Whole Foods Q1 Results Miss View, Lowers 2014 Earnings Outlook

(RTTNews) - Shares of Whole Foods Market Inc. (WFM) tumbled 7 percent in extended trades Wednesday after the grocery chain's financial results for the first quarter missed analysts' expectations and the company lowered its earnings outlook for fiscal 2014.

In addition, the company lowered the top end of its sales and comparable sales growth ranges for the full year. However, Whole Foods' profit for the first quarter rose 8 percent from last year.

Austin, Texas-based Whole Foods reported net income for the first quarter of $158 million or $0.42 per share, up from $146 million or $0.39 per share in the same period last year. On average, 29 analysts polled by Thomson Reuters expected the company to report earnings of $0.44 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the quarter rose 10 percent to $4.24 billion from $3.86 billion in the year-ago period. Analysts had a consensus revenue estimate of $4.29 billion for the quarter.

On a same-store basis, sales for the quarter were up 5.4 percent, on top of a 7.2 percent increase in the year-ago period.

Gross margin for the quarter expanded 6 basis points to 35.03 percent due to lower occupancy costs as a percentage of sales, partially offsetting a slight increase in cost of goods sold as a percentage of sales.

During the quarter, Whole Foods opened 10 stores and signed 21 new leases totaling about 920,000 square feet, increasing the development pipeline to 107 leases.

Looking ahead to fiscal year 2014, Whole Foods lowered the top end of its sales growth range based on year-to-date trends.

Additionally, the lower end of the company's sales and earnings guidance reflects a year-over-year decrease in gross margin for the remainder of the year, while the high end assumes gross margin is relatively flat, reflecting the company's ongoing value strategy and a tough year-ago comparison of 32.6 percent.

Whole Foods now expect fiscal 2014 earnings in a range of $1.58 to $1.65 per share, down from the prior range of $1.65 to $1.69 per share. The company now forecasts sales growth in a range of 11 percent to 12 percent, compared to the prior range of 11 percent to 13 percent.

Analysts currently expect the company to report earnings of $1.68 per share for the year on revenue growth of 12.40 percent to $14.51 billion.

The company projects same-store sales growth in 2014 of 5.5 percent to 6.2 percent, compared to its prior growth range of 5.5 percent to 7 percent.

Walter Robb, co-chief executive officer of Whole Foods Market said, "With a base of 373 stores today and a record 107 stores in our development pipeline, we expect to cross the 500-store mark in 2017. Over the longer term, we see demand for 1,200 Whole Foods Market stores in the U.S. alone."

The company has opened two stores so far in the second quarter, expanding into five new markets. The company expects to open one additional store in the second quarter, with another 20 to 25 stores expected in the second half of the year.

Whole Foods noted that Easter will fall in the third quarter this year compared to the second quarter last year, negatively impacting comparable store sales growth in the second quarter and positively impacting comparable store sales growth in the third quarter by an estimated 50 to 60 basis points.

WFM closed Wednesday regular trading at $55.46, down $0.42 or 0.75 percent on a volume of 6.00 million shares. In after hours, the stock dropped $3.91 or 7.05 percent to $51.55.