Today's stock market
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Technology stocks came under renewed selling pressure, and the Technology Select Sector SPDR ETF (NYSEMKT:XLK) fell 0.5%. Crude oil prices continued to decline, dragging down the SPDR S&P Oil & Gas Exploration & Production ETF (NYSEMKT:XOP) by 2.5%, setting a new 52-week low.
Grocery retailers have been struggling recently amid falling food prices and stiff competition. Shares of Kroger Co. (NYSE:KR) were slammed following its earnings report, and organic specialist Whole Foods Market (NASDAQ: WFM) lost ground following strong comments from the founder and CEO.
Kroger creates worries about future profits
Kroger stock collapsed 18.9% after the company provided weak forward guidance while reporting fiscal first-quarter results that met analyst expectations. Total revenue increased 4.9% to $36.3 billion and adjusted earnings per share -- excluding some one-time items -- came in at $0.58. Excluding fuel, sales were up 2.9% overall, and same-store sales fell 0.2%.
However, new guidance for full-year adjusted earnings per share was $2.00 to $2.05, compared with previous guidance from three months ago of $2.21 to $2.25. In prepared remarks on the conference call, Chairman and CEO Rodney McMullen said (emphasis original to company's transcript):
We know there is a lot of upheaval in the food retail industry. Our strategy is to focus on our customers -- as their wants and needs change, we'll be right there with them. We are confident that we will continue winning with our people, our food, and the customer experience, and we will not lose on price.
Given widespread concerns over pricing challenges in the industry and Kroger's reported 45-basis-point decline in Q1 gross margin, that statement no doubt reinforced worries about a downward trend in profits going forward.
Whole Foods founder cools hopes for a sale
Whole Foods founder and CEO John Mackey apparently added to the pessimism swirling around the organic grocer's stock with testy comments about activist investor Jana Partners. Shares of Whole Foods closed down 6.7%.
The hedge fund has taken an 8.8% stake in the company and is attempting to put representatives on the board in order effect some changes it feels will address the slumping stock price. The battle has gotten personal for Mackey, he said in an interview with Texas Monthly:
These people, they just want to sell Whole Foods Market and make hundreds of millions of dollars, and they have to know that I'm going to resist that. That's my baby. I'm going to protect my kid, and they've got to knock Daddy out if they want to take it over.
Investors apparently feel that activist involvement in Whole Foods will have a beneficial effect on the company's direction, as the stock popped the day news broke of Jana's intentions in April. Today's comments by Mackey may have dashed hopes that a sale at a market premium could happen anytime soon.
John Mackey, CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Jim Crumly owns shares of Whole Foods Market. The Motley Fool owns shares of and recommends Whole Foods Market. The Motley Fool has a disclosure policy.