Whole Foods CEO: The chain is investing in value and technology — with help from Amazon
Whole Foods is trying to juggle value and quality as cautious consumers hunt for deals in the face of stubborn grocery inflation.
"We've increased the number of promotions for our customers ... as a result, we've actually seen double-digit unit growth in promotional items," CEO Jason Buechel told Yahoo Finance at the Milken Institute Global Conference on Tuesday.
Believe it or not, it's been seven years since Amazon (AMZN) acquired Whole Foods. Cutting prices to reaccelerate same-store sales growth was a key focus for the Street at the time. Now Buechel is aiming to strike the right balance.
Cost of groceries remained flat in March and is up 1.2% year over year, according to the Bureau of Labor Statistics. The April read on CPI (Consumer Price Index) is set to come out next week.
"Between commodities, labor, cost — inflation has been real," Buechel said.
While Whole Foods shoppers, who are traditionally higher-income, are looking for cheaper prices, they aren't willing to compromise on quality, Buechel said.
They care about where the product was grown, raised, and produced, which comes at a higher cost, raising a challenge for the company.
"What we need to do is make sure that we can find a point where customers are happy with the value of the product and can appreciate the work that's gone into it. At the same time, [that] our Whole Foods sales and profits [are] growing," he said.
Whole Foods does not publicly share its results, but Buechel said his team is "proud" of recent growth.
Doubling down on private label is another avenue for growth. Buechel said the team is investing in lower prices for its 365 lines as it looks to cater to all budgets.
This comes as Walmart (WMT) and Target (TGT) have been heavily investing in their own private-label businesses. Last week, Walmart launched the Bettergoods brand, which focuses on affordable higher-quality products ranging from $1 to $15.
Both big box retailers are showing strength in their US grocery businesses and gaining consumers across the income spectrum because of it.
"Walmart's in a double tailwind position to gain both low- and high-end consumers over the coming years," with 60% of the Walmart US sales coming from grocery alone, Deutsche Bank analyst Krisztina Katai told Yahoo Finance over the phone following its Q4 results.
On a recent earnings call, Target executive Rick Gomez said its food and beverage business brings in over $20 billion in annual sales, up from $8 billion in 2019.
Whole Foods is ramping up its expansion plans too.
In recent years, its store growth was in the single digits. Now, there are 75 in development, with plans to open 30-plus stores a year. The company has over 500 locations in the US.
"From being single digits to that, that's an expansive growth trend that we've taken on ... we've got a lot of customer interest, a lot of communities that are looking for us to bring new stores," Buechel said.
It's also exploring new formats, including smaller stores for on-the-go customers in urban areas.
And parent company Amazon is helping to build out the future of shopping. Its latest creation, a dash cart, allows you to weigh items and check out as you shop.
Buechel says this technology will "simplify" the customer experience and make shopping "more engaging at the same time."
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Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.
