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Can Whole Foods' Lower-Priced '365' Stores Save Its Business?

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Things are looking somewhat grim at the bourgeois grocer.

Justin Sullivan/Getty Images

Whole Foods revealed its first-quarter sales results yesterday, and the company did its best to provide a sunny outlook for investors. But while it's true that Whole Foods exceeded analysts' expectations with an overall 3 percent increase in sales, a closer look reveals some not-so-great news: "The grocer reported its largest same-store-sales decline since 2009," Bloomberg points out. "It also reported a 1.6 percent drop in the number of customer transactions and a 0.2 percent fall in basket size," meaning overall traffic is down, and the people who are shopping there are buying less stuff.

CNN Money points out that Whole Foods' stock is now nearly half the price it was at the end of 2013, the result of multiple factors including that pesky overcharging scandal in New York City last year. The grocer is also facing more competition than ever: Whole Foods used to be the "king of organic," but it was recently overthrown by bulk retailer Costco.

Whole Foods is no longer the "king of organic."

Then there's the issue of the sky-high prices that have earned the company its well-deserved "Whole Paycheck" nickname. Despite Whole Foods' previous insistence that it would offer more sales, a recent survey showed that customers haven't noticed any real difference in prices over the past few months. In an attempt to mitigate this, the company will now launch digital coupons that customers can access via its mobile app.

The company is also hoping the debut of its new lower-priced stores, 365 by Whole Foods, will give it a boost. But per CNN Money, "some analysts worry that Whole Foods may simply wind up competing with itself and steal sales from existing stores in big cities." Nevertheless, the first 365 store is slated to hit Silver Lake, Calif., in May; then in July, a second store will open in Lake Oswego, Ore., followed by Bellevue, Wash., in August.

In the meantime, the company is also forging ahead with opening new Whole Foods stores, with a total of eight new stores planned for the current quarter. With same-store sales on the decline, adding new outlets is currently the only thing keeping the company from reporting overall sales losses.

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