John? Is that you?

What will you be speaking about next week in Princeton?

Subj: Re: Deb
By: rahodeb
Date: 11/09/05 11:53 am

hubris,

You are really being bold in your predictions aren't you? "I predict the company will announce same store sales growth around 10%, but MAY guide lower. If they do not guide lower this quarter they almost certainly will next quarter." So, if Whole Foods announces another double digit same store sales quarter (which would be 8 in a row) you'll be right and if they announce same store sales less than 10% you'll be right too. They "MAY" guide lower too you say? That means they "MAY NOT" guide lower too. Either way you're safe in your prediction. Just to further hedge your "bold" prediction you give yourself another out by saying that they will guide lower next quarter if they don't do it this quarter. Let me ask you this: what same stores sales number would Whole Foods have to produce before you admitted that you were wrong? Is there any such number?

Your simplistic reasoning on same store sales reminds me of the people who argue that we are about to run out of oil simply because it is a finite non-renewable resource. If we don't run out in 10 years then surely it will be in 20 years or 30 years or sometime anyway. Guess what? We'll never, ever run out of oil because as prices increase new technologies and new sources of supply become more cost effective and substitutes (solar, wind, hydrogen, synthetic, coal,fuel cells, etc.) replace it in use.

Here are several reasons why your reasoning is wrong on Whole Foods same store sales:

1. Let us be clear up front that Whole Foods same store sales will not increase in double digits "forever". That is such a silly argument which of course can never be proven wrong by taking the time horizon out to "forever". Whole Foods will not have same store sales in double digits "forever", but they might for the next decade. All the reasons below apply to the next decade only--not "forever".
2. All stores of course have some theoretical limit to how high their sales can be due to the fact that at some point no more people can be jammed into the store. However, long before that theoretical limit is reached, Whole Foods will either relocate the store or cannibalize it with a new store nearby. Whole Foods has been relocating their smaller stores to larger locations for many years now and is continuing to do so. So while there may be some theoretical limit on any particular store sales, in reality that number is never reached.
3. Average store size in development (over 60% of total current sq. footage open) is 55% greater than the average store open today. These larger stores will therefore be able to grow their sales much higher than the current stores open, thus continuing to produce double digit comps far into the future (at least a decade).
4. Whole Foods stores take many, many years to mature and produce double digit same store sales into their second decade of life. Whole Foods is going to open a boatload of new stores over the next 10 years and these young stores will ratchet up average same store sales considerably over the next decade.
5. Whole Foods is continuing to improve faster than any of their competitors and the large macro trend towards better quality food and healthier living is driving new converts into their stores.
6. Whole Foods has averaged double digit comps for the last 5 years and over 9% over the last decade. They not only don't show any signs of comp sales slowing down, but have accelerated it over the last 2 years.

Conclusion: Whole Foods will continue to produce very strong same store sales for many years to come--probably close to double digits for the next decade--long after you have come and gone from this Board. Sometime after 2015 you can come back on this Board and say that you were right because Whole Foods same store sales didn't in fact continue in double di