Whole Foods & Earnings... Luxury or Staple??? (WFMI)

Tuesday after the close, we’ll get to see earnings out of Whole Foods Market Inc. (NASDAQ: WFMI). The estimates for the organic food grocer from First Call are $0.30 EPS on $1.89 billion in revenues.  Next quarter estimates are $0.35 EPS on $1.96 billion in revenues. Estimates for fiscal Sept-2008 are $1.28 EPS on $8.27 billion in revenues.

Analysts have an average price target north of $41.00.  Whole Foods Market Inc.’s 52-week trading range is $29.99 to $53.65.  In the last 90 days, shares have slid from over $40.00 down to $33.75 Monday, and that was after Monday’s gain of almost 3%.

What is obvious here is that the bar is being set very low going into earnings because of the recent performance.  At least if the company doesn’t do well on earnings, we might get mass message board postings from Rahodeb.

What we have to already expect is margin compression.  Whole Foods already charged much more for the exact same organic or healthy products that you have been able to buy at Kroger and elsewhere.  In the current environment where consumers are looking at ways to pinch pennies, we’ll find out if Whole Foods has remained a staple for the well to do or if it is becoming going to be categorized as luxury goods that the masses are priced out of.

For whatever it’s worth, I have never personally seen any real slide in the raw number of people there.  At the same time, the locations where Whole Foods stores are located in are often as recession proof as it gets.

Jon C. Ogg
May 12, 2008