Whole Foods posts record sales, plans more stores.

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Whole Foods Market said Wednesday it expects to open between 38 and 42 new stores this year, including relocations, for annual square-footage growth of 9% to 10%.

The company also said it expects sales growth for the fiscal year to top 9% and same-store sales to rise in the low- to mid-single-digit range, while it anticipates a greater decline in gross margin than in fiscal 2014 as it continues to invest in value.

For the 16-week first quarter ended Jan. 18, net income rose 5.7% to $167 million, while sales climbed 10.2% to a record $4.7 billion and same-store sales rose 4.5%, with average weekly sales per store of $724,000, or sales per gross square foot of $990. Gross margin fell 20 basis points.

Walter Robb

Walter Robb

Co-CEO Walter Robb said the company attributed its sales momentum to “customers’ positive response to many strategic initiatives, along with improving consumer confidence.”

During a conference call with financial analysts, Robb said the chain’s strategic initiatives included the following:

• The launch of a national “values matter” brand campaign in TV and print.

Although final brand-tracking results have not yet been determined, “the early read is very positive,” Robb noted, “indicating a 100% increase in awareness for our target audience, with increases in both value perception and intent to shop versus our measured competitors.”

• A 15-city partnership with Instacart, with average weekly online delivery sales since September having passed the $1-million mark, reaching as high as 5% of total sales at some stores.

Whole Foods intends to expand the program to additional markets, broaden its product offering and provide richer content about quality standards, Robb noted.

• Offering digital technologies, including Apple Pay, whose users total approximately 2% of Whole Foods sales.

• A test of a shopper reward program, called Affinity, at 12 stores, which has shown “high activation and registration rates and above-average basket sizes for participants,” Robb said.

The Affinity program will be expanded to the Washington D.C. area in the spring, he noted, “with hopes of having it live in a majority of stores for the 2015 holiday season.”

• A new Whole Foods app that has recorded nearly 600,000 downloads.

Robb said the app enables users to access personalized and local store offers, events and information, along with 3,700 recipes where ingredients can be added to shopping lists with a single tap.

• A test of lower produce pricing in several markets.

Although it is too early for conclusive results, “we are looking at expanding the test to additional markets [because] we believe more competitive produce pricing will greatly benefit our overall value perceptions,” Robb said.

In other comments, Robb said changing technology and growing demand for customization “have fundamentally altered retailing forever [in terms of] 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, we believe customers will always want the human connection, sense of community and unparalleled shopping environment our stores deliver, and we are focused on evolving a richer customer experience through innovation, improved value and even higher levels of transparency on the products we sell.”

Whole Foods said it opened nine new stores during the first quarter, including expanding into Ottawa, Canada, and completed 40 store remodelings. It has already opened three new stores during the second quarter, Robb said, with plans to open eight additional stores.

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