May 6, 2015
Executives
John Mackey - Co-CEO Walter Robb - Co-CEO A.C. Gallo - President Glenda Flanagan - EVP & CFO Jim Sud - EVP, Growth & Development David Lannon - EVP, Operations Ken Meyer - EVP, Operations Cindy McCann - VP, IR
Analysts
Vincent Sinisi - Morgan Stanley Charles Grom - Sterne, Agee Ken Goldman - JPMorgan Meredith Adler - Barclays Rupesh Parikh - Oppenheimer Stephen Grambling - Goldman Sachs Jerry Gray - Cowen Karen Short - Deutsche Bank
Operator
Good day and welcome to the Whole Foods Second Quarter Earnings Call. At this time, all participants are in a listen-only mode.
Later you will have the opportunity to ask questions during the question-and-answer session. [Operator Instructions] It's now my pleasure to turn the conference over to Vice President of Investor Relations, Cindy McCann.
Please go ahead.
Cindy McCann
Good afternoon and thank you for joining us. On today’s call are John Mackey and Walter Robb, Co-Chief Executive Officers; A.C.
Gallo, President; Glenda Flanagan, Executive Vice President and Chief Financial Officer; Jim Sud, Executive Vice President of Growth & Development; and David Lannon and Ken Meyer, Executive Vice Presidents of Operations. As a reminder, all forward-looking statements on this call are subject to risks and uncertainties that could cause actual results to differ materially from the expectations and assumptions discussed today.
This may be due to a variety of factors, including the risks outlined in our Company’s most recently filed Form 10-Q and 10-K. Our press release and scripted remarks are available on our website.
I’ll now turn the call over to John Mackey.
John Mackey
Thank you, Cindy. Good afternoon everyone.
In Q2, our sales increased 10% to $3.6 billion driven by comps of 3.6% and square footage growth of 11%. We opened 11 new stores, including three relocations and three former Dominick’s locations.
There are many moving pieces, so we can’t say definitively what caused the moderation in comps during the quarter. We do know that we are not immune to the larger macro environment, and the exploding demand for natural and organic products has resulted in increased competition from many different channels.
In addition, severe weather and cannibalization had a larger impact in Q2 than in Q1. We are on track to report our sixth consecutive year of record new store openings.
A high percentage of our accelerated growth is in existing markets, which is driving market share gains but also producing a drag on comps from higher cannibalization in some cases. We saw this in Austin and Boston last year and we're seeing it in Chicago and Florida now.
Keep in mind that our average weekly sales per store are over $720,000, so even when a store gets hit, it is still highly profitable and continues to produce strong returns on invested capital. The store might report slower growth for a year, but after anniversarying the new store opening, it regains momentum quickly.
Gross margin, excluding the non-routine supplier credit, declined 12 basis points due primarily to higher cost of goods sold as a percentage of sales. While we do our best to estimate the impact of our value efforts, it is more art than science, and customer reactions can vary from our predictions.
In addition, strong execution on the buyside helped offset our investments to a greater degree than we had forecast. For the fiscal year, we still expect a greater year-over-year decline in gross margin, excluding LIFO, than we saw last year.
SG&A improved 29 basis points due to leverage in salaries and benefits. We are pleased with our continued expense disciplines particularly given comps were light of our expectations.
Turning to new stores, for the last eight quarters, our new store class has averaged 36 stores with sales per gross square foot over $700, translating to productivity levels of 80% on a weighted square footage basis. Comparable stores less than two years old have averaged 16% comps and, most importantly, a 13% return on invested capital, well in excess of our weighted average cost of capital.
Our EVA-based approach to site selection allows us to consider markets from Olathe, Kansas to New York City. While our expectations for sales productivity and operating expenses vary depending on the type of market and other factors, when balanced with the appropriate level of capital investment, a wide variety of markets can produce healthy returns for our shareholders.
We are reaffirming our fiscal year targets. Comps have averaged 2.8% over the last five weeks, up from 2.4% for the last nine weeks of Q2 excluding Easter.
We're encouraged by this improvement and are continuing to lean into the changing marketplace, moving forward with our investments in value, marketing, and technology. We continue to see unit lift from the lower produce pricing we have implemented in several markets.
