Whole Foods beats profit expectations, raises outlook

The upscale grocer is stepping up the pace of store openings.

By Kim Peterson Jul 27, 2011 5:08PM
Even in a fragile economy, people are willing to pay more for higher-quality food. And Whole Foods Market (WFM) is reaping the rewards.

The upscale grocer continues to ring up solid earnings reports, beating profit expectations for its third quarter Wednesday and raising its full-year forecast. Profit was $88.5 million, or 50 cents a share, up about 35% from $65.7 million, or 38 cents a share, a year earlier. Analysts had expected 47 to 48 cents a share.

For the quarter ended July 3, sales came in 11% higher at $2.4 billion, about what analysts had anticipated. And same-store sales, a key gauge of performance, rose by 8.1%.

The following video has more about Whole Foods' earnings and how organic-food sales are outperforming those of other foods.

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Investors were pleased with the results, pushing Whole Foods' shares up more than 3% from their $65.43 close in after-hours trading. The stock has been a Wall Street darling this year, with shares rising nearly 29% year to date as of Wednesday's close.

The momentum was enough for Whole Foods to raise its full-year outlook to $1.91 to $1.92 a share from $1.87 to $1.90 a share. Wall Street had expected $1.90. And the company is boosting the number of stores it plans to open this year to between 24 and 26. Previously, it was looking at 20 new stores.

How can Whole Foods pull in these numbers in the current economy? For one thing, the company has made strides in beating its "Whole Paycheck" nickname. Whole Foods has added more value-priced items to its shelves -- in some cases beating similar offerings from Kroger (KR) or Safeway (SWY). But at the same time, it has maintained attention to the higher-quality and organic foods that its customer base wants.

The company is also benefiting from a legitimate economic recovery among the middle class and wealthy. While some lower-income consumers are still living paycheck to paycheck -- a reality that Wal-Mart (WMT) in particular is reeling from -- higher-income households have been in recovery for some time.

But the economy is still affecting Whole Foods. The company says the new stores planned to open this year will be smaller and will receive less capital investment. "We expect they will achieve higher returns on invested capital than the larger stores we have opened," co-founder and co-chief executive officer John Mackey said in a statement.


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