Whole Foods Market said it expects to open the first five units of its new, smaller format — 365 by Whole Foods Market — in the second half of next year and to double the number of openings the following year.
The stores will average 30,000 square feet, with the first unit scheduled to open in the Silver Lake area of Los Angeles — at a site where the company said it converted a lease in development from a Whole Foods Market to 365 — followed by openings in Santa Monica, Calif.; Portland, Ore.; Houston, Texas; and Bellevue, Wash.
Walter A. Robb, co-CEO, said all five are A-plus real-estate sites.
He said Whole Foods chose Silver Lake for the first 365 location “[because] Los Angeles is the perfect dense, urban market to introduce our latest evolution focused on quality food and value in a convenient format.”
He said 365 will allow the company “to address the value-quality proposition in a new way while maintaining the integrity the Whole Foods Market brand represents in the marketplace.”
Robb made his remarks during a conference call with investors detailing the company’s financial results for the third quarter ended July 5.
Net income for the 12-week quarter rose 2% to $154 million, while sales increased 8% to a record $3.6 billion and comparable store sales were up 1.3%, including a negative impact of an estimated 95 basis points from the shift of Easter from the third quarter last year to the second quarter this year.
Robb said results encompassed a 70 basis-point improvement in traffic but a 50 basis-point decline in basket size, which he attributed to “our value efforts and cost deflation in a few key volume product categories, including produce.”
He also said comps dropped sharply in the 11th week of the quarter — averaging 0.4% for the last two weeks of the quarter — after national media attention following an audit by the weights and measures department in New York City that found weight discrepancies.

Whole Foods has seen “a slight improvement” in trends so far in the fourth quarter, Robb noted, “[though] comps are still well below our 2.5% average for the nine weeks prior to the negative publicity.”
He said the problems in New York were not systemic “but rather were caused by inadvertent human error, including errors that were favorable to customers.
“We have taken immediate steps to address these issues, including improving our training regarding in-store packaging, weighing and labeling processes and expanding our third-party auditing process companywide.”
For the 40-week period net income climbed 6.2% to $479 million, with sales increasing 9.3% to $12 billion and comps up 3.3%.
The company said average weekly sales per store for the year-to-date were $728,000, translating to sales per gross square foot of approximately $990.