Whole Foods' sales fall as competitors draw customers

Whole Foods saw a key sales figure fall for the fourth straight quarter as it fights to distinguish itself from a growing number of competitors that it says may offer "good enough'' alternatives that are more convenient.

The Austin, Texas-based company said Wednesday that sales declined 2.6 per cent at established locations for the three months ended July 3 as customer visits dropped. For the current quarter so far, the figure is down 2.4 per cent.

"It's very, very competitive out there,'' co-CEO Walter Robb said during the company's earnings call. "That's the world we're in, and customers have lots of choices,'' he added.

Whole Foods' shares sank 5 per cent to $31.95 in after-market trading.

In addition to other natural and organic grocers, the company cited pressure from restaurant chains, meal-delivery companies and traditional supermarkets such as Kroger.

Co-CEO John Mackey said people might not be driving as far as they used to because they can now get "good enough'' alternatives closer to home. He noted that there's overlap in the products Whole Foods and its competitors offer.

"There's no sense in denying it,'' Mackey said.

Those pressures underscore why Whole Foods Market Inc. is trying to broaden its appeal by keeping down prices, in part by pushing more of its 365 house brand products. The company also started a new chain named after 365, which has a minimalist design and lower costs that better position it to compete with Trader Joe's.

Only two 365 locations have opened so far, and executives said it's too early to share details on how they've been performing. But they said the stores appear to be drawing different types of customers from those who go to Whole Foods.

The new chain would be in addition to the company's 455 namesake locations in the U.S, Canada and the United Kingdom.

The 365 chain, which does not have meat counters, is also serving as a model for reducing operational costs at the flagship stores. Whole Foods has said it will slash $300 million in costs to help it navigate slumping sales.

Whole Foods is also exploring other avenues for growth, including meal kit delivery.

"There's a lot of people in the Willy Wonka factory working on this,'' Robb said.