Whole Foods is creating a crisis that’s choking its business

A Whole Foods store in San Francisco.

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A Whole Foods store in San Francisco.
source
Tommy Wiles

  • Barclays analysts say out-of-stock problems at Whole Foods are hurting the grocery chain’s sales and making it less of a threat to other grocers.
  • “Until execution issues are resolved and broader price cuts are implemented – we believe traction on sales will stall, so for now the pressure on the industry has abated,” analysts wrote in a research note.
  • Whole Foods employees have told Business Insider that the out-of-stocks are the result of a new inventory management system called order-to-shelf.

Whole Foods is having problems keeping shelves stocked at stores across the US, and sales are likely suffering as a result, according to Barclays analysts.

“Until execution issues are resolved and broader price cuts are implemented – we believe traction on sales will stall, so for now the pressure on the industry has abated,” analysts wrote in a note published Wednesday.

Barclays analysts have been visiting various Whole Foods stores on a weekly basis since Amazon acquired the grocery chain last year for $13.7 billion.

The analysts’ most recent store checks revealed “many noticeable out of stocks in the grocery category,” they wrote.

“Specifically, within just one store, we observed major out of stocks in cookies, crackers, popcorn, canned beans, canned peaches, seltzer, and water,” they added. “In addition, we noticed employees utilizing facing to make shelves appear more stocked than they actually were – so, the out of stocks could have been more pervasive than we were able to notice. We also note that frozen seafood out of stocks have persisted for many weeks at one store we routinely check.”

“Facing” is used when stores run out of a specific item, and replace the empty spot with another item.For example, if a store runs out of romaine lettuce, employees might fill the empty spot with spinach.

Whole Foods employees have told Business Insider that the out-of-stocks are the result of a new inventory management system called order-to-shelf. The system allows for a very small amount of storage, so any unexpected increase in demand can result in out-of-stocks.

Whole Foods has not responded to requests for comment on the new system.