Foolish Forecast: Hearty Whole Foods

Attention, upscale shoppers. Motley Fool Stock Advisor pick Whole Foods (NASDAQ:WFMI) will reveal its Q4 and end-of-year earnings numbers Wednesday after the bell. Please have your credit cards ready before you reach the front of the line, because these groceries don't come cheap.

Analysts are expecting big things out of the country's biggest organic and healthy foods retailer. Did I say big? I mean huge. One year ago, the company reported earning $0.42 per share in its fourth quarter. With analysts now calling for $0.53 Wednesday, that would make for a terrific 26% increase in per-share profits. What's more, it would mark an acceleration in the company's profitability over this year's annual trend. Whole Foods earned $2.03 per diluted share for fiscal 2004. Through the end of the fiscal year that ended in September, analysts expect only a 21% gain in earnings per share ($2.46), and 26% is better than 21%, so analysts see the company growing profits faster, not slower, as the year progresses.

All of which might seem even more impressive when viewed in the light of CEO John Mackey's observation, made in last quarter's earnings report: "We are producing impressive sales and earnings results even as we compare against one of the best years in our company's history." Nice touch.

But I don't think Mr. Mackey was trying to gloat over his company's success, to "rub it in" to less successful rivals such as Wild Oats (NASDAQ:OATS), which last week defied expectations by producing zilch in earnings per share, despite analyst predictions of $0.02. Actually, I believe his purpose in highlighting the company's difficult "comps" this year was more to explain away the fact that, through Q3, Whole Foods' profits growth in 2005 had trended toward about a 7% smaller year-over-year increase than the company managed in 2004.

With the company now selling for 62 times trailing earnings, and 50 times forward earnings, a Fool can understand why Whole Foods might feel the need to "spin" even such spectacular results. When you're priced for perfection, reporting imperfect numbers isn't an option.

But honestly, methinks Mr. Mackey protested too much. Rather than spin his generally accepted accounting principles numbers, he simply could have guided investors toward the lower portion of the press release and point out how the company generated $99 million in free cash flow versus the $53 million generated by this time last year. An 87% jump in free cash flow? Now there's a stat worth boasting about.

Browse along the Whole Foods aisle of our Foolish writing supermarket in:

• Foolish Forecast: Sowing Wild Oats
• Ban Won't Hook Whole Foods
• Whole Foods' New Bag

Fool contributor Rich Smith does not own shares in any company mentioned above.