After being accused of overcharging in their New York City stores, Whole Foods stocks are down more than 30% and are trading at $34.50. Growth is sluggish, opening dates for new locations are being postponed, and the name Whole Foods is generally leaving an overpriced, sour taste in our mouths.
A stockholder has filed a class-action lawsuit against the company, reports CNN, arguing that Whole Foods was misleading about its business operations and deliberately overcharging customers. And a “mistake” a few weeks ago—asking $6 for jars of water with asparagus stalks in them—has not helped their profit margins. Despite the company’s price cuts on items, they can’t seem to escape their bad reputation, as people continue to refer to the stores as “Whole Paycheck.”
Whole Foods hopes to unveil new plans for Whole Foods new-concept 360 stores, aimed at younger buyers with less expensive items, but that may not be enough to restore the company in the eyes of its consumers. The stores will likely go up in places where regular Whole Foods stores already exist, inciting worry that sales at the regular stores will take a painful hit. Co-CEO John Mackey said that he thinks there will be some cannibalization of Whole Foods, “but we don’t know exactly how much until we do it…it’s going to appeal to a…different customer, we think. So it is an experiment.”
More trouble could abound in the grocer’s future. Stephan Ward, a retail research analyst, says that the combination of falling margins and slowing sales growth could indicate long-term profitability problems. Last year, Whole Foods paid $800,000 in fines in California for overpricing their products there.
Another problem facing Whole Foods is that the demand for organic products is bigger than they are—the stores are no longer niche because organic has gone mainstream. Most grocery stores now, including Fred Meyer, Publix, and Trader Joe’s, offer great organic products without the hefty Whole Foods price tags. There are plenty of other stores like Whole Foods, too: Metropolitan Market, Central Market, and PCC all boast similar products without the baggage. So even if the future of organic shopping is bright, Whole Foods’s own future might not be quite so shiny.