Whole Foods Squashed

Updated from 9:45 a.m. EST

Whole Foods Market (WFMI - Cramer's Take - Stockpickr) plunged 23% Friday after the peddler of organic cornish hens pointed to a sales slowdown and predicted a 2007 earnings hit.

The Austin, Texas, grocer said it expects slower sales growth, down to a range of 6%-8%, in stores that have been open a year. The company had produced three consecutive years of double-digit comparable stores sales growth.

Whole Foods said CEO John Mackey will cut his salary next year to $1, claiming he has "reached a place in my life where I no longer want to work for money."

Whole Foods raised its salary cap for workers who do want to work for money from $437,000 to $608,000, citing the need to attract and retain executives.

For the fiscal fourth quarter ended Sept. 24, Whole Foods made $40 million, or 28 cents a share, up from the year-ago $9 million, or 6 cents a share.

Excluding certain items, earnings rose to 29 cents a share from 23 cents a year earlier, matching the Thomson Financial analyst consensus estimate. Sales rose to $1.29 billion a year earlier, shy of the $1.32 billion Thomson target.

The company said same-store sales growth slowed to 11% in 2006 from 13.6% in 2005. Whole Foods said same-store sales rose 6.8% in October, the first month of fiscal 2007.

"After producing such strong growth over the last three years, we believe fiscal 2007 will be a transition year for us," Mackey said. "As we revert back to our historical comparable store sales growth range, without yet producing a fully offsetting increase in sales from new stores, we believe our total sales growth will be impacted."

The company said it expects to open 18 to 20 stores this year, including five store relocations. As a result, Whole Foods expects total pre-opening and relocation costs for fiscal year 2007 to be in the range of $68 million to $74 million, which it called a "significant year-over-year increase."

Whole Foods said it expects pre-opening and relocation costs to "significantly impact fiscal year 2007 diluted earnings per share growth."

Shares sank $13.86 to $46.26.