Whole Foods raises outlook after bumper Q1

Whole Foods raises outlook after bumper Q1

Whole Foods Market has hailed the return of its core middle class customers, who have increased spending around special occasions and been won over by the retailers increasingly “strategic” pricing policy.

The US natural and organic retailer today (16 February) booked first-quarter sales gains of 7%, to $2.6bn, and a 3.5% rise in identical-store sales.

Speaking during a conference call following the results, chief executive John Mackay said that the improvement in comparable sales was driven by a rise in the retailer's transaction count.

He added that average basket size was only “slightly” down on last year, which he claimed was a “significant” improvement on the 2% fall witnessed at the tail end of last year. 

“The improvement in basket size trends was driven by an increase in the number of items per transaction, with the average price per item down slightly,” Mackay revealed.

The retailer said its core middle class consumers had regained a degree of confidence after the economic turmoil hit spending in the fourth quarter of last year. Consumers are spending more around “holidays and special events” such as the Super Bowl.

Significantly, Mackay revealed that the quarter had seen a “slight shift” in sales to products at higher price points. He attributed this trend to the holidays and, to a lesser extent, to customers trading down less.

However, he added that price remains an important driver of consumer behaviour, with strong redemption rates for coupons.

Nevertheless, a more rational pricing strategy has helped to boost margins at Whole Foods.

“Early last year, we made the shift from being fairly reactionary on pricing to being much more strategic. We have seen this strategy successfully play out over the last several quarters, as we have produced strong year-over-year improvement in gross margin and comps,” Mackay said.

“While many of our competitors have gone back and forth on their pricing strategies, we are sticking with our goal of offering competitive prices on known value items, day in and day out.

"Our internal benchmarking shows that we maintained our price competitiveness relative to our national competitors during the quarter. We remain focused on continuing to strike the right balance between driving sales, improving our value offerings, and maintaining margin,” he emphasised.

Whole Foods said that its first-quarter performance beat internal expectations and upped its outlook for the full year.

The company said that it now expects sales to grow as much as 10.5% this year, with identical sales up by as much as 5.5%. The company also raised its full-year earnings guidance to a range of $1.20 to $1.25 per share.