Whole Foods' High-Priced Reputation May Finally Be Catching Up With It

In this Oct. 31, 2011 photo, a man carries a surfboard past a Whole Foods store in Santa Monica, Calif. Whole Foods Market In
In this Oct. 31, 2011 photo, a man carries a surfboard past a Whole Foods store in Santa Monica, Calif. Whole Foods Market Inc., reports quarterly financial results Wednesday, Nov. 2, 2011, after the market close.(AP Photo/Reed Saxon)

For years, Whole Foods has shrugged off criticism that it should be renamed "Whole Paycheck" because it is so expensive. But its high-priced reputation might finally be starting to hurt it.

The grocery chain's competitors are luring shoppers away with lower prices, threatening to unlock its long stranglehold on the market for organic food, according to a new note by analysts at Wolfe Research, a New York investment research firm.

Recently, stores ranging from Kroger to Walmart to Sprouts have undercut Whole Foods by bulking up their own, lower-priced healthy offerings.

In its latest quarter, Whole Foods reported that sales at stores open at least a year -- a key retail metric known as "same-store sales" -- rose 3.9 percent. That's not bad, but the company once regularly clocked same-store sales growth of about 8 percent. Its stock price, meanwhile, is down 40 percent since late October 2013.

“The emergence of the multi-pronged competitive attack on Whole Foods by generally lower-priced competitors suggests to us that Whole Foods’ business model faces a very real, clear and present danger,” Wolfe analysts wrote in a note last week.

Wolfe Research compared the average price of a basket of groceries at Whole Foods to average prices of baskets at prominent grocery stores in various regions. What they found is that Whole Foods' prices tended to be much higher across the board:

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Whole Foods' prices versus prices elsewhere.

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Whole Foods' produce prices versus prices elsewhere.

Whole Foods is responding by testing a rewards program and launching a national marketing campaign, two things the grocery giant has resisted for years. It has also lowered prices over the past several months, though shoppers have been slow to take notice.

Whole Foods co-CEO Walter Robb acknowledged the company's struggles in an interview with CNBC earlier this month. But he said that the steps the retailer has taken will ensure a “very bright future.”

Wolfe analysts argue that Whole Foods hasn't done enough to turn sluggish sales trends around. Even significantly lowering prices won't be enough, in their view.

Whole Foods did not immediately respond to a request for comment.