Whole Foods: Busting the 'Whole Paycheck' Image?

I live across the street from Whole Foods, and needless to say, that's where I spend a good deal of money—so much that the store might as well take an automatic deduction from my paycheck. Usually, I turn to Whole Foods for things like tofu and seitan for my vegetarian significant other, produce, and craft beers that are hard to find anywhere else. Although my intention is to shop for the bulk of my groceries at a regular store, I inevitably go the lazy route and end up buying a $6 bag of chocolate chips.

So naturally, I'm interested in how their “Whole Deal” program is working out. The store has been under the gun in this weak consumer environment, so they've been pushing the idea that they're budget friendly, using shopping-on-the-cheap tours of the store and free recipe books that incorporate some of their less expensive products.

According to the company's latest earnings release, they've seen a boost in sales from products promoted in the Whole Deal program—i.e. their 365 brand—but the bulk of that has come from perishables. CEO John Mackey says that's a sign of customers trading down, and while the company won't change perceptions overnight, they think their efforts are gaining traction.

The chain is also determined to keep growing and plans to continue opening stores (about 15 in the next year, according to Clusterstock.) Is this a good idea, given that more cash-strapped consumers are opting out of organics?

I recently talked with Jack Robinson of the Winslow Green Growth fund, a long-time Whole Foods shareholder (the company was not in Green Growth's latest portfolio, however), about the company's strategy. His take is that a great deal of Whole Foods difficulties stem from the fact that natural and organic foods are now being sold through traditional supermarkets, as well as farmer's markets and mom-and-pop shops that deal in local produce. On the growth front, he says: "Their larger stores have lost their warmth. But the last few stores they've opened have been much smaller in scale, and I think they're returning to their roots—I think over time, it will pay off."

Whole Foods could really use a boost. The company's stock has cratered over the past year, falling from $50 a year ago to just $10 today.