Whole Foods To Axe 1,500 Jobs To Improve Cost Structure

Whole Foods Market decided to reduce its workforce by 1.6% or approximately 1,500 jobs over the next eight weeks. The stock price of the company slightly declined to $31.04 per share at the time of this writing, around 1:03 PM in New York.

According to the natural and organic foods supermarket operator, the workforce reduction is part of ongoing commitment to lower the costs for customers and to invest in technology upgrades while improving its cost structure.

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Whole Foods Market said it would cut jobs in its stores and regional operations, and expected to manage the reductions through natural attrition. A significant number of the affected employees can apply for new positions across company because it has almost 2,000 new positions. They can also apply for new jobs created from the company’s more than 100 new stores in development.

Whole Foods offered several options to affected employees

In a statement, Whole Foods Market co-CEO Walter Robb emphasized that the company added more than 9,000 new jobs over the past year and created almost 35,000 jobs over the past five years.

According to him, cutting jobs is a “very difficult decision” for them, and they are “committed to treating affected Team Members in a caring and respectful manner.”

Mr. Robb added that they offered several options to the affected employees including a transition pay, generous severance, and the opportunity to apply for other jobs. Furthermore, they will receive full payment for the next eight weeks as they decide which option to choose.

“We believe this is an important step to evolve Whole Foods Market in a rapidly changing marketplace,” said Mr. Robb.

Whole Foods Market needs to address pricing issue

Ajay Jain, a senior analyst at Pivotal Research Group, told Reuters that the management of Whole Foods Market “had no choice but to address the pricing issue with more urgency.” He added that the situation underscored their view that the company is “not in a position of strength competitively.”

Whole Foods Market is currently facing strong competition from specialty retailers in the United States including Sprouts Farmers Market, Fresh Market, and Trader Joe’s. The company is also competing with Kroger and Wal-Mart Stores.

The New York Department of Consumer Affairs previously revealed that it was investigating Whole Foods Market after finding that some of its prepackaged foods at its nine stores in New York City costs too much.

David Magee, an analyst atSunTrust Robinson Humphrey estimated that Whole Foods Market could save 20 basis points in selling and general expenses over the next two years assuming that the job cuts include full-time positions.

Whole Foods Market is planning to open smaller, more value-focused and “technology oriented” stores next year.