Whole Foods Market Inc. raised its 2011 profit outlook after a sharp acceleration in sales, quashing fears of a growth slowdown and underscoring how better-off U.S. shoppers are spending more freely.
The upscale grocer's results, which sent its shares climbing 9 percent, contrast sharply with retailers who serve a greater proportion of less-affluent customers. Discount giant Wal-Mart Stores Inc., for example, still sees signs that customers are running short of cash at the end of the month.
Whole Food's accelerating growth shattered worries that the sales gains that had driven a stunning gain in the stock over the past year were ending. Including Wednesday's after-hours gain, the stock has more than doubled in the past 12 months.
Shares in Whole Foods, which raised its 2011 profit outlook Wednesday after reporting first-quarter income that topped Wall Street's view, rose to $58.35 in after-hours trading from their Nasdaq close of $53.75.
Closely watched sales at established stores rose 9.1 percent in the fiscal first quarter, which ended Jan. 16, compared with 8.7 percent in the prior quarter.
Whole Foods, the biggest seller of organic and natural food products in the United States, also said same-store sales were up 8.7 percent so far in the second quarter.
"They are continuing their sales momentum into the current quarter," said Hapoalim Securities analyst Ajay Jain.
Executives attributed the same-store sales gain in the first quarter to a 7 percent increase in customer visits, including first-timers, and a 2 percent rise in spending per visit as shoppers continued to switch to generally higher-priced organic foods.
"We are proud that we are continuing to gain market share at a much faster rate than most public food retailers," Walter Robb, Whole Foods' co-chief executive officer, said on a conference call with analysts.
Wall Street has been concerned that the company's industry-leading same-store sales growth rates would slow because they were coming up against strong results from a year ago. Analysts also worry that rising costs for beef, dairy products and produce could force shoppers to cut back.
"The good news is they're gaining share. As the economy continues to improve, there's massive opportunity for them," said Jefferies & Co analyst Scott Mushkin, who added that more trade-ups by shoppers would boost Whole Foods' future results.
Mushkin said new mothers — who often consider organics an investment in the health of their children — were likely among the new shoppers at Whole Foods.
Austin, Texas-based Whole Foods was harder hit than rivals such as Kroger Co., Safeway Inc. and Supervalu Inc. when the U.S. economy slid into recession.
The downturn and resulting contraction in consumer spending prompted Whole Foods to revamp its pricing to focus on value. The company, known by some as "Whole Paycheck," has since then emphasized lower-priced store brands and recently rolled out "extreme value" Three Wishes wines that sell for around $3.
On Wednesday, Whole Foods, based in Austin, Texas, reported net income rose almost 61 percent to $88.7 million, or 51 cents per share — topping analysts' average call for a profit of 46 cents, according to Thomson Reuters I/B/E/S.
Sales rose 14 percent to $3 billion.
Citing the first-quarter beat and improving consumer confidence, executives raised financial targets for the full year.
Whole Foods forecast 2011 earnings per share of $1.76 to $1.80 on same-store sales growth of 7.2 percent to 9.2 percent. Its previous forecast called for full-year earnings of $1.66 to $1.71 per share on same-store sales growth of 5.5 percent to 7.5 percent.
Shares of Wal-Mart, which sells more groceries than any other U.S. retailer, Kroger, Safeway and Supervalu were unchanged in extended trading.
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