By Nutrition Business Journal
In a year when many food retailers have struggled to squeeze sales growth out of soft pricing, Whole Foods Market has beaten analysts\’ and its own expectations for revenue, profits and same-store sales growth. For its 2010 fourth quarter, ended September 26, Whole Foods posted revenues of $2.1 billion on 15% growth. On a same-store basis, sales increased 8.7%, above the company\’s anticipated range of 6.5% – 7.5%, and gross profits climbed to nearly 35% of sales. Only growth in new stores has flagged of late with just one opening in Q4, but the company\’s long-term plan calls for the opening of 15 new stores in 2011 and another 20 in 2012. The retailer closed out its 2010 fiscal year with $9 billion in sales and 301 stores in the United States, Canada and the UK.
“We attribute much of our success to the progress we have made in our relative price positioning and to our initiatives in areas such as healthy eating, animal welfare and sustainable seafood,” said Whole Foods co-CEO John Mackey in a statement. “These initiatives are aligned with our core customer base and reinforce our position as the authentic retailer of natural and organic foods.” The company managed to balance sales growth with price cuts as they noted an increase in customer basket size and increased sales of branded products and higher-priced options in natural & organic food categories such as cheese and seafood.
NBJ Bottom Line
According to Andy Wolf of BB&T Capital Markets, “Top-line momentum has been due to a substantially improved value image, coupled with a relatively more upbeat demographic. This has led to a return of customers and new customers to the channel and the store. Increased transactions drove nearly 80% of the same-store sales gain in Q4, while more items per basket drove the rest of the sales productivity growth.”
If Whole Foods can do it, can the rest of the industry? Brighter days might lie ahead. Whole Foods grew nearly 9% in the last 12 weeks without expansion of its store base, reflecting growing confidence among its core fellowship of natural & organic customers. A sales increase in branded products might suggest relief from the recession-motivated private label scramble of the last several quarters, and the organic market is showing signs of recovery too. Increases in food categories such as seafood and cheese suggest that core customers who had traded down from organic options to natural or even conventional are beginning to trade back up. Organic seafood and cheese both suffered in 2009, with cheese sales shrinking 3.2% from 2008 levels and fish sales falling flat after years of double-digit growth, according to NBJ\’s 2010 Organic Report featuring OTA Data.
What remains to be seen is if Whole Foods can lure the non-core consumer back into the natural & organic fold in a meaningful way. Wolf notes recent independent polling that suggests upscale shoppers are gaining confidence and are more likely to spend than the average consumer. Time will tell if these spendy customers are ready to flock toward Whole Foods, but we sure wouldn\’t bet against the brain trust in Austin.
Article Source: Nutrition Business Journal
