Whole Foods Market's (WFM) Management Presents at Oppenheimer 16th Annual Consumer Conference (Transcript)

| About: Whole Foods (WFM)

Whole Foods Market, Inc. (NASDAQ:WFM)

Oppenheimer 16th Annual Consumer Conference

June 22, 2016 09:05 AM ET

Executives

John Mackey - Co-CEO & Co-Founder

Jason Buechel - EVP & Chief Information Officer

Cindy McCann - Global VP of Investor Relations

Rachael Funk - Investor Relations Associate

Analysts

Rupesh Parikh - Oppenheimer

Presentation

Rupesh Parikh

Thank you for attending Oppenheimer's 16th Annual Consumer Conference. My name is Rupesh Parikh and I'm the senior food, grocery and consumer products analyst at Oppenheimer. I'm very pleased to introduce our next presenting company. Whole Foods Market and its senior management team. We are very fortunate to have in attendance today Co-CEO and Co-Founder John Mackey, EVP and Chief Information Officer, Jason Buechel and in the audience, Cindy McCann, Global VP of Investor Relations and Rachael Funk, Investor Relations Associate.

We continue to look very favorably upon Whole Foods' longer-term prospects. The management team has demonstrated a consistent track record over time of innovating and gaining share. We believe the key elements are starting to come in place to eventually support a sustained turn in the business and return the chain to its historical outperformance. In recent months and quarters we have started to see some of these changes take place including more aggressive value efforts, digital coupon rollout in February and just a few weeks ago the launch of a new concept 365 by Whole Foods Market. A couple quick comments on today's format. We're going to start off with a brief presentation and I will go through a list of questions that I have been preparing.

With that I'll turn it over to Jason.

Jason Buechel

As required here is our disclaimer on forward looking statements. Our comments today will refer to Q2 results ended April 10. Very excited to be here today. We're going to open this morning's talk with just a quick overview on our technology platforms. As many of you are aware this is one of our key to our nine point plan and many of our initiatives have a major component of technology underlying them. So with that we'll jump in and start talking about our key technology platforms. What we did about three years ago is take an overall look at where we need to go from a company perspective to support growth, efficiencies and ultimately support a lot of the key capabilities we needed to put into place. And it had us look at our overall technology landscape and we put together a plan that's essentially is replacing 80% to 90% of our systems over a period of time. So we began that work about three years ago. We've a few years left to pull this off but we grouped it into three major platforms, our team member platform, our customer platform and our product platform.

I am going first just talk quickly about our team member platform. This is one of them that we've made the most progress on. We put in work day which was something that happened in fiscal 2015 this is a foundation of the team member platform, it really allowed us to automate a lot of our HR processes and create one center common system for all team member information and attributes. That allowed us to do things like labor scheduling which is one of the strategic plug ins that sits on top of it, it also allowed us to do things like digital learning, new solutions for account management and recruiting. So this serves as a key foundation and supporting a lot of our other platforms.

Our customer platform is outgoing you've heard a lot about. The foundation of this is our one POS common commerce solution. The intention here is we're moving from four legacy systems right across seven different instance to one common solution that is not just about point of sale it's also about how we ingest product information and how we tied in to all of our downstream systems including analytics. In addition to our point of sale we focused on two other areas, one of them has been Affinity which we've done a pilot in Philly and we're very much looking forward to our next generation of that for within Dallas that is coming later this summer. And as well as insta-card which is a partnership that we've established and we continue to grow, we're very excited about some of our recent news in the space where you're now able to order groceries online from wholefoodsmarket.com directly via our website and fulfilled through insta-cards.

And lastly is our product platform. And this is one of the most transformational projects we will be doing as Whole Foods Market this isn't just about putting in a new piece of technology it's about changing the way that we do our business. For most retailers they have an ERP solution, we currently have a home grown one that is very disparate there is 12 different instances, one for each of our regions. We are partnering with a company called Infor which is the world's third largest ERP solution provider. And we're really developing the next generation retail platform. For us this is going to be about how we host our product information, how we give ordering, receiving, it's going to add a lot of new capabilities for us like replenishment, allocation, forecasting. It's also going to support our purchasing evolution as we adjust the way that we purchase goods, select our assortment, price our goods and put them on promotion this will be our common system to allow our global team members, our regional team members and store team members to interact together. What I personally, I am excited about is the tech key space and this space is we're leveraging modern technology, we're leveraging new advancements in machine learning, Big Data and we're doing in an architecture allows us to put all this in the cloud. Gets us away from batch jobs, things that are very much 1990s architecture.

