Whole Foods Plunges on Earnings Miss

NEW YORK (TheStreet) - Investors are spooked by Whole Foods Market (WFM).

Shares were dropping 5.5% to $52.39 in after-hours trading, as the organic and specialty foods store missed on both profit and revenue estimates and posted store comparable sales growth numbers that were softer than last year, further fueling Wall Street's thesis that Whole Foods is having a tough time against competition. It's likely that the rough winter is hurting traffic and sales.

The Austin, Texas-based company said Wednesday it earned a profit of $158 million, or 42 cents a share for its fiscal first quarter ending Jan. 19, compared to consensus estimates of 44 cents a share. Revenue also came in light at $4.24 billion, up 10% from the year-earlier quarter, compared to the $4.29 billion expected by analysts, according to Thomson Reuters.

Comparable store sales rose 5.4% in the quarter compared to 7.2% growth the prior year's quarter. Whole Foods said comps for the second quarter so far through Feb. 9 were up 5.6%. The company had 373 stores at quarter's end.

Whole Foods tightened its 2014 outlook. It now expects sales growth of 11% to 12% compared to 11% to 13% previously. The company is expecting comparable store sales growth of 5.5% to 6.2% compared to 5.5% to 7%, previously. It expects earnings per share ranging from $1.58 a share to $1.65 a share, down from $1.65 a share to $1.69 a share.

"The company is lowering the top end of its sales growth ranges based on year-to-date trends. Additionally, the lower end of the company's sales and earnings guidance reflects a year-over-year decrease in gross margin for the remainder of the year, while the high end assumes gross margin is relatively flat, reflecting the company's ongoing value strategy and a tough 36.2% year-ago comparison," the company said in a release. "Higher G&A expenses are due primarily to increased spending on technology, and higher pre-opening expenses are due primarily to pre-opening rent associated with the recent acquisition of seven former Dominick's locations, which will remain closed for remodeling in 2014."

Whole Foods opened 10 stores in the first quarter and two more so far in the second and one more opening in the quarter. It expects to have a total of 20 to 25 new stores open in the second half of the year.

Whole Foods co-CEO Walter Robb said that the company expects to hit the 500-store milestone in 2017.

"Over the longer term, we see demand for 1,200 Whole Foods Market stores in the U.S. alone," he said in the release.

--Written by Laurie Kulikowski in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

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