Last updated on February 10th, 2017 at 10:38 am
Whole Foods Market said during its earnings call Wednesday that it will close nine stores in the second quarter. According to John Mackey, co-founder and CEO, the company has been moderating its lease signings and capital expenditures over the last two years.
“We are also continually evaluating stores on a case-by-case basis, balancing the age, size and performance trends of the store with the potential returns from additional capital investments, monitoring lease renewals, and taking into account how each store fits into our longer-term strategy for that particular market,” Mackey said.
Four of the nine stores are located in the company’s Rocky Mountain Region: Santa Fe, New Mexico (St. Francis location); Boulder (Baseline) and Colorado Springs (New Center Point), Colorado; and Salt Lake City (Draper), Utah.
Other store closings include:
Midwest Region—Evanston South, Evanston, Illinois
Northern California Region—Davis, California
South Region—Augusta, Georgia
Southern Pacific Region—Prescott, Arizona, and Encinitas, California
The company said the decision to close the stores was based on a number of factors, including proximity to newer and larger stores and the cost of improving stores it has acquired over time.
Whole Foods said in January that it also is closing its last three remaining commissary kitchens. They are located in Everett, Massachusetts; Landover, Maryland; and Atlanta, Georgia. The company also terminated two leases and signed four new ones. It currently has 93 stores in development.
Comp-store sales fall 2.4 percent
Whole Foods Market reported record earnings of $4.9 billion for the 16-week first quarter ended Jan. 15. Total sales rose 1.9 percent, but comparable stores sales fell 2.4 percent. Comp-store sales have continued to decline since the grocer’s third quarter of fiscal year 2015. That drop marked the first time they had fallen since 2009, and it was a modest 0.2 percent decrease at the time.
Comp-store sales continued to decline after the first quarter. Three weeks into the 12-week second quarter, they were down 3.2 percent. Whole Foods said it no longer will report quarter-to-date comp sales when it announces earnings.
Diluted earnings per share were $0.30; and earnings before interest, taxes, depreciation and amortization (EBITDA) were $360 million, or 7.3% of sales.
“In this increasingly competitive marketplace, we are committed to taking every step necessary to improve comps and deliver higher returns for our shareholders,” Mackey said. “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. 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.”
During the quarter, the company produced $284 million in cash flow from operations, invested $245 million in capital expenditures, and returned $43 million in quarterly dividends to shareholders. Whole Foods Market ended the quarter with $1.1 billion of total debt and $1.2 billion of total available capital.
In the first quarter, the company opened 13 stores, including two relocations.
For the rest of the fiscal year, Whole Foods expects sales growth of 1.5 percent and comp-store sales to remain at negative 2.5 percent or to improve.