We added more market in Q2 and expect this to expand as the year progresses. We continue to believe more competitive produce pricing will greatly benefit our overall value perception.
We are continuing our successful Value Matters brand advertising campaign. Beginning next week, this next round will focus on digital marketing, including online video, digital display ads, and mobile and social ads.
In Q2, our average weekly Instacart sales increased to $1.5 million, we continued to be the leading Apple Pay retailer with over 3.3 million transactions, and surpassed four million followers on Twitter. Given those metrics, it’s not surprising that in our brand tracking results, digital outperformed with our key demographics.
We plan to follow up this fall with an exciting new Values Matter campaign, which will include national television and digital. Now turning to our other news.
At our Investor Conference in February, I said we would be making some pretty exciting announcements over the coming months reflecting our ability to learn, grow, and evolve. Today, we're excited to announce the launch of a new, uniquely-branded store concept unlike anything that currently exists in the marketplace.
Offering our industry-leading standards at value prices, this new format will feature a modern, streamlined design, innovative technology and a curated selection. It will offer convenient, transparent, and values-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high quality, fresh food at great prices.
We are building a team to focus exclusively on this new concept and are already negotiating leases. We plan to begin opening stores next year, and given the more standardized design and product assortment, we expect a fairly rapid expansion from there.
Over the past several years, we have explored the idea of new formats several times but never felt the time was right, particularly given our accelerated growth plans. That issue is now behind us, as we have successfully increased our new store openings for six years.
In addition, we now have a successful track record of opening some smaller format stores with a lower cost structure. The Whole Foods Market brand has helped lead the shift in consciousness toward fresh, healthy foods by offering the highest quality, broadest selection, and best customer service, and we believe we can still triple the number of Whole Foods Market stores in the United States.
At the same time, we also see an opportunity to leverage our long history of retail innovation and extend our reach in the marketplace beyond 1,200 stores. We want to underscore we see this as an “and” to our Whole Foods Market brand, and not an “or.”
We believe the growth potential for this new and complementary brand to be as great as it is for our highly successful Whole Foods Market brand. This is all we are going to reveal today but we look forward to sharing more details about this exciting new venture sometime before Labor Day.
We will now take questions. Our call will end at 4:45 Central time today to allow more time for questions.
Please limit yourself to one question at a time so that everyone has an opportunity to participate. Thank you.
Operator
[Operator Instructions] We can take our first question from Vincent Sinisi with Morgan Stanley. Please go ahead.
Vincent Sinisi
Hi, good afternoon. Thanks very much for taking my question.
Just wanted to of course ask just firstly on the sales deceleration later in the quarter, I know you said it's hard to say exactly or try to get gauge exactly what happened, but can you maybe give us a sense for directionally how comps were not only in those heavier cannibalized markets, but also maybe those versus some of the other markets? Was outside of those?
Was it pretty consistent or did you see any notable changes?
Glenda Flanagan
Hi, this is Glenda. Yes, we did see a broad based decline across many markets in the period from the early on in the quarter to later in the quarter.
Most of that being in transaction count and then with the tick up that we have seen in the last five weeks that was in transaction count also. So above the decline and then the uptick now have been in transaction count.
John Mackey
Oh, deceleration decline.
Vincent Sinisi
Okay. And then the one quick follow-up if I may, realizing that it's early for this new concept, but can you just give us kind of in the order of strategic or a qualitative possession around how you kind of plan the balance back of upcoming concept with of course all the initiatives that you're currently putting into and what you're still early stages in the current stores.
Thanks very much.
John Mackey
So there is a lot of that question. We're really going to stick to share -- I think this biggest rational of this market place continues to grow and explode and I think we think by creating a second growth vehicle for our company, we can broaden the accessibility of fresh healthy foods and we will continue to be leaders in that sense.
With respect to the resources, we said today, we're creating a team right now and that's already in process including the leadership in the rest of the team members to be able to focus on this and so we're adding additional resources to be able to hit the gate running on this. We're going to have a lot more to share with you before Labor Day.
We're going to have a special event where we'll communicate all the details about this in much more particulars at that time, but that's pretty much what we're going to say today.
Walter Robb
Yes, no I think a couple things we could maybe emphasize is that we do think this is a very unique concept. It's not like anything else that's out there right now.
