If green shoots are what you seek, stop by the Whole Foods store in Paramus, N.J. Wander past the multihued display of locally grown flowers and into the oasis of produce for which the upscale grocer is known -- more than 20 types of leafy greens and pristine arrangements of flawless fruit, from rolling mounds of kiwis to deep bins of shiny crimson cherries.
Beyond that, the store stretches on and on. At 63,000 square feet, it's one of the biggest Whole Foods ever.
It opened in March as the recession was in full swing. Skeptics predicted it would elicit an underwhelming consumer response, but thus far the store has exceeded the company's expectations; in the words of CEO John Mackey, customer volume has been "phenomenal."
If Whole Foods Markets (WFMI, news, msgs) were perishable, it probably would have expired this past year. But instead, it’s holding its own in what's now been a yearlong assault on any store considered expensive.
While Whole Foods' most-recent earnings report wasn't dazzling -– year-on-year revenue was flat -– it wasn't dismal, either. And many analysts foresee increased sales when the Austin, Texas, company posts third-quarter financial results on Aug. 4. "We haven't been hearing that anywhere else in the luxury retail space," says supermarket analyst Scott Mushkin at investment bank Jefferies.
Such optimism has fueled the grocer's soaring stock price, up 159% this year. In the same period, shares of traditional grocers Safeway (SWY, news, msgs) and Kroger (KR, news, msgs) have each lost 19% of their value.
What's kept Whole Foods healthy? "We have shown that we can adjust if we have to," co-president and COO A.C. Gallo said.
One adjustment was to slow the pace of expansion. The company now expects to open half the stores it had planned for 2009. "We are moving a little more slowly," says Whole Foods spokeswoman Libba Letton. "We're (also) opening smaller stores."
The Paramus store was one of just three Whole Foods outlets opened in the second quarter. And the sprawling store may be one of the last of its kind as Whole Foods shifts from the megamart model and focuses on less labor-intensive stores, like one recently opened in Capitola, Calif., which, at 23,000 square feet, is half the size of most new Whole Foods outlets and about one-third the size of the Paramus store.
From the onset of the recession, Whole Foods has moved to prevent an exodus of customers. One-fifth of shoppers surveyed by research firm Retail Forward last summer said they had switched grocery stores to save money. Whole Foods' reputation as an expensive place to shop -- it's been nicknamed "Whole Paycheck" -- made it especially vulnerable to losing market share.
Instead of hunkering down and holding out for an economic recovery, Whole Foods experimented with ways of convincing America that it was, in fact, an affordable place to shop, without actually slashing prices storewide.
"Of course, we realized that everyone was trying to save money," Letton says. To make sure budget-conscious customers didn't write off Whole Foods, the retailer ramped up the marketing. "About a year ago, we launched a campaign to make our customers aware of the value that there was in the stores," she says.
The "values" Whole Foods is hawking vary from week to week and don't emulate the "everyday low prices" of a discount retailers like Wal-Mart Stores (WMT, news, msgs).
In a May conference call with analysts and investors, Walter Robb, the company's co-president and chief operating officer, cited research from Nielsen suggesting that negative perceptions about Whole Foods prices had declined from 20% to 10% in recent months.
"While it hasn't been an overnight shift, we believe we are starting to change the dialogue about our prices and, hopefully, the perception as well," Robb said.
If you don't believe Whole Foods is affordable, staff members such as Nancy Katz are happy to show you that it is. Katz sells Whole Foods' budget-friendlier image as part of her job as a "value tour" guide. By leading customers around the store and pointing out the deals, she aims to debunk the assumption that everything at Whole Foods is expensive.
On a recent tour, she flagged a sale on melons and organic lemonade selling for $1.99 a bottle. "You can't get that price at 7-Eleven," she said of the drink. She also emphasized the value of the store's private-label goods, pointing to a container of store-brand organic baby greens that sells year-round for $6.99 a pound.
Katz also noted that you'll pay a premium for organic food wherever you go, and added that a price point isn't everything:"Value means getting a good exchange for your money."
At least for now, Whole Foods shoppers seem to agree.