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Whole Foods makes 'difficult but prudent' call to close 9 stores, moderate growth

Whole Foods Market said Wednesday it will close nine stores in the second quarter as it abandons its goal to open 1,200-plus stores.

"We're going to continue to grow, but I think we're going to be a more disciplined growth company than we have been in the past," John Mackey, co-founder and CEO of Whole Foods, told analysts on the company's first-quarter earnings call.

Mackey called the closing of the nine stores a "difficult but prudent decision" and said the company will now have more targeted site selection and "continued moderation in ending square footage growth." He said these moves together will "result in a healthier bottom line, increased cash flow and higher returns."

Still, the Texas-based company also said it welcomed 14 new stores in the first quarter, including two outlet relocations.

Mackey added the retailer remains "optimistic about the future growth potential for our 365 format but we want to see how this next round of stores perform before getting more aggressive."

The natural and organic foods grocer said that comp sales in the fiscal first quarter ended Jan. 15 experienced some weakness around the election time and added that the current second quarter will be impacted by a calendar shift in Easter.

Meantime, the CEO said the company has seen stability in comps over the last three quarters with "modest traffic improvement from Q4 to Q1. During the quarter [ending Jan. 15], we saw wide swings in comps on a weekly basis as is frequently the case in Q1 due to weather and holiday shifts."

In particular, he said Whole Foods experienced "a strong start for the first 5 weeks" of the first quarter, then indicated that "comps dropped off sharply in the pre- and post-election weeks." Also, the CEO said the company "showed nice lifts over Thanksgiving and Christmas weeks."

The company's second quarter also is expected to be impacted by the shift in Easter from Q2 last year to Q3 this year.

Finally, the CEO said the competitive landscape continues to be "very dynamic" and added that there remains uncertainty about how long the deflationary environment will continue. As a result, he said the company was resetting comp guidance for the full fiscal year.

"What has become clear is that we don't want to compete in the race to the bottom as consumers have ever-increasing choices for how much and where they shop," he said.