Whole Foods Keeps Delivering On Its Turnaround

Investing

Published: February 11, 2015 4:41 pm

Wednesday after the markets closed, Whole Foods Market, Inc. (NASDAQ: WFM) reported its first-quarter financial results as $0.46 in earnings per share (EPS) and record $4.7 billion in revenue against Thomson Reuters consensus estimates of $0.45 in EPS and $4.67 billion in revenue. The first quarter from the previous year had $0.42 in EPS and $4.24 billion in revenue.

The giant organic grocer gave guidance for the 2015 fiscal year. The company expects sales growth over 9% and comparable store sales growth to be in the low-to-middle single digits. Overall, Whole Foods expects to continue its value strategy and make additional investments in areas such as technology, marketing, and new and existing stores. There are consensus estimates of $1.72 in EPS and $15.71 billion in revenue for the 2015 fiscal year.

The company recently signed 11 new leases, including three new sites in Canada, and these store openings are expected to be spread fairly evenly throughout the rest of the fiscal year.

In addition, Whole Foods returned $43 million in quarterly dividends to shareholders and repurchased $43 million of common stock, or 0.9 million shares in the first fiscal quarter. It also ended the quarter with total cash and cash equivalents, restricted cash, and investments of approximately $1.0 billion.

Walter Robb, co-chief executive officer of Whole Foods, said:

We attribute our broad-based sales momentum to our customers’ positive response to our many strategic initiatives, along with improving consumer confidence. Changing technology has fundamentally altered how and when customers choose to connect with us, and we are rapidly building out an extended experience beyond the four walls of our stores. At the same time, there will always be demand for the dynamic shopping environment, passionate service, and sense of community our stores uniquely deliver. Over the past 37 years, we have demonstrated our retail leadership and are confident we will continue to innovate and lead as we triple our store count to 1,200 over the long term.

A few analysts have made calls in February ahead of Whole Foods’ first-quarter earnings report:

Oppenheimer initiated coverage with a Buy rating and a $62 price target.
SunTrust maintained a Buy rating and raised its price target to $62 from $50.
Telsey Advisory Group has a Market Perform rating for Whole Foods, and it raised the price target to $48 from $43.

Whole Foods shares closed Wednesday up 0.9% at $53.51. In after-hours trading, shares were up another 2% at $54.71. The stock has a consensus analyst price target of $49.48 and a 52-week trading range of $36.08 to $56.42.

The long and short of the matter is that the massive drop in 2014 sure looks like more and more of a serious overreaction.

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