Whole Foods Profit Rises, But Sales Misses; Stock Down

(RTTNews) - Whole Foods Market Inc. (WFM) Wednesday reported a higher fourth-quarter profit as sales marginally grew for its natural and organic food products, and margins climbed.

Earnings for the quarter topped Wall Street estimates, while sales missed expectations on concerns over competition and softening of same-store sales.

The grocery chain also said same-store sales for the first quarter were slowing and slashed its earnings expectations for 2014.

Whole Foods announced a 20 percent raise in its quarterly dividend and additional share buyback authorization of $500 million.

Investors were dismayed with the results and Whole Foods stock slid 8 percent in after-hours trade on the Nasdaq.

While there is a broad demand for organic foods, competition is rife as more players throw down the gauntlet. Whole Foods feels its strength lies in store openings even as it faces rivalry from Fairway Group Holdings Corp. (FWM) and Sprouts Farmers Market Inc. (SFM) as well as Kroger Co. (KR).

Austin, Texas-based Whole Foods fourth quarter net income of $121 million or $0.32 per share, compared with $113 million or $0.30 per share last year. On average, 28 analysts polled by Thomson Reuters estimated earnings of $0.31 per share for the quarter. Analysts' estimates typically exclude special items.

Revenue for the quarter rose to $2.98 billion from $2.91 billion a year ago. Twenty-five analysts had a consensus revenue estimate of $3.04 billion for the quarter.

On a same-store basis, sales for the quarter were up 5.9 percent. This is lower compared with 7.5 percent growth in the sequential quarter and 8.5 percent a year ago.

Gross margin for the fourth quarter expanded 37 basis points to 35.6 percent.

Whole Foods opened 12 stores during the quarter and now runs 367 stores in total. The company plans to open 1,000 stores in the US alone.

For fiscal year 2014, Whole Foods now expect earnings in the range of $1.65 to $1.69 per share, compared to its prior guidance of $1.69 to $1.72 per share. Sales growth is expected in the range of 11 percent to 13 percent, from a prior range of 12 percent to 14 percent.

Analysts currently expect earnings of $1.73 per share on sales growth of 13.90 percent for the year.

The company expects same-store sales growth in 2014 of 5.5 percent to 7 percent, compared to its prior growth forecast of 6.5 percent to 8 percent.

Whole Foods' stock closed Wednesday at $64.47, up $0.78 or 1.22%, on a volume of 4.2 million shares. In after hours, the stock dropped $6.27 or 9.73%, trading at $58.20. In the past year, the share trended in the range of $40.70 - $65.59.