Whole Foods Market, Inc., Austin, Texas, reports it will close nine of its 469 stores this quarter as it drops its goal to open 1,200-plus stores in the face of increasing competition.
"We're going to continue to grow, but I think we're going to be a more disciplined growth company than we have been in the past," said John Mackey, co-founder and CEO of Whole Foods, to analysts on an earnings call. "We no longer have a goal of 1,200-plus stores. We remain optimistic about the future growth potential for our 365 format (smaller stores with lower prices), but want to see how this next round of stores performs before getting more aggressive."
According to a CNBC report, Mackey deemed the move a "difficult but prudent decision," saying the company will now have more targeted site selection and "continued moderation in ending square footage growth." He also said these moves together will "result in a healthier bottom line, increased cash flow and higher returns."
In the first quarter, the Texas-based company welcomed more than a dozen new stores, including two outlet relocations, and so far in the second quarter, the company has opened three stores, including one relocation, with plans to open three additional stores, including one relocation. The company has closed a commissary kitchen and expects to close its last two remaining commissary kitchens during the second quarter.
"Over the last two years, we have moderated our lease signings, ending square footage growth, and capital expenditures as a per cent of sales," Mackey added. "We have terminated four leases in development to date and are continually evaluating our pipeline."
CNBC reported the company's second quarter also is expected to be impacted by the shift in Easter from the second quarter last year to the third quarter this year. Mackey said the competitive landscape continues to be "very dynamic," and added that there remains uncertainty about how long the deflationary environment will continue. As a result, he said Whole Foods was resetting comp guidance for the full fiscal year.
