Whole Foods Profit Trails Estimates as Sales Growth Slows

Whole Foods Market Inc., the largest U.S. natural-goods grocer, fell the most in more than three months after posting profit that trailed estimates and lowering its full-year forecast amid increased competition.

The shares slid 7.9 percent to $51.09 at 9:38 a.m. after plunging as much as 8.7 percent for the biggest intraday decline since Nov. 7. Whole Foods yesterday said quarterly net income rose 8.2 percent from a year earlier to $158 million, or 42 cents a share. That missed the 44-cent average of 29 analysts’ estimates compiled by Bloomberg.

The company, based in Austin, Texas, also reduced its forecast for profit excluding certain items to as much as $1.65 a share for the 12 months that ends in September. It previously forecast profit of as much as $1.69 a share, and analysts projected $1.68, on average.

As Whole Foods expands in smaller cities across the U.S., it’s seeing more competition from natural-food sellers such as Fairway Group Holdings Inc. and Sprouts Farmers Market Inc. Whole Foods’ new stores also are taking sales from its existing locations, Co-Chief Executive Officer John Mackey said in November. Sales at stores open at least a year rose 5.4 percent in the first quarter, after a 5.9 percent gain in the prior quarter.

Sales Forecast

Sales in the 16 weeks ended Jan. 19 increased 9.9 percent to $4.24 billion, Whole Foods said in a statement yesterday, trailing analysts’ projections. For the full year, the retailer also cut its full-year sales forecast to as much as 12 percent growth, compared with a previous estimate for as much as 13 percent growth.

Aside from the newer rivals, traditional grocery stores are pushing more organic food, as well. Kroger Co., which sells food under the Simple Truth brand, sees a “huge opportunity” to sell more natural and organic items, Chief Executive Officer Rodney McMullen said on a conference call in December. Cincinnati-based Kroger is the largest U.S. grocery-store chain.

Whole Foods is lowering prices to attract more customers. It sells items such as flour, coffee, milk and frozen pizza under its less expensive 365 Everyday Value brand and is expanding its “value offerings,” Mackey said on a conference call in November.

Earlier this month, the retailer said it bought seven Dominick’s grocery-store leases in the Chicago area from Safeway Inc. The company sees demand for 1,200 Whole Foods stores in the U.S. long term, Co-CEO Walter Robb said in the company’s statement.

It has more than 370 locations in the U.S., Canada and the U.K.

Before it's here, it's on the Bloomberg Terminal.