Whole Foods Market co-CEO Walter Robb has claimed the US retailer sees the potential to triple its store count in the US.
The group booked a 13% jump in sales during the first nine months of the year, boosted by organic sales growth and store openings. Comparable sales were up 7.2%, Whole Foods revealed.
Speaking during an analyst call, Robb said the company is facing “a very exciting time”, driving growth by gaining market share and accelerating store openings.
“We… are on track to deliver our fourth consecutive year of increases in new store openings,” Robb said. “Our outstanding operational performance is funding our growth, and our new stores are creating a cycle of innovation across the company.”
Robb said the group sees the long-term potential to open 1,000 stores “in the US alone”. The company operates 355 natural and organic supermarkets in the country.
Over the last 12 months, the group has signed 50 additional leases. “We… now have 94 signed leases, nearly a three-year supply of new stores, in the pipeline. We expect accelerating square footage growth for several years to come,” Robb predicted.
During the third quarter, Whole Foods opened four outlets, expanding into three new markets. Robb emphasised the company has adapted its offer to meet the local needs of consumers – in particular the demand for value in less affluent areas such as the bankrupt city of Detroit.
“We are able to enter markets as diverse as suburban Danbury, Connecticut to urban Detroit, Michigan by tailoring our store size, product selection and pricing strategy to the particular community. In Detroit, we implemented a new value strategy in our perishable areas that has been very well received. We are opening a similar store in New Orleans later this year and think there are opportunities to duplicate elements of this value strategy for perishables in select markets across the country.”
Whole Foods was quick to emphasise store expansion was not being delivered at the expense of the bottom line. The group said over the last two years the 26 new stores that have been open for around six months are generating weekly average sales per gross square foot of $745 and contribution margin of 5%.
“These results, combined with our capital investment and pre-opening expense discipline, enabled us to deliver another quarter of high return on invested capital. For the quarter, our 25 comparable stores less than two years old produced an after-tax ROIC of 19%, another Q3 record,” Robb revealed.
BB&T Capital Markets analyst Andrew Wolf concurred that “sales productivity at new-stores remained robust”.
“Whole Foods Market plans to open 28 net new stores in FY’13 that will boost square footage by 8.1%. We remain constructive on the long-term growth outlook for Whole Foods Market,” he wrote in a note to investors.
However, Wolf sounded a note of caution on the group’s near-term sales and earnings growth prospects. “Our view [is] that fundamental momentum has peaked in the near term,” he wrote.
Unsurprisingly, Robb was more upbeat about the outlook for Whole Foods. “We are confident that we can maintain our leadership position and continue to gain market share as we step up our new store openings, improve our relative value proposition, further differentiate our shopping experience, and reinforce our standing as America’s healthiest grocery store.”
Whole Foods raised its full-year EPS outlook for 2013 by one to two cents to a range of $1.45 to $1.46 a share. Looking to 2014, the company said it anticipates maintaining its sales momentum and guided to a range of 12-14% growth. EPS is expected to grow by 17-18% in the 12 months, Robb added.