Whole Foods Bruised

Stock quotes in this article: WFMI , OATS  

Updated from 4:40 p.m. EDT

Shares of Whole Foods Market(WFMI Quote) slid in late trading Wednesday after the organic-foods chain posted an unexpected drop in profits and cautioned of potential troubles in its pending purchase of Wild Oats(OATS Quote).

For the quarter ended April 8, the Austin, Texas-based grocer earned $46 million, or 32 cents a share, down from $51.8 million, or 36 cents a share a year earlier. Analysts polled by Thomson Financial expected earnings of 36 cents a share for the most recent quarter.

The profit drop reflected in part a surge in costs for store relocations and openings. Those costs more than doubled to $15.6 million from $7.3 million a year earlier, as Whole Foods opened a record six stores in the quarter. The company currently has 194 stores.

Sales rose 12% to $1.46 billion from $1.31 billion a year earlier, but the top line missed Wall Street's target of $1.49 billion. Same-store sales rose 6%.

While sales rose by a healthy double-digit percentage, the growth was below Whole Foods' target for the year of 13% to 17%. Likewise, same-store sales were at the low end of Whole Foods' view of 6% to 8% for fiscal 2007 and also a marked slowdown from the 11.9% increase a year earlier.

Still, Whole Foods reiterated its sales-growth targets for the year.

Whole Foods shares were mashed last year after the company warned that 2007 would be a "transition year" as it deals with slower growth. The company's rapid expansion had previously made it a favorite on Wall Street.

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