So this is something we're really, really excited about. What's great is we just kicked this project off last October and we're already putting pieces of this into production and some of those pieces actually have shown up in our first 365 store including our ability to have a perpetual inventory there and team member assisted replenishment.

And with that I am going to turn it over to a video that we have on 365 to highlight some of the great things that we've got going on out there.

[Audio/Video Presentation]

Question-and-Answer Session

Q - Rupesh Parikh

We’re going to get started with the fireside chat. So staying on the topic of the new concept, I’ll start with a few questions on 365. So we spent a few days out there and we walked away very impressed by the concept, can you share with us your initial thoughts towards the LA 365 opening? How is the store performing this far versus expectations, any initial positive or negative surprises?

John Mackey

Well, we’re very happy with the start of 365 store, we'd didn't want to put a lot of expectations on it because we weren't exactly sure what was going to happen, it’s a lot of publicity so that of course helps its opening. Today in fact is we’ve just completed our first four week anniversary today and I guess I can’t talk about sales, Cindy is in the audience here, I’ll say that we just added two new cash registers and we’re having to actually redo the entire front end. And we will the next two stores openings, Lake Oswego in the Portland area and Bellevue in Seattle, we are busily taking learnings that we’ve got and integrating them. I suppose one thing potentially relevant is that the register system we had, we didn’t have conveyer belts because we’re expecting with a more smaller store, curetted mix that we get a lot more kind of smaller baskets, but that’s been the opposite, we’ve getting bigger baskets than we traditionally get as Whole Foods. So that’s been a surprise, and we’re very happy with the beginning.

Rupesh Parikh

And any thoughts on the type of consumer that is coming to the store thus far? Or have millennials started to come as a store?

John Mackey

Yeah, the whole millennial thing, yeah I mean it depends on what time of day you go there. If you go there in the morning, you get older people and if you come there at night you get younger people and most of the business is being done at night. So I’d say it’s got a millennial overall millennial. If you go by CHLOES, which is the friends of 365, this part of the store I was eating there when I was there and I was the only person over 30, over 40, over 50 and over 60 in the restaurant, so and that’s going very, very well for this.

Rupesh Parikh

Okay. And then from a product mix perspective, I am curious as you look at the private label and prepared for these experts and legacy hope with stores how do they differ?

Jason Buechel

It’s pretty early and it’s just one store, so it’s very difficult to use generalizations. We put a big emphasis on produce both on our selection and our pricing and we feel like that’s the real competitive advantage for our company so we’ve double downed on that and it's doing produce is driving the overall store sales, so produce is very successful for us. We sort of because we’ve put a entire new organizational structure in that store, it's very differently organized than Whole Foods, we took I don’t know 1000 basis points out of cost, something like that and that’s all reflected in terms of investing in lower prices with less service, less service meat and less service sea food but the interesting thing is we’re doing just as much business in the sea food so that’s a big learning for us. I think possibly one of the most relevant things is that we are quickly going to school on our learnings for 365 and we already have our Regional Presidents are meeting together and we’re plotting out the learnings that we’re taking away that we’re going to integrate into Whole Foods market, so that we can take cost out of our system and invest them in lower prices at Whole Foods as well.

Rupesh Parikh

Okay. And then on the pricing side, how do prices at 365 compare with Whole Foods Store?

Jason Buechel

They're cheaper. I mean in the long-term Whole Foods is a curated product mix, you get about 7000 SKUs in 365 compared to 25,000 in the Whole Foods markets. So there is not, there is differentiation in Whole Foods through greater selection and then with the 365 is very aggressive in price and one of the questions we keep getting asked is, well, how is Whole Foods going to react to that? Well, first, there hasn’t been that much cannibalization. I mean admittedly, stores are a few miles away. So we’ll have a better comparison I think when we open our Bellevue store up in Seattle because that’s less than a mile away. And we don’t exactly know the right way. We know what we want to do with 365.

We haven’t exactly figured out how Whole Foods best responds to that. Does it match prices in certain categories does it just differentiate away from it? How does it treat 365 as a competitor? We know we’re getting a different customer then we’re getting in it, it’s a different customer 365. I never saw so many Trader Joe’s bags in a Whole Foods Market store before. I was kind of joking that we should trade them out two 365 bags for any Trader Joe's bags brought in they brought in that was interpreted by our team as too unfriendly, so we didn’t do that.

