Whole Foods Market said Wednesday it expects the 365 stores it will begin opening in May will help transform the company’s legacy stores.
According to John Mackey, co-CEO of the Austin, Texas-based chain, the 365 stores “are going to leap-frog ahead on many [efficiency-enhancing] practices that we will be evolving at Whole Foods. We can put those practices in 365, where there’s no culture and no legacy to overcome and, assuming those are going to work, they will serve to help accelerate transformation within the mother brand, Whole Foods Market.
“So we’re proceeding as rapidly as we think is prudent in Whole Foods, while the 365 stores won’t have anything holding them back, so in some ways we think they represent the future for Whole Foods evolving.”
Whole Foods said it plans to open the first 365 in Silver Lake, Calif., in late May, followed by a store in Lake Oswego, Ore., in July, and one in Bellevue, Wash., in August.
Jim Sud, EVP, growth and business development, said the chain is finding “a lot of opportunities” for 365 locations, “and we’re able to acquire these stores on very favorable rents.”
Quite a few of the 365 locations in development are in Southern California, he said, “but that’s not necessarily by design. We’re looking everywhere, and the plan is to try and cluster stores where possible.
“That’s what we’re doing in Southern California, but we also have leases in other isolated markets as well,” including Gainesville, Fla., Evergreen Park, Ill., and Concord, Calif. (in Northern California), he said.

Walter Robb, co-CEO, told analysts Whole Foods has re-thought its decision a year ago to launch national advertising.
“As a group we’ve gone back and re-thought exactly how we want to bring the brand forward, and we’re starting with efforts in promotions and prices,” he explained. “Just this week we started a radio campaign in 12 markets across the country promoting produce and produce price investments and produce quality.
“I could see a brand campaign in the future, but we are doing the work on our brand by getting our message out in different platforms and ways, and I think it will evolve from there.”
According to Mackey, the company made a conscious decision not to launch a national television campaign. “That’s not to say we won’t do one in the future, but we decided we had better priorities or better opportunities or strategies for trying to promote our new lower prices, and we’ve got the 365 launch, and a lot of marketing dollars being spent out there, but perhaps not in as visible a way on a national basis.”
A.C. Gallo, co-resident and COO, said Whole Foods will stick with a high-low strategy because that’s what customers expect from the company. “We feel the best way to show our customers value is to ramp up on the promotional side,” he explained.
The company recognizes there are categories in which it needs to be competitive on an everyday basis, he added, “and we are working to systematically identify those and move pricing on those to make sure we’re competitive.
“There are a fair number of items we’ve lowered prices on so far this year, and we have plans to do more as the year goes on.”
David Lannon, EVP, operations, said one promotional strategy Whole Foods has used to draw consumers involves digital offers, such as 99-cent smoothies or 25-cent cookies. “Those are things that get people up off the couch and into the store, and hopefully they will buy other things when they come in,” he pointed out.
Robb said Whole Foods is launching a program that will enable customers to scan preloaded digital coupons at the registers, “[which] is a win for customers and a win for us, as we will gain actionable customer data on a national scale.”
The company also plans to expand its affinity rewards test to a second market in the third quarter “that will build on the best elements of our initial test [in Philadelphia] but with lower costs,” he pointed out.
Asked about initial results from the digital coupon launch, Robb said, “As expected, a lot of [usage] was in the Philadelphia market, where people are used to using their app when they shop. But the usage is pretty encouraging.”
In other comments:
• Whole Foods plans to expand its digital offers and launch a national digital sales flyer later in the year, Robb noted.
• The company is close to completing the pilot phase of a new point-of-sale test in select stores in 10 regions, Robb said, with plans to complete the pilot phase over the next month, after which it will accelerate the rollout to all U.S. stores before the end of the calendar year.
• In the 16 markets where Whole Foods offers Instacart, Robb said Whole Foods is seeing sales as a percentage of total store in the mid- to high-single-digit range at some locations, with several stores averaging baskets exceeding $100.
• Robb said private brand sales are exceeding $725 million, or 15% of total sales — up 150 basis points from a year ago.