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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Handquarters.
Speaker 1: I'm Charlie pel Mixed picture for US equities, the dowin
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Speaker 1: Now let's head right over to the First Word Breaking
Speaker 1: news desk for today's afternoon call, and here's Bill Maloney.
Speaker 1: Good afternoon, Charlie MANUS averages are quiet today, with the
Speaker 1: Dow currently down fifteen points, sps are down to point,
Speaker 1: NAZAC is higher by three, the small cap six hundred
Speaker 1: gains four points, and the US ten yield at one
Speaker 1: point five percent. STP sector leaders included real estate, energy,
Speaker 1: and telecom, while consumer staples and healthcare led to the downside. Doubt.
Speaker 1: Transports outperform rise one point three percent, as airlines gain
Speaker 1: and as a botech's climb fifteen and the vix is
Speaker 1: a little changed. DALLA leaders included IBM, American Express and
Speaker 1: Nike Retailers, Home Depot and Walmart fell one percent. Western
Speaker 1: Digital searched as much as fourteen percent after raising Q
Speaker 1: one views. Nintendo searched as much as thirty percent on
Speaker 1: news the Super Mario mobile game is coming to the iPhone.
Speaker 1: Whole Foods fell as much as seven point two percent
Speaker 1: after spouts, Farmers Market cut its use, and HD supply
Speaker 1: fell twelve percent after its results after the Bell Tonight
Speaker 1: look for earning story HeLa Packard Enterprise and Variant Systems
Speaker 1: live from the first Breaking news desk on Bill Maloney. Charlotte,
Speaker 1: all right, thank you very much, Bill Maloney, and to
Speaker 1: hear live breaking news over your Bloomberg type squaw guess
Speaker 1: you guess Q you a w K on your terminal.
Speaker 1: I'm Charlie Pelof. That's the bloom Bird business splash you're
Speaker 1: listening to. Taking Stock with Kathleen on Bloomberg Radio. Cutthroat competition,
Speaker 1: falling food prices. All of these are hitting some of
Speaker 1: the biggest names in the grocery business, including today Whole
Speaker 1: Foods markets questions about its expansion plan and also the
Speaker 1: share price down a dollar sixty nine cents, the share
Speaker 1: to nine dollars and one cent after Sprouts Farmers Market,
Speaker 1: competing specialty foods retailer, reduced its same store sales guidance,
Speaker 1: making investors wondering about what's going on. A Whole food
Speaker 1: joining us now to dive into this is our Bloomberg
Speaker 1: News reporter Craig Jemona Craig, Welcome to the show. Thanks
Speaker 1: thanks for having me. So, first of all, put this
Speaker 1: in context at a time when Whole Foods has announced
Speaker 1: expansion plans. You want a terrific story starting in Chicago.
Speaker 1: Just just set the stage with that, what's happening there
Speaker 1: and why. It just personifies illustrates what's going on in
Speaker 1: the terms of the Whole Foods challenge. So there's been
Speaker 1: questions for a while about whether or not Whole Foods
Speaker 1: can never get to twelve stores. That was the number
Speaker 1: that John Mackie, the founder, put out there a couple
Speaker 1: of years back, and there's just a lot of people
Speaker 1: that have thought for a while that that's an aggressive
Speaker 1: target because is there really room for that many high
Speaker 1: end stores. So, you know, we used an analyst note
Speaker 1: talking about a store outside of Chicago that was next
Speaker 1: to a dress barn and a shoe carnival, and just
Speaker 1: questioning whether this was sort of emblematic of is this
Speaker 1: the right place for a Whole Foods. You know, they
Speaker 1: do well in Brooklyn. The end of the store here
Speaker 1: near our office in Midtown East in New York City
Speaker 1: is always packed. All the ones in New York City,
Speaker 1: from what I can tell, are packed. But as they
Speaker 1: expanded to other parts of the country, they've sort of
Speaker 1: run into trouble. Now they run into trouble because there
Speaker 1: are copycats or because their prices are demonstrably higher than
Speaker 1: the competition. Both both, you know, the copycats have I
Speaker 1: think put a spotlight on the fact that their prices
Speaker 1: are higher. So for years, Whole Foods created the organic
Speaker 1: food market in this country. They built it up and
Speaker 1: for years the margins were soaring. Obviously, Walmart and Kroger
Speaker 1: saw this and said, well, we can sell organic food too,
Speaker 1: and we can do it cheaper. So now people are saying,
Speaker 1: you know what, I'm not gonna pay twenty send premium
Speaker 1: that Whole Foods. I'm gonna go to Kroger by private
Speaker 1: label stuff. Maybe I'll go to the Farmers Market a
Speaker 1: little bit. There's just other places to get organic food now,
Speaker 1: and it's really hurt Whole Foods. So what do you
Speaker 1: do if your Whole Foods? Because I couldn't read a
Speaker 1: few more everybody's follow the lead and and um my
Speaker 1: neighborhood Westside Market. You know, you look at the last
Speaker 1: year the number of stores like that of all kinds
Speaker 1: who carry grass fed beef, who carry not just cage
Speaker 1: free eggs, but you know, free rowing, pasture raised, it's
Speaker 1: all kinds of product. It's a really upward sloping right.
