Whole Foods Market Down on Guidance

Michael Teague |

Whole Foods Market Shares Plummet After-Hours with Release of Earnings ReportWhole Foods Market (WFM) reported its fourth quarter earnings after the close on Wednesday, precipitating a sharp 6-percent drop in share price during after-hours trading to $90.95.  The company beat Earnings-Per-Share growth expectations by a single cent ($0.78 per share), and the $3.86 billion in revenue was in line with estimates.

These numbers, however, could not offset the fact that same-store sales in Q4 grew 7.2 percent, half a point short of the 7.7 percent estimate, while the company also reduced guidance for in-store sales growth from a range of 6.5 to 8.5 percent down to 6.6 to 8 percent. Additionally, revenue guidance was adjusted downward from 10 to 12 percent growth to 10 to 11 percent.

According to the statement, the company expects to run up against strong gross margin numbers from Q2 and Q3 of last year, and this will affect its EPS growth for the rest of 2013. EPS will also be hurt by the company’s ongoing attempts to expand its store-wide “value offerings”, in its quest to improve its competitive price positioning vis-à-vis other stores like Trader Joe’s.  These cheaper products simply means smaller margins in hopes of higher volume for the company, but they could also eventually end up diluting the chain’s identity as a purveyor of high-quality, and thus more expensive products.

Additionally, there is the fact that the store’s big expansion plans will also become more costly this year. With a steady year-over-year increase in relocation and pre-opening expenses, the 10 to 12 openings scheduled for the rest of 2013, as well as a large number of them estimated for the first quarter of 2014, will send WFM’s costs way up.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
WFM Whole Foods Market Inc. 28.65 0.13 0.46 3,366,372
WUBA 58.com Inc. American Depositary Shares each repres 48.55 -0.92 -1.86 1,351,277

Comments

Emerging Growth

Naked Brand Group Inc

Naked Brand Group Inc through its wholly-owned subsidiary is engaged in manufacturing and selling of direct and wholesale men's undergarments to consumers and retailers.

Private Markets

Cross Campus

With over 500 members and operating 80,000 square feet by summer 2016, Cross Campus is one of the country’s top ten shared, collaborative office or "coworking" operators in the US.…

Knightscope

Autonomous security robots providing advanced detection capabilities at $7 per hour - aiming to define the future of security. Help #StopTheViolence.