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Whole Foods Continues to Fight the 'Whole Paycheck' Label

Three takeaways from the company's second-quarter earnings

Whole Foods continues to face competition from its food retailing rivals, such as Trader Joe's, if it's latest earnings are any indication. In an report released Wednesday, Whole Foods announced same-store sales decreased nearly 3 percent, while total sales at the specialty grocer totaled $3.7 billion during the 12-week quarter.

In an earnings call Wednesday evening, company executives discussed the second-quarter results in depth. Below, three things to expect from Whole Foods in the future, based on that call:

1. More promotions

Same-store sales have decreased 2.3 percent so far this year, in part due to fewer visits from the casual Whole Foods shopper, and also because of increased competition from rivals such as Trader Joe's. In a release, co-founder and co-chief executive officer John Mackey noted: "Food retailing is evolving at an incredibly fast pace, and consumers have more options than ever before." To combat that, the store notoriously referred to as "Whole Paycheck" is aiming to become more price-competitive.

In recent months, Whole Foods has offered a slew of national promotions on produce (including one for strawberries that an executive called the "biggest we've ever done"). But will cheaper fruits and veggies be enough to increase sales? Not yet. Executives said revenue from promotions so far hasn't been enough to offset the investments, "but we think over time we'll capture a larger percentage of [consumers'] shopping."

When asked by an analyst whether Whole Foods closely monitored pricing at Trader Joe's, which often offers discounts of its own, executives said yes, adding the store has "certain price bandwidths we follow with them." In other words, if Trader Joe's lowers the price of a particular item, Whole Foods will follow suit to "maintain the proper bandwidth," a standard practice in the grocery industry.

2. A fancier app, loyalty program, and a (slightly) new look

Jason Buechel, executive vice president and chief information officer, said a digital coupon initiative is so far proving successful. "As a whole, we're very excited about results," Buechel said. "We've significantly increased the number of users of our app, and we have more engaged customers." Over time, the company expects to add more features to its app and expand a loyalty program nationally following a test in Dallas (the program is currently in place in a Philadelphia store).

Back storage rooms are being redesigned, and many stores are pioneering one central kitchen. Areas in some stores are being converted "from full-service to self-service," which one executive said is a win-win: "Customers are responding well to it, and we get labor reductions as well." McDonald's, far from a Whole Foods rival, but a company that has seen a recent turnaround, is currently testing self-service kiosks in some of its stores. It's a move that many note will help circumvent increased labor costs as higher minimum wages roll out in certain parts of the country.

3. Lots of talk about the 365 concept

Expect to hear a lot more about the chain's new line of 365 stores, the first of which will open in California in three weeks. Nineteen of stores are already set in stone, with more to come. Three of those are stores that were recently in development to be Whole Foods Markets (in Bloomington, Ind.; Akron, Ohio; and Toledo, Ohio), but are now being converted to 365 stores. That's mostly due to their size, say executives. Moving forward, the company says Whole Foods Market outposts "should be" 45,000 square feet or larger, while 365 stores will be smaller. The three aforementioned stores are all approximately 30,000 square feet.

Part of the 365 rollout will include traditional advertising (ads in the Los Angeles Times, for instance), social media pushes, and a partnership with BuzzFeed.

"We're going to create a whole new brand ... and all of our stores continue to innovate," said Mackey. "Everybody's continuing to try to copy us because of the innovations. And, sure, we're copying some of our competitors, too."

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