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Growth Concerns Gnaw at Whole Foods

The company's sales growth shows signs of slipping.
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Fourth-quarter profit fell at Whole Foods Marketundefined, but shareholders weren't exactly mistreated.

While simultaneously announcing quarterly results late Wednesday, the natural-foods retailer rolled out a series of stock value-boosting initiatives, including a $4-a-share special dividend, a 20% boost in the regular dividend, a 2-for-1 stock split and a $200 million buyback program.

However, investors showed their appreciation by taking the stock lower in after-hours trading; it was recently off $3.83, or 2.6%, to $142.95.

In truth, investors may have been dismayed by the company's expectations for the new fiscal year under way, which suggested that full-year sales growth may slow for the second straight year.

Whole Foods said net income for the quarter ended Sept. 25 fell to $9.1 million, or 13 cents a share, from $28.2 million, or 43 cents a share, a year earlier.

The latest results were not comparable with Thomson First Call's earnings estimate of 53 cents a share.

Sales rose 20% to $1.12 billion -- essentially in line with First Call's estimate of $1.13 billion -- as results were driven by same-store sales growth of 13.4%.

For the fiscal year ahead, Whole Foods raised its sales growth expectations to 18% to 21% from a previously stated range of 15% to 20%. However, such growth is below the company's performance of the last two fiscal years, when it posted sales growth of 22.8% and 21.6%, respectively.

Similarly, the company's expectations of same-store sales growth of 8% to 11% in fiscal 2006 would be below the last two years' results of 14.9% and 12.8%, respectively.

In contrast, Whole Foods expects to boost its average square footage growth beyond the level of the past three fiscal years (although it's in line with its five-year average).