Whole Foods announced earnings this week that disappointed the street, causing a 2% drop in overnight trading. The press release focused on positives -- 8.3% growth in same store sales, and 14.1% growth in sales overall. But traders preferred to focus on the fact that revenue came in short of analyst estimates, by $30 million, and guidance on future earnings that also looked light. So down came the shorts. In fact, the grocery business is changing rapidly, and most of those changes don't favor Whole Foods' model of premium-priced goods in urban and suburban strip malls, served up by underpaid employees:
- Wal-Mart (WMT) is continuing to advance in groceries. Trefis estimated their 2011 grocery sales at $145 billion, more than 10 times all of Whole Foods' sales.
- Warehouses like Costco (COST) have been increasing their share of the fresh food market.
- Privately-held H.E. Butt in Texas, which is primarily a Texas market but larger than Whole Foods overall, began copying its store concept a few years ago, under the name Central Market.
- The Fresh Market (TFM) has also copied many aspects of Whole Foods, and while one-tenth its size trades at a similar multiple to earnings.
- Ethnic superstores like Super H Mart are grabbing the dollars of both immigrants and more adventurous American eaters.