Whole Foods Market Inc., the largest U.S. natural-goods grocer, surged the most in more than three months after raising its annual forecasts, buoyed by freer- spending consumers prepared to pay for healthy food.
Earnings will be as much as $1.80 a share in 2011, the company said yesterday after markets closed. That compared with a previous target of as much as $1.71. The Austin, Texas-based grocer also raised its sales growth forecasts for the year, citing increasing consumer confidence.
Shoppers are putting more items in their baskets and paying more per item, Co-Chief Executive Officer Walter Robb said on a conference call yesterday. Whole Foods also has wooed customers away from traditional supermarkets as people seek out healthier fare for themselves and their children amid rising obesity rates in the U.S.
“Their turnaround is more than a result of just simply rich people spending more,” said Neil Currie, an analyst at UBS Securities in Stamford, Connecticut. “They’ve recaptured that customer who is still in cost-saving mode by refocusing on their heritage, which is healthy eating and natural foods.” Currie rates the shares “neutral.”
Whole Foods climbed $6.30, or 12 percent, to $60.05 at 4 p.m. New York time on the Nasdaq Stock Market, the biggest jump since Nov. 4. The shares more than doubled in the past 12 months, compared with a 12 percent increase in the Standard & Poor’s 500 Consumer Staples Index.
The retailer, founded more than 30 years ago, operates more than 300 stores globally, with locations in the U.S., Canada and the U.K. The company’s “Health Starts Here” program encourages shoppers to stock up on unprocessed foods, healthy fats and nutrient-dense items. Some stores have a nutritionist on staff to answer questions.
“They’re winning a lot of share based on this wellness initiative,” said Scott Mushkin, an analyst at Jefferies & Co. in New York. “The mom who is newly pregnant is saying, ‘my baby is worth it.’” He advises investors to buy the shares.
Last month, the U.S. government updated its dietary guidelines, saying most adults should eat less salt and sugar and get more exercise. More than two-thirds of the nation’s adults are overweight or obese, according to the Departments of Agriculture and Health and Human Services.
Grocers such as Wal-Mart Stores Inc., Kroger Co. and Safeway Inc. also are vying to win over American shoppers as they recover from the worst recession since the 1930s. Consumer spending accounts for about 70 percent of the U.S. economy. Confidence among shoppers has shown signs of improvement, with sentiment falling less than forecast last month, according to the Thomson Reuters/University of Michigan final index.
“The new norm is that people have a better sense of value,” Robb said in an interview yesterday. “We are seeing an incrementally improving level of confidence.”
That came through in Whole Foods’s first-quarter results yesterday. Sales at stores open more than a year rose 9.1 percent in the period, and the grocer also boosted its forecast for that measure for the year. Analysts consider same-store sales a key measure of a retailer’s results because they exclude store openings and closings.
“You can eat healthfully and not necessarily break the piggybank,” Robb said. Stores have seen “a wonderful uptick in fresh fruits and vegetables.”
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