So we think we're going to come up with a complementary brand and strategy that fits well alongside of Whole Foods Market brand. There are things we can do with the Whole Foods Market brand.
We can continue to do a better job on our expense discipline. We can continue to be aggressive in gradually lowering some of our prices, but the Whole Foods Market brand stands for the highest quality, the best selection, the highest degree of service.
So there is -- that brand can bend a little bit, but we can't break it. We're not willing to break it, but we think we can create a complementary brand that can go places, the Whole Foods Market brand cannot effectively go.
So we're kind of trying to panelize people a little bit today, but it will be a bigger reveal later on before Labor Day. We will give you the name.
We will give you some more details about it. We're very excited about it, but we knew this information is going to leak out because we're negotiating leases and so then if it leaks out, then we're in we ought to deny it.
So it's better just to be proactive, get it out there. yes, We're going to open a new concept store, a new brand.
It will open it in 2016 and we're about to sign, or are signing leases right now. So the information is out there.
That's all we're really going to say about it today. Thanks very much.
David Lannon
So I am really excited about the creative team, the creative startup team we’re putting together to work on this new concept, we’re taking some of the sharpest brightest folks at Whole Foods Market and they’re going to working exclusively on this with us and like as John said, it's truly going to be an innovative retail concept.
Vincent Sinisi
Okay. Thank you.
Operator
And we can take our next question from Charles Grom with Sterne, Agee CRT. Please go head.
Charles Grom
Thanks. Good afternoon.
Just back in February you talked a lot about some of the initiatives you were planning to rollout throughout the year, loyalty, the price efforts the remodels just wondering if you can talk a little bit about the price efforts? Can we dig a little bit deeper into each of those three drivers and I guess, how much are you assuming that your business gets better as we progress throughout 2015 from those efforts?
Thanks.
Walter Robb
Hi, Charles this is Walter. Yeah, the three buckets we reference to this call basically our pricing, the marketing and the technology along with our stepped up efforts around bringing down our cost structure.
So in each of the areas as we referenced today, we're continuing the efforts in produce and within the frame of brining the gross margins down sequentially year-over-year like we talked about. With respect to the marketing, I think we're reaffirming the values matters being successful starting next week.
The whole new digital values matter rolls out with social mobile ads, digital ads and I think what you will see this time is a better connection to actually the shopping ask is which is say through, it will connected to instant card that will connected to affinity app will connected to news letter so try to work on the conversion from those ads and so we’re continuing and then this fall will come out with the next version of the TV ads we will add on to what we did on the first time run, with respect to technology the affinity will moving to our next run of markets to summer. We’re continued to be very pleased with that, we’re getting good results, good data points, we’re taking it the next three markets to summer and we’re continuing to -- and growth from that experience and instant card to numbers were in the script but our average sales per week were up 50%, so last time we spoke to, so that continues to roll and so there is a kind of an update on those three buckets and we’re also continuing to work on our cost control as well and we'll have more details on that as the year progresses.
Charles Grom
Okay. And just a follow up to the first question, when you do look at the comp, the comp declaration from the first quarter and I think John alluded to being a little bit below your expectations and how do you handicap?
Where does it fall out, is it more canalization? Was it more competition and I guess, could you quantify either of those buckets for us.
Thanks.
John Mackey
It's difficult, its John here, it's difficult to quantify it but there is a lot of factors involved as we mentioned there is we have some severe canalization going on right now in Chicago and Florida because of some very success and new stores have opened up there and those markets have taken some big chunk out of those two cities. We know that we are -- we do have more competition than ever before there is no question about that.
And finally we’ve got -- we did have some it's a very weird, weird quarter for weather particularly in the North Atlantic region. We had a lot of store closures.
So I mean weather is a very difficult thing to predict and sometimes it helps you and sometimes it hurts you on balance hurt us a little bit in Q2. So it's hard to say exactly how that divides up but, I think all three can be considered factors.
Charles Grom
Okay. Thank you.
Operator
And our next question will come from Ken Goldman with JPMorgan. Please go ahead.
Ken Goldman
Hey guys thank you for the question. John you mentioned there were a variety of reasons for the comp slowdown, but you weren’t a 100% sure smoking gun was.
