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Pricing Scandal Sinks Sales At Whole Foods

Whole Foods reports that sales at established stores rose only 1.3 percent in the second quarter of the year – its worst performance since the height of the Great Recession in 2009, according to The Wall Street Journal.

This time, general economic performance isn’t the culprit however – charges of overcharging in its New York locations coupled with emerging competitors in the fresh and organic market (like Target and Walmart) seem to have paired up to continue to erode the grocery’s sales.

Officials in New York found that packages were incorrectly labeled when it came to weight, meaning customers were overpaying as much as $15 for items. A wave of apologies followed as co-Chief Executives John Mackey and Walter Robb presented a video mea culpa that affirmed the mislabeling was accidental.

Depressed sales depressed stocks, which were down 11 percent in after-hours trading. So far this year they have lost almost 20 percent of their share price.

“The growth rate has slowed massively,” Edward Jones analyst Brian Yarbrough told WSJ, “yet they are still opening more stores. People are starting to lose faith in the management team.”

Indeed, on July 29 alone, Whole Foods announced two new stores were on their way — one in Kirkland, Washington, and another in Akron, Ohio.

Whole Foods remains committed to a turnaround. A new line of Whole Foods – called 365 – are aimed at a more price conscious, millennial shopper in an attempt to leverage additional growth.

“In this rapidly changing marketplace, we believe we are taking the necessary steps to position ourselves for the longer term,” Robb said.

The Austin-based chain remains optimistic however, and unconcerned that the new line will steal customers from their classic grocery locations. Whole Foods says it ultimately believes it can triple the number of its U.S. namesake stores to 1,200 locations. Today, Whole Foods operates 424 stores worldwide.

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