Is Whole Foods Market Headed for Disaster?

Whole Foods Market had an unimpressive showing in its last quarter, sending the stock down and investors running for the hills.

Feb 13, 2014 at 4:02PM

There's an inaccurate joke that says Whole Foods Market (NASDAQ:WFM) should really be called Whole Paycheck Market. Now, realistically, no one is likely to spend a whole paycheck at Whole Foods, but you may just have lost a whole paycheck as a Whole Foods investor. Last night after the bell, the grocer announced its first-quarter results, sending the stock down 7.5% by midday today. Is this a sign of things to come or merely a bump in the road for Whole Foods?

Whole Foods earnings fall short of expectations
While no doubt still reeling from the last time they went to the store and couldn't find a parking space, analysts were thrown into a metaphorical tizzy after Whole Foods announced earnings per share of a mere $0.42. The consensus had been that the business would earn $0.44 per share on $4.29 billion in revenue. 

This quarter's miss came from a slowdown in comparable-sales growth, which rose just 5.4% compared to the same period a year ago. For comparison, comparable-store sales grew 6.9% in fiscal 2013.The result of the slower growth was another estimate miss, with Whole Foods pulling in $4.24 billion in revenue. 

Hiding behind the lackluster sales was a new price competitiveness plan from Whole Foods. Management cited its "stepped-up value efforts" as the biggest factor in its price-per-item change, which fell 106 basis points. Although the Whole Paycheck moniker may be a myth, it's still had a negative impact on Whole Foods' image among price-conscious shoppers.

Will the trend continue?
In the new dawn of slower growth, Whole Foods dropped its full-year sales growth estimate, increased its opening and relocation costs estimate, and drastically reduced its earnings-per-share forecast. From the company's perspective, most of the bad news came in the first quarter and the rest of the year should be stronger. In reality, there are still a number of challenges that Whole Foods is going to face as the year goes on.

Competition for organic and health-food dollars is heating up across the grocery scene, with everyone trying to get a piece of that action. If income growth continues to stagnate and Whole Foods is unable to shed its premium-priced image, then it's going to have a hard time attracting customers to its new locations. The company is hoping to add around 25 stores over the rest of the fiscal year, and slow starts will lead to slow overall growth.

I still like Whole Foods' plan to try to be more price competitive, but the company has a lot of work to do on its messaging. On its call, Whole Foods said that advertising new prices usually takes nine months to a year to set in, so look for a boost in traffic in the middle of 2014 if things are looking good on that front. If not, it might be time to take that paycheck elsewhere.

Should you go long on Whole Foods?
It's no secret that investors tend to be impatient with the market, but the best investment strategy is to buy shares in solid businesses and keep them for the long term. In the special free report "3 Stocks That Will Help You Retire Rich," The Motley Fool shares investment ideas and strategies that could help you build wealth for years to come. Click here to grab your free copy today.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Andrew Marder has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers