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Whole Foods Comps Continue Decline in Q1

Facing an “increasingly competitive marketplace,” Whole Foods Market has announced its sixth consecutive quarter of declining comparable-store sales, causing the company to adjust its fiscal 2017 outlook and more closely examine its growth strategy.

For the fiscal first quarter of 2017, which ended Jan. 15, the Austin, Texas-based natural foods retailer reported total sales growth of 1.9 percent to a record $4.9 billion, but a decline of 2.4 percent in comps. Net income was $95 million, or 1.9 percent of sales; diluted earnings per share were 30 cents; and EBITDA were $360 million, or 7.3 percent of sales.

“We are committed to taking every step necessary to improve comps and deliver higher returns for our shareholders,” said John Mackey, cofounder and CEO, Whole Foods. “To this end, we are refining our growth strategy, refocusing our efforts on best serving our core customers, and moving faster to fully implement category management. Evolving our purchasing operating model while developing data-rich, customer-centric category management capabilities," Mackey continued, "is critical to our go-forward merchandising, pricing, marketing and affinity strategies.”

To that end, Whole Foods inked a new partnership with Chicago-based analytics firm Dunnhumby to use customer data to tailor customers’ shopping experiences from location to location.

During Q1, the company opened 13 new stores, including two relocations, while the second financial quarter will find Whole Foods closing more stores than it opens: a total of six stores, two being relocations, will be added, while nine will close. Additionally, it will complete shuttering the last two of its three commissaries in quarter two, following the closure of one in the first quarter.

For fiscal 2017, Whole Foods is updating its outlook primarily to reflect lower anticipated sales growth and new costs associated with accelerating implementation of category management: 1.5 percent sales growth, comps of approximately -2.5 percent or better, diluted earnings per share of $1.33 or greater, and EBITDA margin of roughly 8 percent. During the first quarter, it incurred a charge of approximately $47 million related to the separation agreement with Walter Robb, who stepped down as co-CEO Dec. 31, 2016, as well as store and facility closures. In quarter two, Whole Foods expects to incur an additional charge related to these closures of approximately $30 million. The company’s outlook excludes these charges and potential share repurchases.

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