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Whole Foods: Sales hurt by bad publicity from overcharging

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Whole Foods noted that sales growth slowed sharply in the last two weeks of the quarter ending July 5.

NEW YORK >> Whole Foods says its sales are hurting from bad publicity over its overcharging of customers in New York City.

The grocery chain known for its organic offerings noted that sales growth slowed sharply in the last two weeks of the quarter ending July 5. That was after New York City officials said an audit found the chain’s stores were overcharging customers by overstating the weight of pre-packed products — a finding that Whole Foods noted made national news. The company said sales at established locations were still weak in the current quarter.

"There’s no magic bullet for restoring whatever trust was lost," co-CEO Walter Robb said during a call with analysts and investors.

Robb noted the company has taken actions to ensure the overcharging doesn’t happen again. That includes training for workers and an offer to customers that products will be free if the prices are not accurate and not in their favor.

After adjusting for the timing of Easter this year, the company said sales rose 2.6 percent at established locations in the first 10 weeks of the quarter. The figure fell to 0.4 percent in the final two weeks of the period after the NYC audit became public.

In the first three weeks of the current quarter, the figure was up just 0.6 percent.

For the full fiscal year, Whole Foods now expects sales at established locations to rise in the low single-digit percentages, down from the previous forecast of growth in the low- to mid-single digits.

Whole Foods Market Inc., based in Austin, Texas, is trying to find new ways to drive up sales as organic foods become more widely available. At the same time, it’s also trying to appeal to a broader audience by shaking its "Whole Paycheck" image and offering more affordable prices.

In May, the company said it would open a new chain of smaller stores with lower prices starting next year. To emphasize the affordability, the chain will be named after the company’s 365 house brands.

For the third quarter ended July 5, the company earned $154 million, or 43 cents per share. That included an expense of a penny per share in relation to California’s new paid sick leave law.

Analysts expected 45 cents per share, according to Zacks Investment Research.

Total revenue was $3.63 billion, also short of the $3.7 billion analysts expected.

A year ago the company earned $151 million, or 41 cents per share, on revenue of $3.38 billion.

Shares of Whole Foods dropped 10 percent to $36.90 in after-hours trading.

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