Is some of the volatility in your comps lately send you to sort of roll out your rewards cards any more quickly or do anything else, to I get to know some of the data behind your customers. You guys gave some great data presentations I thought at your Analyst Day, I’m just wondering, how it makes you o think about it if it all?
John Mackey
I mean I think affinity card, yeah that what we call it, I think yeah I think the thing is start to lay the foundation properly and to really make sure we’ve got the technology platform working well. We are irritating daily on this platform and yes, I think we’re constantly talking about the balance between additional investments and the speedy investments and what’s the right pace for those to do that as we look at the total pictures so but I think with respect to affinity, our next step is clear is which is we’re taking now which is some extreme markets that’s going to give us much broader based for understating, how that works, how customers use it.
It looks that, the basket higher, looks the frequency improves all of the things are very promising, but we just really got to continue to work and to irritate it sequentially as opposed to -- we’re not ready to jump to the whole company yet.
Ken Goldman
All right. Thanks very much.
Operator
And the next question comes from Meredith Adler with Barclays. Please go ahead.
Meredith Adler
Hi, thanks for taking my question. I would like to talk a little bit about the new format and it would be interesting to see what it looks like that fact that it's different is hard to invasion, but I’m trying to understand kind of how you see getting to 1200 stores with Whole Foods and then opening some meaningful number of these new stores.
Aren’t you going to be either cannibalizing yourself or going after similar markets or and because I guess I've never quite understood how do you get to 1200 stores at Whole Foods.
John Mackey
Meredith, again the 1200 stores are Whole Foods. It's not going to be a difficult thing to do at all.
We're already 420 and we got 114 in development. So we’re well on our way for that and the thing, one thing to understand is that the market is exploding, I mean it's incredible what’s happening.
If you -- one of that's fun to do at Whole Foods is we go back and we do look at what our sales were per store five years ago, eight years ago, 10 years ago. And our sales are so much higher and at the same time, we've been so, so successful that we’d actually brought a lot more competition and everybody jump in kind on the national organic food band wagon and that’s really, frankly do to our success.
So I don’t see that there is a problem but what I do think is that the Whole Foods Market brand is very targeted to certain type of customers, certain type of shopper we think the opportunities are lot larger than that and we think there are certain customers at the Whole Foods market brands attractive to but there are other customer that it's less attractive to and we see a whole generation of young people coming up who are quite interested in national organic foods, they're millennial generation, they’re idealistic, they’re values orient, their mission driven, these are all play to Whole Foods Market strength, they’re also very value cautious. So we think a streamlined hip cool technology oriented store unlike any store anybody has ever seen before that has lower capital, lower cost, perhaps little labor cost and lower prices is going to be very, very attractive to that particular generation.
So you can't envision it yet because it hasn’t been created yet. We’re creating it.
It will be new. It will be different.
It will be unlike any of the other stores you've seen out there. And hey, sometimes you have to wait to see it, but it will be worth waiting for.
Walter Robb
Meredith, this is Walter, I will just continue to add there. We've continued to had a lot of excitement and enthusiasm for Whole Foods Market our flagship brand, maybe we got over 70 stores knocking back a $1 million a week.
We have tremendous success and vitality that in this company that continues to grow. And as we open 38, 39, 40 new stores next year we're continuing down that back and it just looks that this new format that we’re developing, that we're going to tell you more about in a few months is going to be a access many more broader markets and communities perhaps that we couldn’t serve with our flagship brand.
And so you think about if like you everybody knows this marketplace for fresh healthy foods is getting larger by the day with the different announcements that people are making and this new opportunities -- this new concept that we're developing will allow us to access and participate and contribute and lead in many more markets than -- it just opens up a whole lot new range of opportunity for all of our stakeholders. So that’s the kind of complimentary idea that John talked about early on.
Meredith Adler
That’s very helpful and interesting. Can I ask one just sort of housekeeping question?
You talked about the -- and adjusted to the employee appreciation event in the last five weeks, does that mean that their actual comp was lower or you’ve already reflected that in the comp that the 2.8 % that you reported?
Glenda Flanagan
The 2.8% is the last five weeks which includes Easter in both years. Is that what you're asking me Meredith.
Meredith Adler
No, the employee appreciation event, there is…
Glenda Flanagan
Yes, what about it?
Meredith Adler
Well, is that the number the 2.8 is reflecting.
