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AP Photo / Tony Dejak
Mmmm, expensive produce.
TURNAROUND TIME

Whole Foods has discovered that people like lower prices

By Alison Griswold

The past year has been ugly for Whole Foods, but things were looking up Wednesday (Feb. 10) afternoon. The company reported earnings and revenue that beat Wall Street’s expectations for the first quarter of 2015. Total sales also increased 3%, to what Whole Foods says was a record $4.8 billion. Shares initially rose 4% in after-hours trading, but were flat ahead of the company’s scheduled earnings call.

The positive results are important for Whole Foods, which in November laid out a nine-point plan for revitalizing its business. The grocery chain’s saga is long and, lately, not very good. It made its name selling high-quality, organic foodstuffs at premium prices, but has more recently struggled to shake a negative “whole paycheck” image and entice younger shoppers into its stores. Over the last year, Whole Foods’ stock has lost nearly half its value.

Last year, it cut prices and announced ”365 by Whole Foods Market,” a chain of stores that would put value first. But the nine-point plan Whole Foods released late in the year was much more detailed. In points one through three, John Mackey, the company’s co-CEO, promised the chain would dramatically reduce expenses (something it started with layoffs in September), would “innovate faster” to “differentiate the Whole Foods Market shopping experience,” and would continue to improve its value perception. Points four through nine were basically subsets of the first three.

Not everyone is buying in. On value, Whole Foods has said it sees room for 1,200 of its 365-branded stores in the US, and plans to open three stores in fiscal year 2016. But an analyst report from Deutsche Bank in January expressed doubt that America wants more than 700 to 840 of these stores.

At the same time, it’s good news that revenue beat, earnings beat, and that sales were up. Whole Foods is “pleased with the progress we have made on our nine-point plan,” co-CEO Walter Robb said in a statement. “We improved our cost structure, stepped up our value efforts, and are excited to announce today the national launch of digital coupons within our mobile app.” (Digital coupons!) In short, the turnaround isn’t anywhere near complete, but it’s underway.