Wall Street Sours on Whole Foods Market – CNBC

“It’s going to be interesting to see what Whole Foods does differently with 365. Are they really going to be different?” said Joe Dobrow, who has worked at several natural foods companies and is the author of “Natural Prophets,” a history of the business. “Or will it just be a downsized version of Whole Foods with a particular attention to price? I hope it’s not too little too late.”

Mr. Dobrow said the new stores could be a little more like Trader Joe’s, which gets about four-fifths of its sales from higher-margin private-label products, and Sprouts, which spends less to open stores and has lower labor costs because it has no prepared foods.

But Sprouts, which declined to comment, is not any more popular than Whole Foods with investors. Its stock is down about as much from its high this year as are the shares of Whole Foods.

Mr. Mackey is bemused by the interest in 365. “It’s not a revolutionary idea,” he said, noting that he expects the 365 concept to be to Whole Foods what Nordstrom Rack is to Nordstrom.

“In Whole Foods, you can find a wedge of brie for $ 2.99, and you can find a wedge of triple crème brie from France that’s made with milk from grass-fed cows that sells for $ 40,” Mr. Mackey said. “You won’t find any $ 40 brie at 365.”

The 365 stores will be less expensive to build, deploy more technology and be more self-service than Whole Foods stores.

More than 90 percent of the product selection and pricing for 365 will be set centrally, from Whole Foods’ offices in Austin, Tex., whereas such decisions are made for Whole Foods stores by regional teams and even at a store level. “Everything will be a lot more streamlined,” Mr. Robb said. “It’s going to be very different from Whole Foods Market.”

The first of the stores will open in Los Angeles next year. But Mr. Mackey and Mr. Robb believe 365 will do more than just add valuable new business to the company; it will help Whole Foods introduce its philosophy of food and values to neighborhoods that cannot sustain stores’ selling $ 40 blocks of cheese.

As Mr. Mackey says, “365 can go places Whole Foods can’t.”