Whole Foods Market (WFM) Stock Falls on Product Overcharge Probe

NEW YORK (TheStreet) -- Whole Foods Market (WFM) shares are down 0.35% to $40.94 in early market trading on Wednesday after investigators in New York City launched a probe of the organic foods grocer to determine whether it has been routinely overcharging customers.

The investigation dates back to at least 2010, according to the New York Daily News.

The city's Department of Consumer Affairs conducted a sting operation in the fall to check the accuracy of the weight labeled on pre-packaged foods.

Investors accumulated a sample of 80 different types of items at eight different Whole Foods locations around the city and found that the weight on every label was inaccurate.

Whole Foods has denied the allegations with a spokesman saying that the grocer is "vigorously defending itself" and that the company "never intentionally used deceptive practices to incorrectly charge customers," according to the Daily News.

New York City's investigation comes in the wake of the company agreeing to pay $800,000 to settle similar allegations in California last summer.

TheStreet Ratings team rates WHOLE FOODS MARKET INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WHOLE FOODS MARKET INC (WFM) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, growth in earnings per share, increase in net income, expanding profit margins and good cash flow from operations. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 5.0%. Since the same quarter one year prior, revenues slightly increased by 9.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • WHOLE FOODS MARKET INC has improved earnings per share by 15.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, WHOLE FOODS MARKET INC increased its bottom line by earning $1.56 versus $1.47 in the prior year. This year, the market expects an improvement in earnings ($1.72 versus $1.56).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Food & Staples Retailing industry average. The net income increased by 12.0% when compared to the same quarter one year prior, going from $142.00 million to $159.00 million.
  • 38.68% is the gross profit margin for WHOLE FOODS MARKET INC which we consider to be strong. It has increased from the same quarter the previous year. Along with this, the net profit margin of 4.35% is above that of the industry average.
  • Net operating cash flow has increased to $322.00 million or 14.18% when compared to the same quarter last year. The firm also exceeded the industry average cash flow growth rate of -24.50%.
  • You can view the full analysis from the report here: WFM Ratings Report

More from Markets

Global Stocks Rise on Tech Resurgence; Dollar Past 3-Month High Ahead of Q1 GDP

Global Stocks Rise on Tech Resurgence; Dollar Past 3-Month High Ahead of Q1 GDP

AMD Rises Above the Competition; Loan Losses Mount for Big Banks -- ICYMI

AMD Rises Above the Competition; Loan Losses Mount for Big Banks -- ICYMI

McKesson Internal Review Clears Senior Management of Wrongdoing on Opioids

McKesson Internal Review Clears Senior Management of Wrongdoing on Opioids

Starbucks Surprises Wall Street With U.S. Sales Up a Paltry 2%

Starbucks Surprises Wall Street With U.S. Sales Up a Paltry 2%

Dow Jumps 238 Points as S&P 500, Nasdaq Also Climb

Dow Jumps 238 Points as S&P 500, Nasdaq Also Climb