percent to $28.79 in extended trading. Prior to the drop, it was down 4.7 percent in 2017.
Whole Foods’ struggles have fueled speculation that an activist investor could take on the chain, and one of its largest shareholders is said to have discussed agitating for sweeping changes.
For years, Whole Foods offered products that were tough to find elsewhere, and the shares gave investors exposure to the fast-growing market for organic and natural food. But that advantage has eroded in recent years. With sales growth stagnating last year, Whole Foods announced $300 million in cost cuts.
But the company is still ramping up spending elsewhere, including on marketing and technology, and that’s expected to offset the cutbacks. It also introduced a new store concept last year aimed at younger, budget-conscious consumers. So far, only three of the locations -- dubbed 365 by Whole Foods Market -- have opened on the West Coast. The company announced on Wednesday that it has signed leases for new 365 stores in Brooklyn, New York, and Oakland, California.
The new concept, named after the company’s private-label brand, is seen as a way for Whole Foods to connect with shoppers who perceive the chain’s conventional stores as too pricey.