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.
Is Your Money Earning the Best Possible Rate? (Sponsor)
Let’s face it: If your money is just sitting in a checking account, you’re losing value every single day. With most checking accounts offering little to no interest, the cash you worked so hard to save is gradually being eroded by inflation.
However, by moving that money into a high-yield savings account, you can put your cash to work, growing steadily with little to no effort on your part. In just a few clicks, you can set up a high-yield savings account and start earning interest immediately.
There are plenty of reputable banks and online platforms that offer competitive rates, and many of them come with zero fees and no minimum balance requirements. Click here to see if you’re earning the best possible rate on your money!
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.