This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Surviving Whole Foods In a Walmart World

NEW YORK (TheStreet) -- Grocery superstar Whole Foods Market's (WFM - Get Report) shine faded after the company reported disappointing earnings after the market closed Tuesday. The market reacted quickly, sending shares to less than $40 for the first time since July 2012.

In Jim Cramer's book Get Rich Carefully, he writes about buying shares in companies that beat estimates and raise guidance. It's a one-two punch combination that historically is very profitable. The flip-side is selling shares in companies that miss and lower their outlooks. Unfortunately for Whole Foods shareholders, more continued pressure should be anticipated.

WFM Chart

Analysts were quick to adjust, and no less than nine adjusted their outlook and or price targets.

  • Canaccord Genuity - Lowered price target from $63 to $49
  • Jefferies Group - cut rating from a buy to a hold and lowered price target from $61 to $46
  • Cantor Fitzgerald - lowered rating from hold to sell
  • BMO Capital Markets - lowered rating from outperform to market perform
  • Deutsche Bank - changed rating from buy to hold
  • Sterne Agee - cut rating from buy to neutral
  • Piper Jaffray - lowered rating from overweight to neutral

WATCH: More market update videos on TheStreet TV | More videos from Brittany Umar

Bucking the trend of downgrades, Argus views the falling share price as a buying opportunity and upgraded Whole Foods from hold to buy. Argus may prove it's the smartest analyst in the room, but investors should proceed with caution. I will explain why.

Enter the world's largest retailer, Walmart (WMT - Get Report) and its margin-destroying expansion into organic foods. Walmart isn't Whole Foods' only problem. Safeway (SWY), Target (TGT), Kmart (SHLD), Kroger (KR), and almost left-for-dead SuperValue (SVU) are closing the competitive advantage gap.

About a month ago, Walmart and organic foods supplier Wild Oats announced that about half of Walmart's stores will stock 100 of Wild Oats' packaged foods on its shelves. Wal-Mart already carries more than 1,600 organic SKUs. Walmart's decision is problematic for Whole Foods for several reasons.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
WMT $68.26 1.60%
WFM $29.91 -0.99%
AAPL $92.69 -0.59%
FB $119.49 1.40%
GOOG $711.11 1.40%


Chart of I:DJI
DOW 17,740.63 +79.92 0.45%
S&P 500 2,057.14 +6.51 0.32%
NASDAQ 4,736.1550 +19.0610 0.40%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs