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Whole Foods sees slip in shares

BY Vivian Gomez

AUSTIN, TX — Whole Foods Market said total sales for the first quarter ended Jan. 19 climbed 10% to a record $4.2 billion. But those results reportedly missed analysts’ expectations, and the company has lowered its earnings outlook for 2014 as a result.

Momentum at Whole Foods — as well as shares — slipped. Comparable store sales for the quarter increased 5.4%, compared to a 7.2% increase in the prior year.

The company has revised its outlook for the year, and now expects sales growth of 11% to 12%, comparable store sales growth of 5.5% to 6.2% and diluted earnings per share of $1.58 to $1.65. The company’s prior outlook anticipated sales growth of 11% to 13%, comparable store sales growth of 5.5% to 7% and diluted earnings per share of $1.65 to $1.69.

The company also expects Easter to negatively impact comparable store sales growth in the second quarter and positively impact them in the third by an estimated 50-60 basis points, because the holiday will fall in the third quarter this year versus the second quarter last year.  

Sales growth slowdown notwithstanding, the company’s growth initiative remains aggressive. CEO Walter Robb remained positive and reiterated that he sees demand for 1,200 Whole Foods stores in the United States alone.

"With unparalleled quality standards, we are the leading retailer of fresh, healthy, natural and organic foods. We are very confident in our future growth potential and are moving aggressively to take advantage of that opportunity," said Walter Robb, co-CEO of Whole Foods Market. "With a base of 373 stores today and a record 107 stores in our development pipeline, we expect to cross the 500-store mark in 2017."

The company opened 10 stores in the first quarter and has opened two stores so far in the second quarter, expanding into five new markets. It plans to open an additional store in the second quarter and expects to open another 20 to 25 in the second half of the year. The company currently has 373 stores totaling approximately 14.2 million sq. ft.

The company recently signed 21 new leases totaling approximately 920,000 sq. ft., increasing its development pipeline to a record 107 stores. These leases are for new stores in Huntsville, Ala.; Vancouver, Canada; Brea, Calif.; San Diego, Calif.; Winter Park, Fla.; Kennesaw, Ga.; Schererville, Ind.; Lexington, Ky.; Charlotte, N.C.; Wall, N.J.; New York City, N.Y. (Bryant Park); Frisco, Texas; Tacoma, Wash.; and Wauwatosa, Wis. They also include leases acquired for seven Chicago-area locations formerly operated as Dominick’s stores in Edgewater; Elmhurst; Evanston; Lincoln Park; Streeterville; West Loop; and Willowbrook.

Whole Foods’ expansion plans don’t seem limited to more stores in new markets. The company is adding non-organic, conventional produce into its stores to attract a broader range of consumers, according to reports — which should put the company in a position to compete more effectively.

 

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Acosta to buy sales and marketing agency for Costco

BY Antoinette Alexander

JACKSONVILLE, Fla. — Acosta Sales & Marketing, a sales and marketing agency in the consumer packaged goods industry, has signed an agreement to acquire Anderson Daymon Worldwide, the sales and marketing agency that exclusively serves Costco Wholesale.

“Anderson Daymon’s extensive experience serving Costco for more than three decades will not only broaden our platform and enable us to better serve a very important growth customer, but also increases the breadth and depth of our capabilities at Costco for our clients,” stated Robert Hill, president and CEO of Acosta. “Anderson Daymon’s history of leadership and solid growth, unique capabilities of their associates and commitment to understanding every facet of Costco will be of particular importance as we look to help our clients prosper at this important customer.”

The transaction is expected to close in February.

Acosta’s current Costco team will merge with Anderson Daymon and become ADW, an Acosta Company, a new division focused solely on Costco Wholesale. Moe Krabbe, CEO of Anderson Daymon Worldwide, will serve as president of the new group reporting to Darian Pickett, Acosta’s president, strategic channels. Spike Anderson, chairman and founder of Anderson Daymon Worldwide, has agreed to remain with the company for at least one year following the closing to provide transition assistance. ADW will remain headquartered in Issaquah, Wash., with all 11 regional offices remaining in full operation. As part of this transaction, Daymon Worldwide will no longer hold an interest in this business and will not be affiliated with the new Acosta division.

Anderson Daymon represents food and nonfood products exclusively to Costco. The company has more than 200 employees and a network of 11 regional offices in the United States, Canada and the United Kingdom.

“By joining forces with an industry leader like Acosta, we will provide enhanced services for our clients, including access to full-service and experiential marketing solutions, shopper analytics and best-in-class training,” added Krabbe. “We are very excited about the potential of this partnership and the new, diversified offerings we will deliver together to Costco and its members.”

 

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Walgreens: Value-based insurance design programs can be optimized by targeting least adherent

BY Michael Johnsen

DEERFIELD, Ill. — Walgreens on Wednesday presented research on how value-based insurance design programs can be optimized by targeting the sickest, least adherent and most costly patients. These findings, presented at the 2014 PBMI Drug Benefit Conference in Las Vegas, examined how the VBID model can be most successful by reaching these targeted employee sub-populations.

VBID programs are emerging as a new benefit design focused on aligning patients’ out-of-pocket costs, such as co-payments and deductibles, with the value of health services. The model reduces barriers to such high-value services as preventive and chronic care therapies through lower costs to patients, while discouraging unproven, misused or low-benefit care through higher costs, ultimately improving health outcomes. Studies have shown that co-payment reductions often are associated with improvements in medication adherence.

“As employers continue to look for innovative ways to manage healthcare costs while keeping employees healthy, VBID programs have emerged as a viable and effective solution,” said Bobby Clark, Walgreens director of clinical outcomes and reporting. “However, we have only just begun to look at whether these VBID programs are reaching the employees who can benefit the most from the programs. Our recent research provides new insight into how to successfully reach these sickest and most costly patients. We hope to see future studies further investigate how opt-in VBID programs can become more targeted and what the full cost, adherence and outcomes benefits will be when these programs are fully optimized.”

The Walgreens study examined an employer-based VBID program implemented in January 2010, which eliminated the co-pay for generic anti-diabetic and anti-hyperlipidemic (cholesterol) medications. Eligible members (diabetic and/or high-cholesterol beneficiaries) were required to participate in a case management or wellness program to receive the zero co-pay benefit. 

In a related study by Clark and colleagues published in the Journal of Managed Care Pharmacy, medication adherence and the costs for generic diabetes and cholesterol medications resulting from participation in a zero co-pay VBID program were examined. The zero co-pay program used a reduction in cost sharing to incentivize members to use more generic drugs and to enroll in a care management coaching program. That study also demonstrated that a value-based program can have a positive impact on adherence and cost outcomes among those who participate.

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