Whole Foods reported disappointing earnings yesterday, and shares are collapsing.
CEO John Mackey blames mounting competition from other retailers selling organic groceries, and suggested that the company would lower its prices to draw in more customers.
But his explanations were not enough for Wall Street analysts, who ripped into the company on the earnings conference call.
“I’ve got to be honest. I’m not really hearing anything that’s suggesting management is taking this situation as seriously as some investors want you to,” Ken Goldman at JPMorgan said. “There’s a lot of talk about what’s going, not a lot to talk about what it takes to win the change market.”
He also suggested that the company has failed to change its strategy.
“I’m really just curious: What are you doing differently versus a year ago other than taking your cost down, which I think the market’s telling you may not be enough anymore?” he implored.
When Mackey stressed that the company was lowering prices, Goldman became impatient.
“You’ve been doing that for years. You’ve been taking price down for years. I mean, it’s hard to understand,” he said.
Analysts also questioned why, despite slowing sales, the company is stocking more merchandise than ever.
Charles Grom at Sterne Agee asked management why it hasn’t advertised lower prices to customers.
“You’re lowering prices, but you haven’t been really advertising them within the stores or doing it in some of the promotions that you do to get the message out there.” he said. “Is it safe to say that that’s still to come or it’s not part of the strategy at all — you’re just going to lower the prices and hope that the customer starts to recognise that over time?”
Whole Foods Vice President David Lannon said that the company has made some attempts to advertise in California.
Mackey acknowledged that the call was awkward.
“I can tell by some of the questions on the call that people may not agree with our strategy and of course, people are free to make their own decisions about whether this is a good strategy or not,” he said. “But we want to be as transparent and as honest and as open with our shareholders as we possibly can be.”
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