Whole Foods’ Guidance Cut Takes an Ax to the Stock Price

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Published: July 30, 2014 4:29 pm

Last Updated: April 28, 2020 10:08 am

Whole Foods Market Inc. (NASDAQ: WFM) reported third-quarter 2014 results after markets closed Wednesday evening. For the quarter, the high-ticket grocery store chain posted adjusted diluted earnings per share (EPS) of $0.41 on revenues of $3.38 billion. In the same period a year ago, the company reported EPS of $0.38 on revenues of $3.06 billion. Third-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.39 EPS and $3.39 billion in revenues.

Same-store sales rose 3.9% in the quarter compared with the same period a year ago, including a 60-basis point gain from the impact of a late Easter which fell in the company’s third quarter this year.

Had the company been able to stop here we’d be looking at a share price gain in after-hours trading instead of a loss. Whole Foods guided sales growth for the year down from a previous range of 10.5% to 11% to a new range of 9.6% to 9.9%, missing even the low end of the old range. Full-year same-store sales growth previously forecast at 5% to 5.5% has been trimmed to a new range of 4.1% to 4.4%. Operating margin has also been trimmed, from a prior range of 6.5% to 6.6% to a new range of 6.4% to 6.5%.

To take some of the sting out of the new guidance Whole Foods announced a new $1 billion share buyback program to replace the current program which still had $322 million remaining. The overall increase, then, is $678 million, and the new program runs until August 1, 2016.

The company’s co-CEO said:

Our business model is producing industry-leading sales per gross square foot, healthy returns on invested capital and strong operating cash flow. We are seeing signs of stability in our sales trends and believe our strategic initiatives will help generate further momentum and produce increasing returns on invested capital over the long term.

The company relinquished its spot atop the biggest losers on the S&P 500 index at the end of the second quarter but shares are still down about 34% since the beginning of the year.

Whole Foods’ shares are down more than 5% at $37.11 in a 52-week range of $36.08 to $65.59. Thomson Reuters had a consensus analyst price target of around $44.75 before today’s report.

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