So we’re going to be experimenting, we’re going to try lots of things. Whole Foods is a very experimental entrepreneurial company so we’re going to, we’ve already got three different distinct strategies for Whole Foods pricing vis-à-vis the 365 store. And Whole Foods will continue to differentiate away from 365 and it will match where it needs to probably and we’ll learn and evolve

Rupesh Parikh

Okay, great. And shifting gears to competition, clearly there have been a number of players entered the category in recent years. From your vantage point where do you believe Whole Foods is feeling the greatest pressure? And along the same lines we also get a lot of really more questions lately about the online threat Amazon and other players, entering the category. So I was also curious, how much of your business do you believe is going online or if you're losing share to some of those players?

Jason Buechel

We don’t exactly know. I do think that the more media worthy things like Amazon Fresh and Blue Apron Plated get a lot of media attention and get some analyst coverage but at the end of the day by far the biggest competitors to Whole Foods are the legacy supermarket companies Krogers, HEB in Texas, Publix in Florida, Wegmans on the East Coast, those are all very, very good competitors and there all copying Whole Foods and so I think that, for the longest, I mean Whole Foods does fabulous sales per store, fabulous sales per square foot, far, far higher than our competitors do.

And part of that drive has been we’ve had unique products. And people have driven further to go to our stores than this typical, typical supermarket company. Well with more outlets for natural and organic foods they don’t drive as far you know come as frequently. So the convenience factor begins to weigh more heavily in the choices. And I think on the online aspects there’s just no question that, I mean, I’ve talk to people who aren’t interested in food, they are busily, they are working and they don’t, just want convenience as the overriding value. I think that Whole Foods wants to compete for those customers to be sure, we have a lot of things in the works which probably Jason will talk about later. But you’re going to lose some of the business is going to bleed off in that direction. And we’ll compete with it as best we can but just the world is evolving and changing.

Rupesh Parikh

Okay, great. And staying on the competitive landscape, so as we do our stores around the country in some of the markets whether it’s Denver or Houston, there is so many different specialty concepts out there. So from your perspective, without naming any specific markets do you believe that we’re in an overcapacity situation at this point more on the specialty grocery side?

John Mackey

I mean one of the reasons there’s so much new competition sprouting up is because the world is changing. Well Whole Foods kind of won, our basic philosophy has been adopted. And everybody wants to be selling natural and organic foods, everybody wants to be selling healthier foods. I’m watching these little mom-and-pop things, startups that Whole Foods nurtures being snapped up for multiples of sales, but barely any profits, because the package food industry is so they’re losing share, the markets turning away from them and they’re trying to just stay relevant by making expensive acquisitions.

So it is if we're over capacity, I mean these things are dynamic. And I mean look at, on the one hand you see something like well the fresh market has you pulled out of California, pulled out of Houston and Saint Paulo, Fairway when bankrupt. You mean you have the inevitable shakeout that occurs. When you have too much competition the weak players get shifted out. I’d like to think and I believe, Whole Foods market is not one of those weak players but one of the strong players that’s going to be, we’re getting stronger as we change and transform ourselves.

Rupesh Parikh

Okay. And moving onto another area that is very topical, gross margins. So first on price investments, so we fairly see Whole Foods take a more aggressive approach towards both price investments and promotions really, I would say really the last several quarters. Where do you feel we are in this journey and have pricing gaps started to narrow based on the options to be?

John Mackey

Well price gaps are definitely narrowing. Whether they are narrow enough or not, I don’t think they are, I think Whole Foods has more work to do. I don’t know exactly where we are in that process, because it’s dynamic. Competitors respond. Some competitors go bankrupt, other entrants come in. If you’ve got competitors that are being held up by venture capital money that are subsidizing their pricing in order to give sales like Thrive Market is doing or Plated and Blue Apron are doing eventually, it can't do that definitely. Well Amazon can, but no one else can. And so I think that you will see Whole Foods is going to continue to I think learn, grow and adapt in this area.

Rupesh Parikh

Okay. And staying on gross margin, another question we get all the time, is where Whole Foods gross margin did bottom over time they are down more than 150 basis points off recent peaks. Any updated views on where these…

John Mackey

I mean we're sticking with our strategy we've outlined in our nine point plan which is still only like few quarters old. So probably dated. We're going to continue to take cost out of our system it committed a $300 million out by the end of fiscal 2017 and we're going to continue to invest that in better pricing. We hope this has the highest gross margins and we, I think perhaps we were so well differentiated for so long that that enabled us to get higher profits and getting perhaps sustainable over the long run as new competition came into the marketplace.

