FORTUNE — Everyone needs to just chill out about Whole Foods
Yes, the company did fall short of analyst expectations when it reported its quarterly earnings this week. And, yes, it did cut its sales and earnings forecast again.
But despite the some 20% tumble in its stock price that followed, Whole Foods still trades at a premium to the average supermarket. Its margins are still higher, and so are its same-store-sales numbers. And it’s still the leader in the natural and organics space, which makes up a massive and growing segment of the retail market. The company believes that it can open its 500th store by 2017 and eventually grow to 1,200 stores — a growth story that Fortune detailed in a recent cover story that explored the Whole Foods phenomenon.
Fortune spoke with Whole Foods co-CEO Walter Robb about the company’s most recent quarterly results. Robb believes that some of the stock’s fall is due to a failure on the company’s part to effectively communicate its strategy during its earnings call. So he laid it out for Fortune and answered some questions.
The following are edited excerpts.
Continue to grow. We have 115 leases in hand right now for excellent sites. If you look at Brooklyn most recently, we’re going to continue to raise the level of experience and innovation that we bring to every store.
Price investments. Relative to several years ago, we’re a whole lot better around value, and customers tell us that. We have a fundamental commitment to be more competitive. When you make price investments like this, as we did at end of the third quarter and early fourth quarter last year, there’s a lag time to translate into higher sales.
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Investments in technology. We recognize that it’s not all about price. It’s also about how you’re able to meet customers where they are — in particular, the digital world. We’re working with Google in San Francisco and Los Angeles, and with Instacart in eight cities. We’re having conversations around last-mile delivery of products to your home, or ordering food online and picking it up from the store. We’re working with Square — that’s a project in a pilot phase in three different stores. We think our customers, of all supermarket customers, are the most technologically advanced so we need to take that to a whole other level.
Communicating and marketing: People are asking questions about how, given the level of competition, we’re going to reach out beyond the existing customers and acquire new customers. Historically, we have not done that. We haven’t needed to do that. We’ve grown organically through word of mouth. We’re doing a tremendous amount of marketing in social and communities, and at a store level. You’ll see us make some sort of effort at a higher level to build up and acquire customers. We’re working on something right now that I’m not prepared to share today because it’s still in the oven, so to speak.
Refresh: We’re evolving so quickly that stores that are a little bit older have an opportunity to be brought up to a more contemporary level through a targeted investment program.
Innovation and differentiation: We have thousands of exclusive products you can only get from us. You’re going to see a real focus on saying how do we continue to raise the bar on the standards of food in the marketplace, because, ultimately, I believe our role is to stand for quality of food.
Many in the media are saying we’re the same thing as Sprouts and Fairway. It’s not true. They are not us, and we are not them. I’m taking nothing away from whatever success they’re achieving — hats off to them. But don’t say it’s the same product as Whole Foods. It’s not.
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Does Wal-Mart’s push into cheaper organics concern you? Do you worry you’ll lose customers to them?
If you’re a true retailer, worrying is in your DNA. That’s the nature of capitalism, but retail in particular because any idea you put out there can be copied right away. You respect Wal-Mart
for its size and scale, but they’ve been in and out of organics before. This is not their first foray there.
I don’t think our customers particularly overlap. I don’t think it’s core to their merchandising proposition, which is essentially the cheapest food possible, and it doesn’t line up with their compensation philosophy. But, ultimately, it’s a good thing for the world, because the market continues to get bigger for organic food.
You had to revise earnings a couple of times this year. What happened? Why were you off from what you expected?
You’re absolutely right to say that. That’s true. And we own it and take responsibility for it. In retrospect, our sales slowed more than we thought and more than we foresaw. Every time we put that guidance out it represented our very best view of what we thought was going to happen. It’s just attributable to the fact that the sales were a little softer. The weather didn’t help this winter at all. There were also some one-off things. We were overly optimistic, and we have to take responsibility for that.
Your comps were up, although not as high as they have been. Do you think you’ve lost momentum, or is that momentum just not as strong as it has been historically?
If you look at the quarter, a 5% comp ex-Easter is a pretty good number. Fourteen million square feet of retail with 114 leases signed with favorable economic terms, and we had sales of $1,000 per square foot. These are good numbers. The disparity is really between where the market expects us to be — a 7% comp company — and the 5% comp company we’re at right now. Some of it is self-inflicted. That’s the biggest difference. We’re still gaining market share, just not as quickly.
–Fortune.com’s Benjamin Snyder contributed to this article.