Shares of Whole Foods Market, Inc. (NASDAQ:WFM) aren't looking as fresh as they once were. The one-time stock market darling is still trading down nearly 50% from its 2013 peak, and much of the recent news has been negative.

The organic grocer reported its seventh straight quarter of declining comparable sales last month and expects same-store sales to fall for the full year. Profits for the year are also expected to drop.

Cans of Whole Foods 365 tuna, stacked on a store shelf.

Image source: Whole Foods.

It's clear what's going on. Traditional supermarket chains including Kroger (NYSE:KR)Wal-Mart (NYSE:WMT), and Costco have horned in on Whole Foods' traditional strength: organic and natural foods. Kroger's Simple Truth brand, which launched in 2012, reached $1 billion in sales in just two years, and the company now has more than $10 billion in annual sales of organic and natural products. 

Wal-Mart, meanwhile, has been devoting more space to selling fresh food such as produce and has been aggressively lowering prices, and Costco is the nation's largest seller of organic food, according to some metrics.

Whole Foods has struggled to respond to this renewed competition, despite a change in its management structure and efforts to lower prices, launch a loyalty program, and open a new discount banner, Whole Foods 365. 

While some investors, such as activist hedge fund Jana Partners, seem to think Whole Foods offers opportunity after the recent stock slide, there are reasons to think its performance will continue to be challenged.  

Competition is only increasing

It's not only entrenched players that are on the move in the grocery space. While Wal-Mart's efforts to expand its online grocery-pickup program to nearly 1,000 stores is winning plaudits from customers, new competitors are also jumping into the giant $800 billion U.S grocery market. (NASDAQ:AMZN) is accelerating its grocery ambitions, too. It expanded its Amazon Fresh delivery service to a number of new cities last year, is testing the cashier-less Amazon Go convenience-store concept, and just made its first two Amazon Fresh Pickup locations open to the public. Amazon has already upended a number of retail sectors and is focused on penetrating the grocery market. Expect increasing investments from the e-commerce giant.

Another entrant expected to threaten a swath of the industry is German grocery giant Lidl, which will open its first stores in the U.S. in June. Lidl has already squeezed Wal-Mart subsidiary Asda in the U.K. and plans to open as many as 600 stores in the United States. Known for rock-bottom prices, Lidl isn't a direct competitor of Whole Foods, but it's likely to put more price pressure on the industry, which could carry over to Whole Foods. 

Its competitive advantage isn't coming back

Ten years ago, Whole Foods was dominating the organic-food sector it pioneered, posting double-digit comparable-sales growth. The company's brand and unique approach to groceries gave it a competitive advantage, allowing it to charge higher prices and reap a higher margin. But the mainstreaming of organic food brought increased competition from traditional grocers, alternative concepts such as Trader Joe's, and farmers' markets and community-supported agriculture programs. 

Whole Foods still has an edge in gourmet, specialty, and prepared foods that its customers seek out, but when it comes to organic produce and other such goods that used to set Whole Foods apart, that difference no longer exists. The advantage it once had isn't coming back.

The stock is still overpriced

Despite Whole Foods' manifest challenges, the stock is still overpriced compared with its peers. Whole Foods trades at a P/E ratio of 28 today, and that value is likely to expand as profits decline. Kroger, meanwhile, carries a P/E of 15; Wal-Mart trades at a P/E of 18, and Supervalu has a P/E of just 10.

While its traditionally higher margin may be some justification for the premium, investors seem to be betting on Jana Partners' ability to engineer a sale or a turnaround in the business. With a market cap of $11 billion, Whole Foods won't have an easy time finding a buyer, and sales continue to decline despite a number of initiatives to turn around the business. Considering the stock's valuation and the company's problems, the stock is likely to head lower.