Despite Record Sales, Whole Foods Market Inc. Lowers Expectations for 2014

Whole Foods (NASDAQ: WFM  ) reported earnings for the quarter ending April 13 today. The popular chain saw its sales increase to a company record of $3.3 billion, a gain of 10% from the year-ago quarter, however its earnings per share were flat at $0.38, which missed the $0.41 in earnings per share expected by analysts. 

Sales at stores open at least a year rose by 4.5%, but the company noted a negative impact of 0.5% was attributable to the timing of the Easter Holiday, which will fall in the third quarter of 2014 versus the second quarter of 2013. (The quarter being reported on today is Whole Foods' second quarter.)

In addition, the company noted it reached a record in sales per square foot at its stores, which rose to exactly $1,000.

Whole Foods Market did see its operating income as a percentage of sales fall from 7.5% in the second quarter of 2013 to 7% in the most recent quarter. This was largely the result of a rise in its direct store expenses, which rose by 9%, or $71 million, to $840 million. In total its net income stayed flat at $142 million.

Whole Foods also updated its expectations for the full year of 2014 by providing lower guidance across many of its pertinent metrics. It notes it now expects sales to grow by 10.5% to 11% versus the prior expectation of 11% to 12%. In addition it also lowered its earnings per share estimates from $1.58 to $1.65 in its prior outlook to now $1.52 to $1.56.

"The rapidly growing demand for fresh, healthy foods affirms our mission for the last 36 years and highlights the increasing growth opportunity ahead of us," noted the co-founder and co-CEO of Whole Foods Market, John Mackey, in the press release announcing the earnings. "Whole Foods Market is the premier brand in natural and organic foods, with unparalleled quality standards and the broadest selection. As we continue to innovate and evolve at a fast pace, we are confident in our ability to gain market share and expect our sales to approach $25 billion over the next five years."

The company concluded its release by adding its vision through the 2018 fiscal year, in which it anticipates its earnings per share to stand at $2.65. When speaking of the figures, co-CEO Walter Robb added, "this is not guidance but rather a reasonable roadmap of how we are thinking about evolving our business model."

Whole Foods has more than 370 locations and has grown in popularity as people look to eat foods marketed as natural or organic. More recently, however, the chain is facing tougher competition from traditional supermarkets and big-box retailers that have stepped up their own organic and natural offerings.

-- Material from The Associated Press was used in this report.

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Patrick Morris

After a few stints in banking and corporate finance, Patrick joined the Motley Fool as a writer covering the financial sector. He's scaled back his everyday writing a bit, but he's always happy to opine on the latest headline news surrounding Berkshire Hathaway, Warren Buffett and all things personal finance.

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8/27/2015 3:59 PM
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Whole Foods Market CAPS Rating: ****