Shares of Whole Foods Market Inc. fell more than 9% Thursday after the healthy foods retailer announced plans for a "hip-cool technology-oriented" chain targeting millennials.
Whole Foods gave few details of its plans for the new, smaller stores beyond saying they would offer all-natural food at lower prices and be geared to the 18- to 34-year-old segment that makes up almost 25% of the population.
Whole Foods plans a bigger reveal later this summer, but said the new stores would be smaller, "tech-savvy" and have a more "streamlined" design and "curated" product selection.
Stores will begin opening next year.
"It will be new, it will be different," John Mackey, co-chief executive, told analysts Wednesday. "It will be unlike any of the other stores you’re seeing out there."
According to a Nielsen survey, 33% of millennials said healthful food was "very important" to them. More important, 29% were "very willing" to pay premium prices for those products.
"I don't think they have to change much of anything," said David J. Livingston, founder of supermarket research firm DJL Research. "I think they hit it off pretty well with the millennials."
Josh Goldman, global director for digital shopping at Nielsen, said Whole Foods should make sure to retain quick and easy meals, which are "king" with millennials.
The emphasis on technology should also expand beyond just finding products at the store, he added.
“Millennials will look for an engaging and interactive shopping experience," Goldman said. "It has to be two-way -- so, for example, consumers should be able to look to the store to receive recipes, ask for items, etc., but the store should provide digital platforms to do so."
Several analysts said the new stores needed to go beyond the millennial buzzword to give the company a way to differentiate itself in an increasingly crowded organic food landscape.
"The industry is changing, and it's changing rapidly," said Brian Yarbrough, senior analyst at Edward Jones. "You're seeing a lot more competition coming in, and they're coming in at lower price points, and that's causing some issues for Whole Foods."
Though some analysts said the new stores could cannibalize business from current Whole Foods sites, Mackey said they would complement each other.
"They’ll come in and enjoy the big, exciting Whole Foods Market and they’ll do filling shops at the new concept," he told analysts. "The stores will intermix with each other."
Whole foods shares fell $4.38, or 9.2%, to $43.34.
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