Whole Foods reported lower-than-expected earnings and a sixth straight quarterly decline in same-store sales as the grocer continued to struggle with competition from conventional grocery stores offering organic foods at lower prices.
For the first quarter, Whole Foods earned 30 cents per share on revenue of $4.92 billion, falling short of analysts’ estimates of about $4.98 billion and earnings of 39 cents per share.
The key metric of comparable sales showed another decline, sliding 2.4% compared with the FactSet consensus of a 1.8% drop. The company also lowered full-year 2017 sales and earnings guidance in light of the weak first-quarter results.
“In this increasingly competitive marketplace, we are committed to taking every step necessary to improve comps and deliver higher returns for our shareholders,” CEO John Mackey said in a news release. “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.”
As CNBC reports, Whole Foods “has been struggling to get shoppers into its stores as lower-price competitors offer organic foods at a discount. Indeed, while customers put more items in their baskets during the first quarter, fewer shoppers made transactions in its stores.”
In a research note, William Blair analyst Ryan Domyancic said last month that Kroger, Costco, and Walmart are now competing with Whole Foods on price while Amazon has also made inroads into fresh groceries.
Whole Foods has responded by, among other things, rolling out more budget-friendly 365 by Whole Foods Market stores. In November, it ousted co-CEO Walter Robb, leaving Mackey in charge.
The company now expects comp sales to decline 2.5% “or better” in 2017 compared with its previous expectation of flat to down 2%. The outlook for earnings is $1.33 a share “or greater,” compared with the $1.42 a share it previously forecast.
“Evolving our purchasing operating model while developing data-rich, customer-centric category management capabilities is critical to our go-forward merchandising, pricing, marketing and affinity strategies,” Mackey said.