5 Things Whole Foods Market Inc. Management Wants You to Know

By Markets Fool.com

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Last year was a tough one for shareholders of Whole Foods Market . It became clear competition was heating up in the organic foods sector, and many wondered how the grocer would combat the onslaught of more affordable organic and natural fare. Shares of the company fell in lockstep with these concerns, losing 45% of their value between October 2013 and October 2014.

But with the recent fourth quarter earnings release, Whole Foods management sent amessage to Wall Street: don't count us out quite yet.

While it is easy to get excited over the headline numbers -- a beat on earnings and accelerating same-store sales growth -- there were lots of details that long-term investors might have missed if they tuned out the company conference call.

Below are five of the most important tidbits that Whole Foods investors need to be aware of.

Investments in technology are paying off
It might sound odd to hear about a grocer investing in technology, especially Whole Foods whose customers generally eschew the type of technology that leads to genetically modified food.

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But here, we are talking about a three-pronged approach that has nothing to do with GMOs. The first is a focus on online ordering and home delivery. After partnering with Instacart to fulfill orders, co-CEO Walter Robb said that "online delivery sales [were] as high as 5% of total sales in some of our stores." That is a big deal for a service that is only available in 15 markets and just recently introduced.

The second prong is a focus on the "affinity program" -- fancy-talk for a rewards program. Whole Foods has been testing the program in 12 stores, and results have been encouraging: "the results of our . . . affinity test . . . shows high activation and registration rates and above average basket sizes for participants."

And finally, the company has become "the largest Apple Pay retailer in terms of both transactions and sales." Clearly, the payment option resonates with customers, and management believes it can extend its partnership with Appleto include "expanding functionality to support our affinity program."

Making the in-store experience even better
While that technology might represent a pleasant convenience for shoppers, Robb and co-CEO John Mackey know that they will need to do more to keep customers coming back to their locations. Creating a unique, can't-find-it-anywhere-else shopping experience is crucial.

That is why the company has long focused on taprooms within the store -- there are over 100 companywide -- and took a huge leap last quarter. Said Robb, "Our . . . Oak store in Houston took the next step debuting our first ever in-store micro-brewery. Our second brewery is already open and we expect many more to come."

Those prices will continue dropping
Much to the delight of customers -- and the ire of Wall Street -- Whole Foods also announced that it was not done cutting prices on its organic and natural goods. The recent earnings release stated that: "[It] expects to continue its value strategy and . . . expects a greater decline in gross margin . . . in fiscal year 2015 than in fiscal year 2014."

In the past, news like this usually sent Whole Foods stock plummeting -- not this time. That is largely because . . .

This will be offset by cost-cutting elsewhere
By focusing on greater efficiency in "internal distribution, coordinated purchasing, and labor leverage," management said it still expects "earnings per share growth . . . to be in line with or slightly higher than sales growth."

In fact, the company thinks it can save so much money from these improved efficiencies that Robb stated lower food prices was only one bucket where those savings could be offset. The other two were the aforementioned technological investments and the continued nationwide advertising campaign -- the first of its kind in company history.

Keeping things in perspective
Finally, as Whole Foods continues to grow its store count north of 400 locations, some analysts on the conference call asked whether or not larger competitors were cutting the prices on their organic goods in response to their recent slashing of prices.

Mackey's response was brilliant and serves as a good reminder of how much room for growth Whole Foods still has:

In almost all of our markets . . . our market share is relatively low . . . We're not a big threat to a major supermarket who dominates the market . . . It doesn't make much economic sense for them to go overreact and lower all their produce prices to try to match Whole Foods Market . . . for very little market share gains . . . So this is an example where not having a big market share works to our advantage.

That type of long-term view has served investors well in the past, and it is encouraging to see that management has no plans on taking shortcuts to profitability in the future.

The article 5 Things Whole Foods Market Inc. Management Wants You to Know originally appeared on Fool.com.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Brian Stoffelis impatiently waiting for Whole Foods to open more stores in his native Southeastern Wisconsin. He owns shares of Apple and Whole Foods Market. The Motley Fool recommends Apple and Whole Foods Market. The Motley Fool owns shares of Apple and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.