Speaker 1: There were years where that Whole Foods was the only
Speaker 1: place to get that kind of thing. Now it's ubiquitous
Speaker 1: and so people and it's cheaper at other places. So
Speaker 1: the thing that the big thing they're doing is this
Speaker 1: new chain called three sixty five by Whole Foods. It's
Speaker 1: kind of targeted at millennials. The stories are cheaper to build,
Speaker 1: their smaller, cheaper to operate. They've been gushing about the
Speaker 1: economics of that store model. Is only two open so far,
Speaker 1: one in l A, one in Oregon. Another one is coming,
Speaker 1: i believe next week in Washington State and in Bellevue
Speaker 1: and your Seattle so that's the thing they've hit on
Speaker 1: that they think it's working. So far, haven't said much
Speaker 1: about the results. Were expecting that November when they were report.
Speaker 1: But maybe they can get to twelve hundred by doing
Speaker 1: six d three sixty five and six hundred flagships. But
Speaker 1: the question is they've said to this point twelve hundred
Speaker 1: stores plus three sixty five, so a lot of questions
Speaker 1: about whether they can get to that total. I was
Speaker 1: also looking at the stock of United Natural food shares
Speaker 1: down about four and a quarter percent, because they are
Speaker 1: the biggest supplier right the Whole Foods Right there there
Speaker 1: are the large The Whole Foods is the largest customer.
Speaker 1: I think I could be you know, wrong here on
Speaker 1: a little bit, but I believe the revenue for United
Speaker 1: Natural comes from Whole Foods. It's a gigantic customers. So
Speaker 1: any day that you see Whole Foods up or down,
Speaker 1: United Natural tends to move with them. Sprouts is the
Speaker 1: same way. You know. Sprouts is two stores, so a
Speaker 1: little smaller than Whole Foods, but it's an organic natural retailer.
Speaker 1: They cut their forecast this morning. That just leads people
Speaker 1: to again, people are very sensitive about Whole foods right now.
Speaker 1: So any any little blip, any negative news I think
Speaker 1: pushes the stock down. Can you talk to us a
Speaker 1: little bit about Starbucks? First of all, I was like, whoa,
Speaker 1: they're gonna Stevia, you know, alongside the splendor to there
Speaker 1: you know, there their coffee customers. And then we've got
Speaker 1: the ceo endorsing Miss Hillary Clinton for president. That's right there.
Speaker 1: He was at an event this morning of breakfast in
Speaker 1: New York City, rolling out a series of videos that
Speaker 1: they're calling up standards. You know, he hired a former
Speaker 1: editor from the Washington Post to create this sort of
Speaker 1: almost like a news operation for him in Starbucks. So
Speaker 1: they're saying, you know, he basically said, it's been very
Speaker 1: divisive election season and we need change. We can't do this.
Speaker 1: He called Donald Trump a divisive candidate. So it's always
Speaker 1: a little surprising for the CEO of a big company
Speaker 1: like that to wait into politics. Really haven't seen that
Speaker 1: much of it, but he he did come out and
Speaker 1: said he supported Hillary Clinton. He also sort of headed
Speaker 1: a bit on whether he would ever run. A lot
Speaker 1: of people think of him as a potential candidate. He's
Speaker 1: ruled that out prior, but today he said, never say never.
Speaker 1: Now is not the right time. But I'm a young man,
Speaker 1: so you know, he's sixty three years old. But some
Speaker 1: people think that Schultz is setting himself up for a
Speaker 1: run at some point. Any chance that we're going to
Speaker 1: see Starbucks move into other retail establishments. I mean, there
Speaker 1: are a lot of malls which are going through a
Speaker 1: big transition. He talked about that. He talks about the pressure.
Speaker 1: You know, there's just less people out brick and mortar retailing.
Speaker 1: You know, you don't go out on Saturday and shop
Speaker 1: the malls pick up your Starbucks. They've invested heavily in
Speaker 1: e commerce. You know, he likes to call it a
Speaker 1: tech company inside of a coffee company. So he was
Speaker 1: asked that question this morning and kind of said that
Speaker 1: the e commerce is how they're going to pick up
Speaker 1: for that. So you're still you know, you're out and about.
Speaker 1: Maybe you're not visiting traditional retailers. But I guess his
Speaker 1: hope is that people don't ultimately just sit on the
Speaker 1: couch and you know, shop online all day every day.
Speaker 1: That would, you know, sort of remove some of the
Speaker 1: coffee customers. Thank you very much for joining us. Craig Giamona.
Speaker 1: He is consumer reporter for Bloomberg News. You can follow
Speaker 1: him on Twitter at stick a writer. That's s t
Speaker 1: I k A w R I t e R. This
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Speaker 1: the sizzle they need to do so that's coming up
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