So, in some way we have a little bit of regression underneath and I don't think people fully understand that that our sales force gross profit are 50% to a 100% higher than most of our competitors that's going to regress a little bit we may not get a $1,000 a square feet although 365 may do a lot better than that. But we're going to little bit is going to competed away, gross margins are going to be competed down a bit, does it mean that the business model is broken or it's not sustainable in the long run I don't believe that. But I do think we have to be more what we say price relevant. We have to, we can't engage in install pricing and so we're, we think we all know our strategy, we are taking cost of our system, we're investing them in lower prices, we're lowering the price gap. It's a multiyear journey because we're not willing to sacrifice our culture and just throw it all in and sort of insane attempt to change everything at once.

So, that requires some patience if you're going to invest in Whole Foods Market, but we think it's the right strategy and it's going to pay long term dividends for our shareholders.

Rupesh Parikh

Great. Now I'd like to talk to you pertaining to some of your IT and digital initiatives. So Whole Foods has clearly been stepping up its investments in technology to catch up and potentially leapfrog some of its peers. What are some of the key advancements which you expect to see from one POS system and how do you envision this upgrade changing the consumer experience overtime?

John Mackey

Yeah, so one of the POS side of things, I mentioned a little bit earlier we had four legacy solutions and the first piece is really around speed to market. So we need to make change previously but there is support of promotion or new initiative, it was lot harder to bring the other set of seven different instances together to make those changes. Two areas that I think will be most impactful one is on pricing and promotion itself. So as we want to make price changes does us to be more dynamic and responsive so we can do things more closer to realtime same day. And putting together promotions that allow us to do things more in a personalized level.

So, as you're seeing the digital coupon side of things in our newest point of sale solution we allow the ability to do personalized offers directly, one to one for individual customer they can only redeem those things once versus a lot of our legacy pieces you don't have the ability to control that in a more generalized offers. So we can reward and recognize customers on that side of it and that plays directly into Affinity which now will have the ability to have one platform to really bring together all the different offerings that we want to have uniquely and one of the things that you will notice with our Dallas program is we're adding more things that allow customer choice and differentiation than what you've seen in the Philly pilot as well as what's in the marketplace.

Rupesh Parikh

And on your other technology initiatives, such as the cloud based platform that you are creating with Infor, what's the best way for us to visualize on the benefits that will come from these systems overtime?

John Mackey

Yeah, I think the speed to market and the efficiencies of having one solution sits there, as well that sort of like the table stakes piece we'll be moving from 12 different systems to one common solution. So, today when we setup an item for instance we set about 12 different times as we make price changes to we go back and adjust it to our times. So there is some basic efficiencies that happen there. So I think the more exciting piece is the ability to automate stuff that we do today and ultimately actually use data and analytics to better support our business. So, if you look at how we move product today, our team members are going around the store and they are actually creating orders based on what they see on the shelves. We're putting in tool that are looking at everything throughout this supply chain, so expecting when we forecast after sales, when we suggest a replenishment as we have product that we want to allocate making sure that it gets to the right store at the right spot at the right time.

And then on the category management side of things it's part of our purchasing evolution most of the things that we today for assortment planning, space planning, pricing and promotions we're doing sort of in 12 different ways and in Excel spreadsheets we don't have very sophisticated solutions there. So this is giving us one cohesive system where whether you are a category manager at a global office or looking in purchasing on a region or even a store level you have full view to the entire supply chain around the attributes to the product. So where it is as far as where the product is and how it's moving in the supply chain to how we support all the different elements of category management. So I think there is going to be lot of efficiency and labor and ultimately I think it allows us to drive our business better.

Rupesh Parikh

So going back to your efficiency. So there is a $300 million goal out there the expense savings over the next few years. How important are your technology initiatives in achieving that goal or should we think about or should we think of this way that your technology initiatives can help to guide even more upside of the savings overtime?

John Mackey

Look, I think it's both. If you look at some of the adjustments we made this past fall with some of the organizational changes, a lot of those are based upon things that we're put into place with Workday. So, a lot of the stuff involving our team members previously were manual pieces of paper and processes that require lots of people to do administrative work and when we did that reorganization that system allowed us to get after some of those savings. If you look at labor scheduling which we’ve rolled out to all of our front-end teams, again that’s not only helping us make sure that we’ve got the right team member there when we need to have this sale but ultimately we’re not dealing with situations as scheduling team members when we don’t need to have them there and it's only just been more efficient with that labor. We’re going to continue to roll that out to all of our teams over the course of the next year or so and that’s something that these solutions also allow us to put better process in place, standard operating procedures, labor standards and so allows us to measure our productivity and it’s been great for team members as well because we put a structure in place that allows them to get the basics the foundations done and allows them to free up more time to focus on what hopefully is great about it, it’s team member innovation and some of the entrepreneurial things that they get to do on creating a great customer experience.

