Grocers Rise on Strong Expectations

Brittney Barrett  |

The results for retail of many varieties have repeatedly bucked the trends of the broader economy. The upcoming quarterly results of both Whole Foods and Kraft are expected to be consistent with the year's consistent outperformance of the broader market. Projections of optimistic afterhours earnings drove up shares of Whole Foods (WFM) and Kraft Inc. (KFT) during the session. The hotly anticipated results helped drive up the remainder for the sector. Every component trading under the retail grocery specification besides one was up on Wednesday.

Whole Foods Market (WFM) is expected to report earnings growth of 24 percent to 41 cents a share. While Whole Foods shares shed some value earlier in the year, as many feared that tighter consumer spending would negatively impact the company, others asserted that Whole Foods upscale customer would not be as impacted by declining consumer sentiment as other grocers.

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The strongest Q2 results in five years, reported in May, supported the latter group and led to a strong current forecast and higher share prices. Present projections place sales growth at around 13 percent or $2.36 billion and the company is only around 5 percent off its 52-week peak. Full-year EPS for the fiscal year ending in September is expected to be $1.93, as the company has succeeded in negating the higher price of food.

The Fresh Market Inc (TFM), which also sells groceries at an above market premium, is also projected to have thrived in the current economic environment. Shares of the company added over three percent during trading and prices are approaching a new 52-week high.  The Fresh Market is not expected to report quarterly earnings until December 1, but investors are presumably driving up shares on the basis of strength in its competitors.

The same thing may have happened to Ruddick Corporation (RDK) today.  Earnings for the quarter are expected to head higher and the company’s decision to spin off its thread-making and textile business to a private equity firm last week for the price of $180 million and focus exclusively on its grocery division, could be contributing to the strong performance in trading today. The company is up over 13 percent for the month.

Also in food news, earnings at Kraft Foods (KFT) are projected at 55 cents a share for the third quarter, a 17 percent increase from the same period last year and an indicator that analysts feel somewhat bullish about food. Revenue is predicted to have grown by 8 percent to $12.8 billion in the most recent quarter. The generous forecasts helped not only shares of Kraft, but other food processing companies like General Mills (GIS) and Sara Lee (SLE) as well as a number of grocers who could stand to benefit from strong growth in processed foods.


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