Bloomberg's Giammona on Whole Foods Expansion Problems (Audio)

Now let's head right over to the First Word Breaking news desk for today's afternoon call, and here's Bill Maloney. Good afternoon, Charlie MANUS averages are quiet today, with the Dow currently down fifteen points, sps are down to point, NAZAC is higher by three, the small cap six hundred gains four points, and the US ten yield at one point five percent. STP sector leaders included real estate, energy, and telecom, while consumer staples and healthcare led to the downside. Doubt.

Transports outperform rise one point three percent, as airlines gain and as a botech's climb fifteen and the vix is a little changed. DALLA leaders included IBM, American Express and Nike Retailers, Home Depot and Walmart fell one percent. Western Digital searched as much as fourteen percent after raising Q one views. Nintendo searched as much as thirty percent on news the Super Mario mobile game is coming to the iPhone.

Whole Foods fell as much as seven point two percent after spouts, Farmers Market cut its use, and HD supply fell twelve percent after its results after the Bell Tonight look for earning story HeLa Packard Enterprise and Variant Systems live from the first Breaking news desk on Bill Maloney. Charlotte, all right, thank you very much, Bill Maloney, and to hear live breaking news over your Bloomberg type squaw guess you guess Q you a w K on your terminal.

I'm Charlie Pelof. That's the bloom Bird business splash you're listening to. Taking Stock with Kathleen on Bloomberg Radio. Cutthroat competition,

falling food prices. All of these are hitting some of the biggest names in the grocery business, including today Whole Foods markets questions about its expansion plan and also the share price down a dollar sixty nine cents, the share to nine dollars and one cent after Sprouts Farmers Market, competing specialty foods retailer, reduced its same store sales guidance, making investors wondering about what's going on. A Whole food joining us now to dive into this is our Bloomberg

News reporter Craig Jemona Craig, Welcome to the show. Thanks thanks for having me. So, first of all, put this in context at a time when Whole Foods has announced expansion plans. You want a terrific story starting in Chicago. Just just set the stage with that, what's happening there and why. It just personifies illustrates what's going on in the terms of the Whole Foods challenge. So there's been questions for a while about whether or not Whole Foods

can never get to twelve stores. That was the number that John Mackie, the founder, put out there a couple of years back, and there's just a lot of people that have thought for a while that that's an aggressive target because is there really room for that many high end stores. So, you know, we used an analyst note talking about a store outside of Chicago that was next to a dress barn and a shoe carnival, and just questioning whether this was sort of emblematic of is this

the right place for a Whole Foods. You know, they do well in Brooklyn. The end of the store here near our office in Midtown East in New York City is always packed. All the ones in New York City, from what I can tell, are packed. But as they expanded to other parts of the country, they've sort of run into trouble. Now they run into trouble because there are copycats or because their prices are demonstrably higher than

the competition. Both both, you know, the copycats have I think put a spotlight on the fact that their prices are higher. So for years, Whole Foods created the organic food market in this country. They built it up and for years the margins were soaring. Obviously, Walmart and Kroger saw this and said, well, we can sell organic food too, and we can do it cheaper. So now people are saying, you know what, I'm not gonna pay twenty send premium that Whole Foods. I'm gonna go to Kroger by private

label stuff. Maybe I'll go to the Farmers Market a little bit. There's just other places to get organic food now, and it's really hurt Whole Foods. So what do you do if your Whole Foods? Because I couldn't read a few more everybody's follow the lead and and um my neighborhood Westside Market. You know, you look at the last year the number of stores like that of all kinds who carry grass fed beef, who carry not just cage free eggs, but you know, free rowing, pasture raised, it's

all kinds of product. It's a really upward sloping right. There were years where that Whole Foods was the only place to get that kind of thing. Now it's ubiquitous and so people and it's cheaper at other places. So the thing that the big thing they're doing is this new chain called three sixty five by Whole Foods. It's kind of targeted at millennials. The stories are cheaper to build, their smaller, cheaper to operate. They've been gushing about the

economics of that store model. Is only two open so far, one in l A, one in Oregon. Another one is coming, i believe next week in Washington State and in Bellevue and your Seattle so that's the thing they've hit on that they think it's working. So far, haven't said much about the results. Were expecting that November when they were report. But maybe they can get to twelve hundred by doing

six d three sixty five and six hundred flagships. But the question is they've said to this point twelve hundred stores plus three sixty five, so a lot of questions about whether they can get to that total. I was also looking at the stock of United Natural food shares down about four and a quarter percent, because they are the biggest supplier right the Whole Foods Right there there are the large The Whole Foods is the largest customer.

I think I could be you know, wrong here on a little bit, but I believe the revenue for United Natural comes from Whole Foods. It's a gigantic customers. So any day that you see Whole Foods up or down, United Natural tends to move with them. Sprouts is the same way. You know. Sprouts is two stores, so a little smaller than Whole Foods, but it's an organic natural retailer. They cut their forecast this morning. That just leads people to again, people are very sensitive about Whole foods right now.

So any any little blip, any negative news I think pushes the stock down. Can you talk to us a little bit about Starbucks? First of all, I was like, whoa, they're gonna Stevia, you know, alongside the splendor to there you know, there their coffee customers. And then we've got the ceo endorsing Miss Hillary Clinton for president. That's right there. He was at an event this morning of breakfast in New York City, rolling out a series of videos that

they're calling up standards. You know, he hired a former editor from the Washington Post to create this sort of almost like a news operation for him in Starbucks. So they're saying, you know, he basically said, it's been very divisive election season and we need change. We can't do this. He called Donald Trump a divisive candidate. So it's always a little surprising for the CEO of a big company like that to wait into politics. Really haven't seen that much of it, but he he did come out and

said he supported Hillary Clinton. He also sort of headed a bit on whether he would ever run. A lot of people think of him as a potential candidate. He's ruled that out prior, but today he said, never say never. Now is not the right time. But I'm a young man, so you know, he's sixty three years old. But some people think that Schultz is setting himself up for a run at some point. Any chance that we're going to

see Starbucks move into other retail establishments. I mean, there are a lot of malls which are going through a big transition. He talked about that. He talks about the pressure. You know, there's just less people out brick and mortar retailing. You know, you don't go out on Saturday and shop the malls pick up your Starbucks. They've invested heavily in e commerce. You know, he likes to call it a

tech company inside of a coffee company. So he was asked that question this morning and kind of said that the e commerce is how they're going to pick up for that. So you're still you know, you're out and about. Maybe you're not visiting traditional retailers. But I guess his hope is that people don't ultimately just sit on the couch and you know, shop online all day every day. That would, you know, sort of remove some of the coffee customers. Thank you very much for joining us. Craig Giamona.

He is consumer reporter for Bloomberg News. You can follow him on Twitter at stick a writer. That's s t I k A w R I t e R. This is Bloomberg, Apple, iPhone seven, iPhone seven plus. They want to reignite sales growth, but will the new iPhones have the sizzle they need to do so that's coming up on taking stock on Bloomberg Radio