Glenda Flanagan
It excludes in last year, yes.
Meredith Adler
Excludes in last year. Okay that’s very helpful.
Thank you
Glenda Flanagan
Okay.
Operator
And our next question comes from Rupesh Parikh with Oppenheimer. Please go ahead.
Rupesh Parikh
Thanks for taking my question. So I just wanted to touch a little bit more on gross margins.
So the gross margin performance again was let's say better than expectation this quarter. So as you guys look at the price investments you've been making the past few months versus prior quarters, has there been any moderation in the magnitude of price investments?
A.C. Gallo
Hi it's A.C. No there really hasn’t been moderation.
We attribute the fact that the -- our gross margin did not decline as much in this quarter as we originally projected to -- largely to just a little bit better purchasing than we originally -- little better results on the purchasing side. We're able to negotiate stronger -- some stronger value discounts with some of our suppliers, especially in the grocery and produce areas than we originally thought.
So when we projected that we were going to do certain investments in price as it turns out because of the volume we move, we were able to actually negotiate little bit better cost on that than we expected to. But we see -- when we look out for the rest of the year, we're holding our guidance.
We still see that our sequential decline in gross margin, it will be what we have said at the beginning of the year would be. So we think -- we're going to continue with this and if we've got a little better purchasing here, we'll do a little bit deeper investment going forward for the rest of the year.
David Lannon
Yes, David here too. Also I want to point out that there are so many great products that we make inside our stores and Ken and I are working with all the operators in the regions on more and more products that are made exclusively inside of our Whole Food stores.
So these are products that we're manufacturing ourselves. So we're really working on recipe discipline, shrink control.
So it's kind of a countervailing thing that is unrelated to the pricing efforts in things like produce and grocery and whole body and those kind of areas.
Rupesh Parikh
Okay. Thanks for all the color and then just switching to competition and we continue to hear more and more about not organic expanding to other channels, I just want to understand what you guys are maybe doing differently?
What you are doing differently now to combat this threat?
John Mackey
I think we're doing several things that we've already sort of addressed. We are investing in value and prices.
We're doing better job at controlling our expenses. We're investing more in marketing and we're investing more in technology.
At the same time today, we've announced that we're coming out with a new format that we think will be specifically geared to address an entire generation of people coming out that we think -- that line up well with Whole Foods and this new concept will be less capital, more streamlined. It will have -- it will be value oriented and it will -- but it will still have Whole Foods quality standards.
It will still have our mission and drive. We think it's going to be an exciting new concept.
So these are the things that we're doing. Also in some ways, the new competition is as much as the market is expanding, a lot of people get into it for the first time and they're going to temporarily gain some share because for convenience standpoint or they migrate certain customers over, but then they anniversary that.
So the question is whether they will be able to comp in comps two, three, four, five years down the road and so I mean one of the things that people don't fully understand is that even if Whole Foods Market just stopped. Our comps went flat.
We were at zero. Our sales per square foot, our return on invested capital, our whole store operating model is still frankly light years better than just anybody on the other food retailer that are at least public that we have their data on.
So it's going to take a long time before people can catch up with us but we're not going to sit still. We're going to continue to innovate.
We're going to continue to differentiate ourselves. Our commitment to prepared foods, top of sales we do there, we're doing all that we can, but the reality is there is more competition.
Hey, I wish that wasn’t true, but it's where we find ourselves and we think we're doing, taking the necessary steps to compete well and continue to win in the marketplace.
Walter Robb
It's Walter. I am just going to add a little bit to it.
I think we're clearly in a transition to a much more expanded marketplace. You see that what you're referencing with foods and products available in many more places than historically.
So I think just add a little to each of those, I mean the price thing for us what's driving for relevance on price, so we can continue our conversation about quality. So like we said before we're not looking to race to the bottom, We're looking to be relevant on price.
So we can really, really have this conversation about quality. And the second bucket with marketing specifically it's about communicating the differences because we don't also sell the same stuff and market sometimes wants to drop it down to lowest common denominator and while there are some common products, much of our product which is different and I think the ability for us to communicate the differences in our product and the broader offerings that we're bringing to our customers is where we're really trying to grow these efforts as well as create a kind of a personal connection through the affinity.
