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Exclusive: Whole Foods drops small-format 365 store name

Krystal Hu
(Yahoo Finance/David Foster)
(Yahoo Finance/David Foster)

Whole Foods 365 stores will soon become a thing of the past.

The grocery chain owned by Amazon plans to convert all of its existing 365 stores into regular Whole Foods stores by the end of this year, Yahoo Finance has learned. The move follows its decision to stop expanding the smaller format stores, revealed in an internal announcement in January.

There will be changes in store signages, product assortments, and back-end distributions, according to people familiar with the plan. The transformation will not be too disruptive of current operations. A Whole Foods spokesperson said all 12 Whole Foods Market 365 stores remain open in an emailed statement to Yahoo Finance.

At about 25,000 to 30,000 square feet, 365 stores are smaller than conventional Whole Foods supermarkets, which are around 40,000 square feet on average. Two 365 stores opened just three months ago in Atlanta. Given their size, the newly converted Whole Foods stores will be smaller in footprint and may lack features like a full-service meat counter. Both Whole Foods and 365 stores carry the popular private 365 Everyday Value brand.

“It’s logical just to convert these few stores into Whole Foods, keep locations that have already got the leases on them,” Phil Lempert, a grocery industry analyst at Supermarket Guru, told Yahoo Finance. “I think that it's smart to just have a singular focus.”

Some small-format stores didn’t perform well

Whole Foods’ enthusiasm about 365 stores has shifted since Amazon bought the grocery chain in August 2017. One month prior to announcing the deal, CEO John Mackey told investors there were 22,365 stores under development. Only nine have opened since then.

Some of the originally anticipated Whole Foods 365 stores have already been turned into full-fledged Whole Foods stores. The latest Whole Foods store, expected to open on March 6 in Evergreen Park, Illinois, was supposed to be a 365 store.

“I believe they had a contract before the acquisition. And things slowed down a little bit because of the acquisition. And when they regrouped, they came back out as a regular Whole Foods,” James Sexton, mayor of Evergreen Park, told Yahoo Finance. The city government issued a license for a grocery store in 2017, leaving the renter and landlord to decide what to do with it.

365 brand organic peanut butter in the new Whole Foods' 365 Fort Greene in the Fort Greene neighborhood of Brooklyn in New York on opening day Wednesday, January 31, 2018. Located near the Barclays Center the 30,000 square-foot store, their first on the East Coast, is a lower-cost alternative Whole Foods Market selling their 365 brand as well as merchandise from other food manufacturers. (�Photo by Richard B. Levine)
365 brand organic peanut butter in the new Whole Foods' 365 Fort Greene in the Fort Greene neighborhood of Brooklyn in New York on opening day Wednesday, January 31, 2018. (Photo by Richard B. Levine)

Mackey said the main reason to move away from the smaller, value-based store concept is the price drop at regular Whole Foods stores. “Whole Foods Market’s leadership independently made this decision,” said a Whole Foods spokesperson in January.

Lempert attributed the shift to the disappointing performance of the small format stores and Amazon’s overall strategy. In 2017 October, Whole Foods closed a 365 store in Seattle citing weak performance, only one year after its opening.

“Amazon is focused on making Whole Foods for the general population not just an upscale more healthy minded population. They’re focused on Amazon Go, those stores, and they’re focused on delivery,” Lempert said, referring to Amazon's cashierless convenience stores. He added, referring to 365 stores, "So, it really didn’t have a place to fit in what I think is the plan that Amazon has.”

Do you shop at Whole Foods? Share your thoughts with Krystal Hu via krystalh@yahoofinance.com

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