Whole Foods is debuting lower prices in its stores Wednesday, and former Walmart U.S. President and CEO Bill Simon doesn't expect that the strategy will boost its sales.
Whole Foods, known for its organic selection and premium prices, last made major price cuts in November 2017 after being acquired by Amazon. Simon said the new lower prices on select items, announced earlier this week, likely show the retailer is working through the kinks of the competitive grocery market.
The recent price cuts are probably an "indication that [Amazon's strategy] hasn't worked the way they expected it to," Simon, a frequent critic of Amazon, told CNBC's "Squawk on the Street" on Wednesday.
In response to a request for comment on Simon's remarks, an Amazon spokesperson said: "That's simply not true. Price reductions at Whole Foods Market have been successful and feedback from customers has been overwhelmingly positive — in fact customers have already saved hundreds of millions of dollars through lower prices and Prime member deals."
Even with the announced average 20% off certain items, Whole Foods still has higher prices than other national grocery retailers. A recent analysis from Morgan Stanley revealed that a basket of items at Whole Foods costs $198, while it's $172 at a conventional grocery store and $157 at Kroger.
A separate analysis from J.P. Morgan, which looked at online prices for a shopping list of 117 items, said prices in March broke a three-month streak of month-over-month declines, with the average price change up 1.8%. That makes it the highest price increase since the survey began, according to the report.
However, two large retailers reported decreasing prices: Walmart and Whole Foods. More decreases could be ahead in April's report given Whole Foods' price cuts.
In March, Whole Foods' pricing was down 1% month over month, according to the report. It follows February's 4% price increase.
Walmart showed the most consistent decline in online pricing. Online costs were down 1% this past month, and J.P. Morgan said it has been steadily declining over the past year.
"No other grocer in our survey has invested so consistently in pricing," according to the report.
Walmart did not immediately respond to a request for comment.
Prices for Target were reportedly down slightly, but no specific percentage was reported.
Kroger saw its pricing rise 2%, which "wiped out the past 4 months' price investments," the report said. Retailer Sprouts also hiked prices by 3%, and analysts said that was as its price increases normally follow declines.
Spokespeople for Kroger and Sprouts did not immediately respond to requests for comment.
Groceries, especially with a focus on the produce market, are a difficult market to enter, said Simon, who was president and CEO of Walmart U.S. from 2010 to 2014. Acquiring a grocery chain is likely the hardest thing Amazon could have chosen to do, he said, adding that it would have been easier to buy a national retailer such as Walgreens or Target if it wanted to expand its physical footprint.
Consumers are less likely to flock to one of Whole Foods' 480 locations over this price reduction, Simon said, because customers seeking low costs usually live near less-expensive retailers. Whole Foods had originally been selective in its targeted consumers and physical footprint, he said, so its current customers aren't likely to note a huge change in prices.
"[Products] are still expensive," he said. However, that's not to say this won't benefit the company, adding that Amazon "got the lift they're looking for from this price action, because it's been covered in the press."
But Simon said he wouldn't be surprised if this was part of a larger plan under Amazon CEO Jeff Bezos.
"I still think there may be something that Jeff's got up his sleeves with this digital, physical integration that we haven't seen yet," Simon said. "I don't think we've seen success yet with it."