Granted we've been a little slower perhaps than we should have been in terms of getting those things in place, but we are through the use of technology building out and extending ourselves where our customers are whether it's through Instacart for home delivery, which we're doing more than any other grocery store in America now. And we're really just getting started whether it's through affinity which builds a personal connection to customers who will allow to customize their relationship with us.
whether it's through the ease of Apple pay that which we assume go to the next thing you know about, which will use customers the easier more seamless experience whether it's our improving App which ultimately these things can be put together to give customers more integrated experience with Whole Foods digitally. All those things are in the works and I wish that we were doing them faster, but we're doing them as fast as we can do as we replace all our foundational systems and technology to get there ultimately where we're going is to create this fuller richer experience basically and digitally for our customers and as John says, we're taking these steps and we're doing it at a time when the marketplace is going through a huge transition.
But make no mistake about it. We still have a tremendous amount of strength in this company.
John Mackey
Okay. I would like to actually add.
We're talking about differentiation. We're still doing -- we're really ramping up a lot of -- our differentiation a lot on the product side and it's true that you might take some branded natural organic products that we sell and other people sell and everybody has the same things, but we've got a lot of things in place to help differentiate ourselves in product side.
We've been -- we're ramping up our exclusive brands team so that we can come out with some really -- get some really great innovative and exciting products coming out in over the next six and nine months. We also continue to differentiate ourselves in produce with our responsively grown program and our whole trade guarantee products.
We're the largest seller of fair trade produce and flours in the U.S. and we continue to expand -- rapidly expand our supply there and we've got some -- we've got some great new products coming in, in our meat and sea food department.
We've established this club pack frozen program that's doing extremely well in our sea food departments and is a very unique high quality product, at really great price and so there is a lot of work going on, on the product side to continue to differentiate our product mix and really add the kind of products that our customers really like.
David Lannon
Yes and this is David, on the in-store experience, we're continuing to innovate -- juice bars continue to grow as a big part of the breakfast experience in our stores. We just opened a great new juice bars with our friend JugoFresh in Miami and we have a great juice bar with our friend Vega up in Cambie.
Vancouver. We're closing in on the 100 taprooms where we serve beer wine and all sort of exciting things making Pete in our new west loop store.
We're continuing to be the retail innovator in terms of in-store experience. Against things you can't get online you can only get it Whole Foods Market and I encourage you guys to go into some of our new stores.
Rupesh Parikh
Thank you.
Operator
And the next question comes from Stephen Grambling with Goldman Sachs. Please go ahead.
Stephen Grambling
Hey, good afternoon. Thanks for taking the question.
Just to follow-up on the new concept, does the distribution model have to change or do you have the capacity for these smaller stores at this point?
John Mackey
We think one of the great things about this model is that we can leverage all of our existing distribution capabilities and our distribution partners. We can use our regional structure and yet we can create a more centrally driven model from a product standpoint, a pricing standpoint and overall selection standpoint, while allowing innovation to occur on a limited basis within a regional and local basis.
So we think we've got the right structure to really create a new model that will be highly successful. We can talk about it in general terms.
We want to limit what we talk about this call. It will be so much easier once we open the first one and people don't look at it then you'll see it.
And we will reveal a little bit more in the next few months, but we're excited about it. We think it a big deal, but hey, proof will be when we start to open them up.
Walter Robb
But the question is no, we don't need a new distribution network to serve.
John Mackey
We do not need an in distribution network.
Stephen Grambling
Understood, that's helpful. And then I guess changing gears a little bit, you mentioned better -- doing a better job on expense discipline and you saw some leverage on salaries and benefits among other areas, where are the improvements coming from at this point and is there kind of a new leverage point to be thinking about as it relates to the comp?
John Mackey
You mean on comp on SG&A?
Stephen Grambling
Correct.
John Mackey
You mean on sales. The trick on expense leverage, it's just continued had work.
It's retails details about getting in there and looking at your business processes. This is some we're doing right now.
We have a number of task force going examining things like how we buy in the store, how we serve in prepared foods and we're looking at this and we're taking cost out of the system in a systematic basis. 29 basis points times $15 billion over a year is a heck of a lot of money and we're going to continue to do that.
So I think that's what we've announced we're going to do and we're also getting leverage as we continue to grow and open new stores. We're getting leverage in our overall G&A as well as store leverage.
