Whole Foods whiffs on earnings and cuts outlook

The stock falls in after-hours trading as investors react to the disappointing news.

By Benzinga Feb 12, 2014 6:03PM

File photo of a Whole Foods sign (© Tim Boyle/Getty Images)By Louis Bedigian

Whole Foods Market (WFM) isn't getting the kind of investor attention it may have hoped for Wednesday afternoon.

The natural foods supermarket chain was hit hard by investors who were less than excited by the company's results.

"The stock moves around quite a bit, usually around earnings," Williams Capital analyst Marc Riddick told Benzinga before the market close. "And it usually has a lot more to do with guidance than earnings."

Unfortunately, Whole Foods reported an earnings miss for the first quarter and reduced its guidance for 2014. The stock fell more than 5 percent as a result in after-hours trading.

Wall Street expected the company to report first-quarter earnings of 44 cents a share, but Whole Foods could only muster 42 cents. Despite the miss, earnings per share were up 8 percent for the quarter.

Whole Foods' revenue of $4.24 billion was lower than the Street's estimate of $4.29 billion.

The company -- often referred to as "Whole Paycheck" by customers not enthused by the grocer's high prices -- also reduced its fiscal 2014 guidance from $1.65 to $1.69 a share to $1.58 to $1.65 a share. The Wall Street consensus had been $1.68 a share.

On the upside, Whole Foods said that sales should increase 11 percent to 12 percent this year.

"We are very confident in our future growth potential and are moving aggressively to take advantage of that opportunity," Walter Robb, co-CEO of Whole Foods Market, said in a company release.

Whole Foods currently operates 373 stores in the United States, Canada and the United Kingdom. The firm is developing 107 new stores and expects to cross the 500-store mark in 2017.

"Over the longer term, we see demand for 1,200 Whole Foods Market stores in the U.S. alone," Robb added.

Rocky growth

At first glance, Whole Foods seems to be heading in the right direction. Shares have risen more than 16 percent over the last 12 months and increased more than 38 percent over the last two years.

Look a little closer, however, and investors will notice a troubling trend. While Whole Foods has successfully maintained some of its growth, the company typically experiences a significant dip after rising to new highs.

For example, the stock jumped more than 10 percent between June 28, 2013 and July 15, 2013 but fell 3.85 percent over the next nine days. Whole Foods continued to fluctuate, but the downward trend ultimately prevailed. By Aug. 28, Whole Foods was down an additional five percent.

After that, Whole Foods began to rise again. The stock increased every day for the next two weeks. As of Sept. 18, Whole Foods had gained more than 15 percent and traded at $51.48 a share.

The upward trend continued. On Oct. 25, the market achieved a new all-time high of $65.24.

After that, Whole Foods headed downward again -- and lost more than 12 percent of its value by Nov. 7.

That downward trend continued throughout most of January 2014.

Ongoing expansion

Earlier this month Whole Foods announced that it had acquired seven leases from Safeway in the greater Chicago area. The company plans to remodel these locations and re-open them as Whole Foods stores in 2015.

These locations will add to the 19 existing stores that are already in Chicago and its surrounding cities. Separately, Whole Foods plans to open three all-new Chicago stores in 2017.

Whole Foods is not invulnerable

Whole Foods is a successful supermarket chain, but it will take more than lofty, long-term goals to intrigue investors after this quarter.

At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.

More from Benzinga

Feb 12, 2014 6:16PM
People can't afford this snubby place and I can't afford their stock !
Feb 12, 2014 7:29PM
The only major food store chain selling nutrition.
Sorry - quality food (like your great grandparents would eat) costs real money.  Not that cheap chemical laden frankenfood you buy at Kroger, Kings, Shoprite, Walmart, etc.

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