Whole Foods Sales Trail Estimates as Health-Food Rivals Grow

Wednesday, 31 Jul 2013 05:51 PM


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Whole Foods Market Inc. posted fiscal third-quarter revenue that trailed analysts’ estimates and lowered the top end of its same-store sales forecast as rivals move into the natural-foods business.

Revenue in the three months ended July 7 rose 12 percent to $3.06 billion, the Austin, Texas-based company said Wednesday in a statement. Analysts projected $3.09 billion, on average.

The grocer, which plans to increase its store base to 1,000 U.S. locations, has tried to boost sales by appealing to health-conscious Americans. It’s seeing more competition from natural and organic-food sellers as chains including Fairway Group Holdings Corp. and Sprouts Farmers Market expand.

“It really boiled down to the deceleration of sales in the fourth quarter,” Benjamin Brownlow, an Atlanta-based analyst with Raymond James Financial Inc., said during an interview. Whole Foods may be facing increased competition from other natural-foods supermarkets, he said.

Same-store sales are up 5.8 percent so far in the fourth quarter, after rising 7.5 percent in the company’s third quarter. Sales at Whole Foods stores open at least a year will increase as much as 7.3 percent in fiscal 2013, compared with a previous estimate of as much as 7.5 percent.

Net income rose 21 percent to $142 million, or 38 cents a share, from about $117 million, or 31 cents, a year earlier. Analysts projected 37 cents, the average of 25 estimates compiled by Bloomberg.

Fairway, Sprouts

The shares fell 2 percent to $54.48 at 4:53 p.m. in New York. The stock had advanced 22 percent this year through the close of regular trading Wednesday, while the Standard & Poor’s 500 Index increased 18 percent.

Whole Foods is seeing more competition from other grocers trying to lure shoppers who want natural and organic goods. Fairway, the supermarket focused on greater New York, raised $204.1 million in a U.S. initial public offering in April. Sprouts, the 163-store grocery chain that’s owned by Apollo Global Management LLC, said this month it plans to sell 18.5 million shares, valuing the company at as much as $296 million. Sprouts sells all-natural pork, dairy-free yogurt and organic produce.

Billionaire Ron Burkle is in talks to buy Tesco Plc’s Fresh & Easy chain and would use the stores to reintroduce the Wild Oats brand, according to people familiar with the discussions.

Whole Foods raised its forecast for profit excluding some items to as much as $1.46 a share for the year ending in September. That compares with $1.45, the equivalent of the company’s estimate after it split its stock two for one in May. Analysts estimate $1.45, on average.

The company reiterated its forecast that revenue will increase as much as 11 percent this fiscal year.

Whole Foods, which plans to open between 33 and 38 new stores in fiscal 2014, has 355 locations.

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