Third-quarter net income at Wild Oats came in at $3.1 million, or $0.10 per share, compared with a profit of $82,000, breaking even per share, last year. Sales increased 4.8% to $291.8 million. Same-store sales increased a mere 1.6%, vs. a 6.1% increase in the third quarter last year. The company missed its own guidance for a comps increase of 3% to 4%, blaming the miss on the tough comparison with last year and the "continued impact of new competition." (It fell short of Wall Street's sales expectations as well.)
Granted, Wild Oats improved its profitability during the quarter, lifting gross profit margin and reducing expenses. In addition, Pathmark
Plus, it's well known that the competition to provide organic (or gourmet) goods is getting steeper all the time. And it's not just specialty grocers like privately held Trader Joe's; conventional names like Safeway
Investors freaked out about Whole Foods Market's
Speaking of leaders, Wild Oats is still in the process of searching for a CEO. That's another area where Whole Foods excels, considering that it's led up by John Mackey, who's a founder of the company and well acquainted with the organic industry and lifestyle.
It's not hard to see, then, why Wild Oats' P/E of 41 might make it look, well, wildly pricy at the moment. For now, I see little reason for investors to be wild about Wild Oats.
For related Foolish commentary, see the following articles:
- Take a look at Whole Foods' most recent quarter.
- Is there a panic in organics?
- Flash back to Wild Oats earlier this year.