So I think that's a long term. We look out and we do our own internal work several years in advance.
We see okay we're going to continue to get expense leverage. We're going to continue to work on a process or we'll continue to take these costs out and we're going to continue to lower prices, lower our gross margins accordingly.
And hopefully we'll be able to produce a similar type of bottom line that we've been producing for the last several years. That's our strategy and we think it's a good strategy.
Stephen Grambling
Good and if I can sneak one more housekeeping in and just on the refresh, can you just refresh us on how many have actually occurred year-to-date and how those have performed thanks?
David Lannon
This is David. We're encouraged about what the store are doing.
We're still committed to doing over 200 by the end of this year. We got some good results this quarter through these great stores.
Bishops Corner and West Hartford in Connecticut, just spoke to spoke to Laura Durbin the Regional President there and their sales are higher than the regional comp number. And we're very excited to be focusing a lot of energy in Colorado, stores like Four Collins, Cherry Creek, Colfax, Wash Park, Colorado Boulevard some of our older stores where we're doing the new color, the new painting, the new look, but we're -- a significant chunk of them are going to happen in summer, which is the slowest time for sales for us, but also the most convenient time to do without getting in the way of our customers.
So expect a significant chunk to happen in the June, July, August timeframe, but we're still committed to doing and encouraged to do them all by the end of the year.
Stephen Grambling
Great, best of luck.
Operator
And our next question comes from Jerry Gray with Cowen. Please go ahead.
Jerry Gray
Hey, thanks for taking my question. So the Instacart business grew about 50% sequentially in terms of your average weekly sales volume, was there any new markets or new stores added there?
Is that mostly organic growth within the existing stores?
John Mackey
That is mostly organic growth. We added one small market, but the next burst of markets is soon to come.
David Lannon
This is David. I would say that we're also if you look on the Instacart App, we're adding new items all the time.
We're starting to add more and more of our prepared foods mix, which wasn’t available and we started with Instacart. So there is a more full shop for our customers and they're responding.
Jerry Gray
All right, great. And then just on the gross margin, with your produce pricing, could you give us any more details on the rollout of that and how the cadence of that is going to go in the second half and into next year as you expand that two additional markets?
John Mackey
Right. We started at the beginning of this year with several of our markets with our first investment and then we've just started -- really just rolled out not too long ago our second wave of investments and again we're a little different.
Some were doing more every day a little pricing. Others were doing stronger promotional strategy I think the ones we added in the second wave are more in the promotional side in some additional regions.
Our plan is to continue with all of that going forward and then to add at some point later in the fiscal year we're going to add some more markets to it, but right now we've got plans to as we move into the new fiscal year, continue with another wave of -- with another wave of investments.
Jerry Gray
All right, great. Thank you guys.
Operator
Our next question comes from Karen Short with Deutsche Bank. Please go ahead.
Karen Short
Hi, thanks for taking my question. So obviously everyone acknowledge, you have a great store format and I appreciate this opportunity that you’re looking into, but I guess the question I have is that you know well there is a significant opportunity with this new concept, how do you think about the risk that this new concept will start broad based decline in margins across the Board and natural and organic.
And M&A obviously including a bigger gross margin risk at your Whole Food standard stores and what pace is not kind of a slippery slope on the margin front?
Walter Robb
Well instead of the slippery kind of I think we’ve already articulated it for the last year and half that the trajectory of the gross margins are going to continue to incrementally move down as the competitive marketplace emerges. So I think that -- we've already acknowledge that as this thing broadens and widens, but thing is the opportunity keeps getting so much bigger.
Here is another way for us to do that, it's going to access other communities and other folks that we cannot access particularly with our Whole Foods Flagship brand. So no one saying that the size of the opportunity is enormous.
I think we’re all seeing that on unfold daily, but I think we've already going to laid out the trajectory that we see that the margins will in fact go down year-over-year for the next several years. You want to add to that John?
John Mackey
Well, Karen imagine that we have these larger Whole Foods Markets flagship stores that's got think about our one in Austin for example which is a good example of big store, great prepared foods, lots of different venues, huge service, it's an experience when you go into the store and then say that’s kind of the Whole Foods Market brand trajectory. And then you have this new format that is, that the stores are not as large, they’re more streamlined, they’re tech savvy, there is less capital being invested in it, they’re very convenient for people and they’re very value focused with a tailored product mix.
