Whole 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.