Not long ago, Whole Foods Market (WFM) delivered best-in-class same-store sales in the retail food industry. While it was riding on the wave of increasing demand for organic food products, there was no real competition that it faced. The company’s average same-store sales stood at 7.1% between fiscal 2010 to fiscal 2014, compared to 3.7% for The Kroger Company (KR), 4.5% for The Fresh Market (TFM), and 0.3% for Wal-Mart Stores (WMT). However, times have changed, and so has the story of Whole Foods.
Same-store sales turned negative in fiscal 4Q15
The company scrambled to keep pace with the rising competition. In addition, it gained some negative publicity from allegations of overcharging on prepackaged foods and mislabeling weights, which badly dented its image. As a result, Whole Foods, for the first time in five years, registered negative same-store sales in its last reported quarter, fiscal 4Q15. The company’s comparable sales, or comps, stood at -0.2% in 4Q15, compared to 3.1% in 4Q14 and 5.9% in 4Q13.
Comparing the recent same-store sales with peers
While WFM has seen a deterioration in same-store sales over the past several quarters, Kroger, on the other hand, has registered an increase in sales comps for 48 consecutive quarters. The company has been quick to horn its way into the organic food space, and its Simple Truth product line has been a hit with customers. The company reported comparable sales growth of 5.4% in its most recent quarter (ending November 7, 2015), for example. By comparison, Sprouts Farmers Market (SFM), which sells similar products to Whole Foods at lower prices, also registered a 5.8% increase in same-store sales in its most recent quarter (which ended November 5, 2015)
Investors looking for exposure to WFM, KR, TFM, or SFM can choose to invest in the SPDR S&P Retail ETF (XRT). These four companies account for approximately 4.2% of the total index weight.
To understand what initiatives the company has been taking to stay afloat in the competitive retail food industry, please read the next part.