Whole Foods Earnings Don’t Taste Right to Investors

Whole Foods Markets Inc. (NASDAQ: WFM) reported fiscal third-quarter financial results after markets closed on Wednesday. This company is on the path to expansion with 365 new stores, but at this point it might be too early to tell. Whole Foods has been fighting a battle of perception against consumers, trying to lower prices and not be known as “Whole Paycheck,” but this is an uphill battle that will take time. Although earnings may have been more or less in line, guidance and comparable sales definitely weighed down the stock.

This organic grocer posted $0.37 in earnings per share (EPS) on $3.70 billion in revenue, versus consensus estimates from Thomson Reuters that called for $0.37 in EPS on $3.73 billion in revenue. The same period from last year had $0.43 in EPS on $3.63 billion in revenue.

Comparable store sales decreased 2.6% in this quarter. The number does not change much year to date with comps down 2.4% in this time.

In the third quarter, the company opened 12 new stores, including the first 365 by Whole Foods Market store in Silver Lake, California.

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In terms of the outlook for its fourth fiscal quarter, Whole Foods expects to have EPS in the range of $0.23 to $0.24 and to see sales growth of roughly 2%. The consensus estimates are calling for $0.25 in EPS on $3.56 billion in revenue. In the first two weeks of the fourth quarter, the company has opened one 365 and two Whole Foods Market stores and plans to open two additional stores, including one 365 and one Whole Foods Market store in the quarter.

Walter Robb, co-CEO of Whole Foods, commented on earnings:

We delivered record sales of $3.7 billion this quarter along with a sequential improvement in our comparable store sales trends. We are continuing to make measurable progress on fundamentally evolving our business including the successful launch of our new 365 format, expanded value investments, and increased efforts to better understand and provide personalized offers to our customers. We are seeing some encouraging signs in terms of our sales and believe our nine-point plan will produce strong returns for our shareholders over the long term.

The company produced $189 million in cash flow from operations, returned $44 million in quarterly dividends to shareholders, and repurchased $195 million or 6.5 million shares of common stock. On the books, cash, cash equivalents, and marketable securities totaled $625 million at the end of the quarter, versus $392 million at the end of the previous fiscal year.

Shares of Whole Foods closed Wednesday down 1.4% at $33.64, with a consensus analyst price target of $30.95 and a 52-week trading range of $28.07 to $41.75. Following the release of the earnings report, the stock was down about 4% at $32.34 in the after-hours trading session.

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