Whole Foods Market Inc. fell for the sixth straight day on concern that the retailer’s sales growth is slowing, hurt by increased competition from big-box rivals and conventional grocery stores.
Same-store sales in the fourth quarter may be flat, compared with a previous estimate for growth of 0.5 percent to 1 percent, Scott Bender, an analyst at Cleveland Research, said in note. Bender downgraded his rating on the shares to underperform, the equivalent of a sell.
Whole Foods has been losing shoppers as rivals like Wal-Mart Stores Inc. and Kroger Co. sell more organic products -- often at lower prices. That’s hit Whole Foods’ top line, with same-store sales gaining just 1.3 percent in the quarter through July 5. In response, the organic grocer is opening a new line of smaller, value-focused stores to lure millennials. It also said last month that it was eliminating 1,500 jobs to reduce costs.
"Increasing competition has had a significant negative impact on Whole Foods’ financial performance over the past two years, and the company’s lack of effective reaction appears to be driving a widening gap of underperformance versus peers," Bender said. "We do not have much confidence in Whole Foods being able to reverse this trend."
The shares tumbled 4.9 percent, or $1.58, to $30.70 at the close in New York. Whole Foods has dropped 9.3 percent since the close on Oct. 16, the last trading day that it gained. The shares now trade at about 18.3 times earnings, on par with the average for the Standard & Poor’s 500 Index.