Rupesh Parikh

One last technology question, so we clearly saw the various elements of your Affinity program whether it’s the pilot test or the digital coupons program, can you help us understand the infrastructure analytics on Whole Foods has right now that support those loyalty card program and how quickly you can actually use that data to help down better sales and profitability.

John Mackey

So the entire Affinity platform is actually out there production live and we really don’t have a lot more investment necessarily to do in that particular space and then one is reporting the things you mentioned, the Philly Pilot will support Dallas, it’s supporting the 365 at the new program as well as digital coupons. It’s all if you will the same CRM solution we’ve just got different facades for some of those different experiences right now. We’re actively using that data to inform how we’re looking at our business, it’s allowed us for the first time really to identify customer segments, in addition one of the great teams with the one POS solution is that it allowed us to tokenize credit card data.

So now we can take our Affinity data with our tokenized data and its helping us inform real time decisions, you take 365 as an example, some of these capabilities are going to allow us to understand what customers are shopping between the 365 stores as well as the rest of the LA stores, where is the crossover, how is that changing the overall spend. So this is something that we really do not have a lot of capabilities in the customer data space, this is really helping leapfrog us to much more and not only what the basics out there but we think some leading things as well.

Rupesh Parikh

Okay, great. So next topic I’d like to cover is new stores. So how do you feel about your remaining store pipeline in light of the weaker comps and potentially software gross margins, at least versus your recent peaks going forward and at the same time do you believe anything has changed and hope we continue opening up successful stores?

John Mackey

That’s like 3 or 4 questions rolled into one. So I mean I’ll take as much but please repeat part that’s left out. So, well going forward in the real-estate meetings that we have today, I mean it’s well known I think the Whole Foods EVA driven company, so for a very disciplined real-estate process, we spend a lot of money going through our stores, we’re making and signing a 20 year lease investing millions and millions of capital so we needed to be successful.

So with our slowdown in comps, when that ripples through and so you have to redo your sales projections overtime and so that’s already, we’ve already done that and we’ve really taken down conservative comps and they still have to have a five year hurdle rate with present value EVA figuring the cost of capital. So, does that mean some projects that would have been approved before and are not getting approved, it does mean that absolutely.

Some sites are not being, they are not being brought first of all because the Regional President, they don’t have, there is no point in bringing a project, the real-estate committee that is not going to make have positive EVA in five years because it's getting rejected, so they are a self eliminating sites, but we’re still seeing lots of good projects.

So now in the stores that we have in the pipeline we’ve gone back and we’ve looked at those with lower comp assumptions and the great thing about this real-estate discipline is that it creates a margin of safety. So are there any projects that we have in development that are not five year EVA deals based on the new comp assumptions, well yes of course there are some because there are some that were sort of just on the cusp when they got approved in the first place. So maybe there is 6 year, 7 year EVA now, that’s not a disaster for many years, 7 year was our EVA hurdle rate.

So I don’t see that, that’s necessarily a problem. The thing that we don’t know right now for Whole Foods market is going forward, I anticipate and I’m not going to answer this question, so you shouldn't ask is how many Whole Foods market stores will there ultimately be, everybody wants to be able to put that in their projection, well we don’t know. I mean we did calculations based on demographics when we came up with the 1200 figures. How many 365s are they going to be, well we don’t know have one open, we have 20 in development and bunch more we’re negotiating on.

So we don’t exactly know because we’re going to have a competitive market landscape is going to evolve and change and those type of projections are, they are educated yes based on the data that you have. So at some point in the next 6 months or 9 months is we’re going to hopefully and probably we’ll have more data on 365, we’ll come out with a new sort of updated estimates.

Yeah, I do think that 365 is such an exciting growth opportunity, I do think we’re going to have a lot of those stores, it has such superior economics because you’re taking your capital down, I mean 50% to two thirds where the Whole Foods market is and you’ve got more of a better approach and yet you’ve got a really still exciting format and you've taken all of these costs out of labor, if you get anything close to Whole Foods markets sales per square foot, economics are astounding, we’re looking at one-year, or two-year or three-year EVA deals.

