What: The stock of organic and natural-foods grocer Whole Foods (NASDAQ:WFM) fell 14% in May, according to S&P Capital IQ data. Shares are now much closer to the 52-week low of $36 per share set last summer than the high of $57 reached in mid-February.

WFM Chart

WFM data by YCharts.

So what: Last month's dip was caused by a fiscal-second-quarter earnings announcement that failed to meet Wall Street's expectations. Whole Foods increased comparable-store sales by just 3%, which suggests it is continuing to feel pressure from rivals such as Kroger (NYSE:KR) and Costco (NASDAQ:COST), which are using low prices to grab market share in the organic and natural foods-sector. That competition threatens to put a lid on Whole Foods' sales growth opportunities while lowering profitability.

Indeed, the retailer's gross profit margin slipped slightly to below 36%. While that's far above Kroger's 21% and Costco's 13%, the profit gap highlights how hard it would be for Whole Foods to compete against these companies on price alone. Kroger and Costco both take a "no frills" approach to grocery retailing, while Whole Foods' stated mission is to "transform food shopping from a chore into a dynamic experience."

Now what: That structural mismatch is likely a key reason why Whole Foods' management last month outlined plans for an entirely new store concept, one with a lighter expense profile better designed to meet the challenge posed by low-cost rivals. "Offering our industry-leading standards at value prices, this new format will feature a modern, streamlined design, innovative technology and a curated selection," said co-CEO Walter Robb in the earnings press release. "It will deliver a convenient, transparent, and values-oriented experience geared toward millennial shoppers, while appealing to anyone looking for high-quality fresh food at great prices."

Management also told investors to expect a "rapid expansion" of the concept after it launches sometime next year.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Demitrios Kalogeropoulos owns shares of Apple, Costco Wholesale, and Whole Foods Market. The Motley Fool recommends Apple, Costco Wholesale, and Whole Foods Market. The Motley Fool owns shares of Apple, Costco Wholesale, and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.