The company tried to soothe investors with a quarterly dividend hike from $0.10 to $0.12 and a planned $500 million stock buyback program, but Whole Foods’ timing was not good. We noted that the company would have been better off waiting a week to make these announcements because they will not change investors’ reactions at all.
Whole Foods has been trying to shed its image as a luxury retailer of food. As it tries to become just one of the guys, chains like Safeway Inc. (NYSE: SWY) and Kroger Inc. (NYSE: KR) are adding higher-priced specialty items and organic foods.
Whole Foods has fought back by offering discounts, adding cheaper brands and matching prices. That hurts margins. The company also continues to open new stores. The CEO said there are 94 leases in the company’s development pipeline and that Whole Foods looks forward “to delivering accelerating new store growth for several years to come.” The company currently has 367 stores in the United States, Canada and the United Kingdom.
Widening the store’s customer base is a good idea, of course, but Whole Foods is getting no help from the U.S. economy. Unemployment remains high, wages are stagnant and confidence is low. Not the best time for strivers to step up to more expensive food. In order to grow, Whole Foods has to play to a less-affluent crowd, and that cannot help but hurt margins. And if the new target audience does not arrive in sufficient numbers, well, things will get worse in a hurry.
Shares of Whole Foods were down about 9.1% in premarket trading Thursday, at $58.60 in a 52-week range of $40.69 to $65.59.
Take Charge of Your Retirement In Just A Few Minutes (Sponsor)
Retirement planning doesn’t have to feel overwhelming. The key is finding expert guidance—and SmartAsset’s simple quiz makes it easier than ever for you to connect with a vetted financial advisor.
Here’s how it works:
- Answer a Few Simple Questions. Tell us a bit about your goals and preferences—it only takes a few minutes!
- Get Matched with Vetted Advisors Our smart tool matches you with up to three pre-screened, vetted advisors who serve your area and are held to a fiduciary standard to act in your best interests. Click here to begin
- Choose Your Fit Review their profiles, schedule an introductory call (or meet in person), and select the advisor who feel is right for you.
Why wait? Start building the retirement you’ve always dreamed of. Click here to get started today!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.
Latest from 24/7
Our expert who first called NVIDIA in 2009 is predicting 2025 will see a historic AI breakthrough.
You can follow him investing $500,000 of his own money on our top AI stocks for free.