And, in fact it’s doing better so far than Whole Foods Market is. It’s just one store, so the EVA returns on that Silver Lake store are going to be off the charts. So we think, we have this exciting growth story ahead and assuming that the first few stores give us anything close to what Silver Lake does than we’re probably going to roll that out very rapidly. What does that impact have on Whole Foods? Well, we don’t know yet. We just don’t have enough data.

Rupesh Parikh

Okay, great. So I have a few more questions before we wrap up. So we continue to see turnaround progress to-date. So how would you rate overall the progress that you’ve seen versus your expectations?

John Mackey

Well, I mean from internally Whole Foods point of view, we think we’re doing great. I mean in terms of we’re making great progress on everything that we promise to do and in terms of our own expectations, we’re very excited about the technology, we think Affinity is is going to be a big deal. We’re going to roll that out probably completely across the company in calendar 2017 or very close to it. We’re excited about the Infor platform. 365 we’re super excited about. And we also excited about Whole Foods Markets evolving internally.

We are in the most transformative period in the history of the company right now. We are undergoing tremendous internal transformations that are organizational, structured, the operating model that we’re using, the cost structures that we work on.

I mean the reality of competition is it helps you to get better or you perish and I think we are rising to the occasion. I know so often the only thing in the retail market anybody cares about is comps. But I mean, if our comps stay like let’s assume we have flat comps for the next 20 years and everybody grows at about 2% or 2.5%. We’re still going to have the higher sales per square foot 20 years from now, you had 0% comps. We are so far ahead and most of these metrics that even if there is some regression to the mean Whole Foods Market still going to be have the superior business model, it is going to produce a lot cash and great returns on invested capital. 365 is a whole new direction that our company can grow and evolve in.

Rupesh Parikh

Okay. And of all the turnaround initiatives, as you’ve said that you’re very excited about 365 what’s happening there. What other initiatives out there that you guys have been implementing that you’re really excited about? Is there anything else that you would point us?

John Mackey

I’ll let Jason talk about technology because something he’s particularly excited about. But I think it’s what we’re doing to transform Whole Foods Market it's the biggest story out there. And if you’ve been in our most recent LA leadership meeting, of course I’m glad nobody was there, but we’re so excited about the transformation that’s occurring. The way that we are restructuring a lot of our gain sharing, the way we are restructuring the way we operate the stores, that we think are going to keep Whole Foods Market one of the 100 best companies to work for and yet are going to take cost out of our system to better experiences to our customers. And ultimately actually we’ll produce strong comps down the road. So we’re very excited about this sort of transformation it’s hard work, but we’re all invigorated by it.

Rupesh Parikh

And Jason, on the technology side.

Jason Buechel

For me, it really is sort of the blending of how do we best serve our customers with the use their technology. You saw a few of the snippets that we’re in the video, but we’ve piloted a lot of cool new technology in 365 store, which is had a very positive reception. We have other things planned for some of the future stores and what we’re finding is we can use it as a test bed to then bring some of those things back into the rest of the organization. I would say that we have the best digital ordering system for our venues, for instance in the 365 experience right now.

Both from a technology side of it as well as customer experience piece. So what 365 is allowing us to do, as John mentioned, help transform Whole Foods Market it's a great test bed for us to try new things and as a customer, as a whole have been really engaged with a lot of things we’ve done. The electronic shelf labels, I will just point out, is one example.

We put in place, because of some of the efficiencies we could have around labor and just making the store cleaner. But customers seem to love them as well, and the attributes that we can show on them and I think there’s a lot of cool things we can take not only use that, but in conjunction with a mobile experience that can allow customer to go a lot deeper into our quality standards, into nutritional information, into product attributes, which aren’t just on the label but they are things digging you deeper into the supply chain and dietary restrictions and such. So for me allowing personalized experiences via mobile. I think will be a huge thing and just taking some of the great things we’re running from 365 back into the rest of Whole Foods Market.

John Mackey

Okay. One thing I’m excited about this Friday. Friday is the anniversary of the DCA attacks on Whole Foods Market last year that hurt our same-store sales so much. So to have a little weaker comparisons after beginning Friday. Our cost may look better, doesn't mean our sales went up, it just means the comparisons get easier. And so kind of excited about that.

Rupesh Parikh

Okay. So that wraps up our session today. I would like to thank the Whole Foods management team for joining us. And we look forward to watching some of these initiatives play out and we’re hoping for a 365 store to come to the Northeast soon.

John Mackey

They will be.

Rupesh Parikh

Thank you.

Jason Buechel

Thank you.