Recently the question was asked. Can Whole Foods Market Inc. (NASDAQ:WFMC) make big changes in order to compete? Apparently, the answer is a “Yes!” Wednesday the company named a new board chairman and indicated 5 directors would step down immediately with more to follow.
The departing directors will be replaced by people with retail and financial experience at companies such as Panera Bread Co. (:PNRAN/A), Foot Locker Inc. (NYSE:FLC) and Best Buy Co. Inc. (NYSE:BBYC).
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Behind The Shakeup
Whole Foods is credited with turning organic food products into a multibillion-dollar business in the U.S. Unfortunately for Whole Foods, with success comes competition. Competitors, both in organic foods and mainstream grocers, have jumped on the bandwagon and are taking market share away from Whole Foods.
According to Whole Foods co-founder and CEO John Mackey, “Our competitors are not standing still.” He added that significant change is required at an accelerated pace in order to effectively compete.
The competition consists of organic-leaning chains like Trader Joe’s and Sprouts Farmers Market (TSX:SFMC) but also conventional grocers like The Kroger Co. (NYSE:KRC). The entry of conventional grocers, especially those the size of Kroger, has introduced lower prices and wide availability. In 2015 Kroger had 2,778 locations while Whole Foods had just 431.
The competition has had a real effect on Whole Foods sales. In its earnings report Wednesday, the company acknowledged that same-store sales fell 2.8% for Q2 of fiscal 2017. Furthermore, the company said it expected sales to continue to drop by 2.5% for the rest of the fiscal year.
The 9 Point Plan Goes On
Because of all this, Whole Foods, in 2015, outlined a 9-point plan to revive sales. The plan, which included such things as cutting costs, increased differentiations, more innovation and increased investments in key areas.
The plan has undergone some adjustment but since then the company gave up plans to triple the number of stores in the U.S., slashed 1,500 jobs and cut prices on many items. The just announced changes to the board of directors constitute the latest indication the company is serious about turning things around.
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Results So Far
Following Wednesday’s earnings and board shakeup including new chair of the board and new CFO announcements, Whole Foods stock rose as much 3.5%, an indication investors liked what they heard. The posted $0.37 per share earnings was in line with Wall Street expectations and the negative 2.8% same store sales drop was actually less than analysts expected at 3%.
Far from “out of the woods” status, Whole Foods stock, which peaked in 2013 at $65.31 hit a low of $27.67 over the past year. The stock closed Thursday at $37.03, up $0.78 (2.15%) from Wednesday’s close of $36.25.