So maybe if you go into a big Whole Foods Market, maybe you've got a thousand different kinds of wine from price points all the way from $299 to a few $100, but maybe in this our concept store you'll have a more tailored mix of wine. You won’t have it will just be good quality value wines and they won’t have the same upward trajectory.
So is it something that’s going to harm Whole Foods Market? We don’t see it that way.
We see it as complementary. We’ll see that our loyalty card program will be -- will include both brands and we see people crossing over in it and -- but one of the things that I think I’ve learned from other businesses is you have to be willing to evolve with the marketplace.
You have to be willing to do what it takes to serve your customers better and you cannot do that because it might possibly take sales from your existing flagship brand. You've got to be willing to serve your customers where you find them.
That will be cause the Whole Foods Market flagship brand to evolve as we roll out our as our next brand. Just like it’s evolving right now with the competition that we’re facing.
So we see that this as a huge opportunity that the natural organic foods revolution is sweeping America. We intend to be -- continue to be the leader in this category for the rest of the century.
And so we’re evolving with the marketplace. We’re going to create a new -- we are creating a new format, a new concept it's not been seen, the non one else is done.
It's going to be unique and we think it's going to be really signing to the customer base and we’ll see what happens. It's hard to predict exactly what’s going to happen in telling to start doing them.
Walter Robb
I was just going to add, I really got John brought that up, because you were there at our Investor conference. We talked a lot about us being a company that’s continually changing, evolving, growing, you read the marketplace as it’s and you say, how do you continue to respond?
How do you continued to evolve and for us as a group thinking about it. We think this is a way for us to -- the thing gets bigger.
It allows us to broaden our reach, accelerate our growth, serve more people in bringing healthier food to the world. So we do see it as evolution of our company.
Karen Short
No, I agree, evolution is obviously the key to survival but I did have another question just on your existing store base in your store growth plans, obviously looking back to 2007 and 2008, when you find larger stores and then kind of retrenched and obviously there was a macro element to retrenching but you obviously moving in your Whole Food fleet to a larger format. And I guess first question is, are you -- is the larger increase store size basically to accommodate mostly the wine bars and the beer hauls?
And then can you help me to understand how that impacts ROIC going forward if in fact it is wine bar and beer haul.
John Mackey
Well, I mean that's where we do have our taproom and wind bars and we want to make haul for these markets, this incredible experience for people. We want to stores to be fun.
We want them to be exciting. We want them to be places that are destinations for people to come, it's an experience that -- food is a very essential, exciting thing for people.
We want these stores to be incredibly exciting. So the trend line for haul foods market will probably be towards larger stores that are very experientially oriented with a very differentiated product mix for the customer base and then we will have our new format that will be, the stores will be more streamlined and won't be as large.
It will be value oriented. There will be more tailored product mix.
They will be tech -- they will be very tech savvy stores and they will be very exciting to we think to millennial generation of about 90 million people. So we think these concepts are very complimentary to each other.
There will be some overlap, but in the best of all worlds for Whole Foods, people will shop both stores. They’ll come in and enjoy the big exciting Whole Foods market and they will do fill in shops at the new concept and the stores will intermix with each other in a very unique way.
And we'll have a larger product mix at the bigger flagship Whole Foods Market stores and we will the new format. We will have a more tailored mix there.
So that's what's -- we really say too much more than that. There will be a bigger reveal later on as we get into this summer.
So it's not that far away. You have to wait only a few months and we'll give you more.
Walter Robb
But we will use our technology platforms in our programs to connect shoppers across both of them. So that will also support the complementary above right, so…
Karen Short
Great. Look forward to seeing it.
Operator
And ladies and gentlemen, this does conclude today’s portion of the program. I will now return the floor to John Mackey for closing remarks.
John Mackey
Okay. Thanks everybody for listening in.
We look forward to speaking with you again in July at our Q3 earning call. A transcript of the scripted portion of this call along with the recording of the call is available on our website as well.
Everybody have a great summer. We look forward to talking to you soon, bye.
Operator
And this does conclude today's program. Thank you for your participation.
You may now disconnect. Have a great day.