Whole Foods Market is “encouraged” by the pricing experiments it is running in several markets and expects to expand testing to more markets over the next few months if results continue to be positive, John Mackey, the company’s co-CEO, told analysts Wednesday.
“We remain committed to the highest quality standards and to expanding our value offering,” he said, “[with] opportunities to broaden our selection of products at entry-level price points, increase promotions and narrow price gaps on select known-value items.
John Mackey
John Mackey
“Our priorities are to compete effectively in this highly dynamic market. While we do our best to estimate the impact of our value efforts, it more art than science, and customer reactions will likely vary from our predictions.”
As a result of its investments in value, Mackey said the company anticipates year-over-year declines in gross margin, excluding LIFO, will be greater in fiscal 2015 than the 20-basis-point decline in the fiscal year just ended.
Mackey made his remarks during a conference call to discuss financial results for the fourth quarter and fiscal year ended Sept. 28.
Net income for the 12-week quarter increased 5.8% to $128 million, while sales rose 9.4% to a record $3.3 billion and comparable store sales were up 3.1%.
For the year net income climbed 5.1% to $579 million, while sales increased 9.9% to a record $14.2 billion and comps rose 4.3%.

The company said transactions in the quarter rose 1.3% and basket size was up 1.8%, while gross margin fell 20 basis points to 35.4% due to a $5-million LIFO charge and a higher cost-of-goods sold. Mackey said the fourth quarter was the 11th consecutive quarter in which the company did not fully pass through higher product costs.
Whole Foods opened 13 new stores during the quarter, a company record — including five openings in a single day — for a total of 38 new stores during the year, which was also a record, Mackey said.
The chain has already opened two new stores during the first quarter, with between 38 and 42 openings planned for the next year, including five or six relocations, with store sizes ranging from 20,000 to 60,000 square feet, he noted.
Stores opened in the last two years are averaging weekly sales per store of $503,000, with sales per gross square foot of $722 and productivity levels, on a weighted basis, of 83%, Mackey said.
According to Mackey, plans for the new fiscal year include expanding into six new markets, including Ottawa, Canada; continuing efforts to unify its point-of-sale systems; introducing a new front-end labor-scheduling program; and introducing a new mobile application.
Mackey said strategic initiatives implemented during the past year included the launch of the company's first national advertising campaign; a partnership with Instacart in 15 major cities that has resulted in orders 2.5 times the chain’s average basket size; expansion of an affinity program test from one store to 11, with plans to be chainwide by the end of 2015; and the introduction of a ‘good, better, best” labeling system for perishables.