Whole Foods' value emphasis will compress 2015 margins

Whole Foods Market's value message is resonating with shoppers as America’s favorite natural grocer delivered same store sales growth of 4.5% and record first quarter profits.

Whole Foods said sales for its first quarter ended Jan. 18 increased 10% to $4.7 billion due to the addition of new selling space and the increased productivity of existing stores reflected in the 4.5% comp increase, which pushed sales per square foot to $990.

Whole Foods opened nine new stores during the quarter to end the period with 408 locations. Net income increased to $167 million from $158 million and earnings per share increased to 46 cents from 42 cents.

"We are pleased with our first quarter results which reflect accelerating comparable store sales growth and healthy returns. We attribute our broad-based sales momentum to our customers' positive response to our many strategic initiatives, along with improving consumer confidence," said Walter Robb, Whole Foods co-CEO. "Changing technology has fundamentally altered how and when customers choose to connect with us, and we are rapidly building out an extended experience beyond the four walls of our stores. At the same time, there will always be demand for the dynamic shopping environment, passionate service, and sense of community our stores uniquely deliver.”

Robb reaffirmed the company’s commitment to triple its store count over the longer term with a market potential for 1,200 stores.

For the remainder of the year, Whole Foods said it expects same store sales growth in the low to mid single digit range and total sales growth of more than 9% thanks to the full year addition of 38 to 42 new stores.

However, the company cautioned that it heightened emphasis on showcasing value will result in a greater decline in gross margins than the company experienced in the past.