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Whole Foods Market, Inc. Earnings: Ignore the Noise, Focus on These 3 Things

By Brian Stoffel – Feb 10, 2014 at 11:17AM

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The iconic company isn't the only organic player anymore. How will investors know if it can still thrive?

When companies report earnings, it can be difficult to sift through all the facts and figures and determine what really matters. Having followed Whole Foods (WFM) for some time now, there are three things that I'll be focusing intently on when the company reports after the market closes on Wednesday.

We'll start with the easy stuff
No two numbers are followed as closely as a company's revenue and earnings. Though they aren't enough to tell the whole story, they do offer one important piece of the puzzle. Here's what analysts expect the company to announce:

Expected Revenue

Expected EPS

Fiscal 2014 Revenue

Fiscal 2014 EPS

$4.3 billion


$14.5 billion


Source: E*Trade.

Remember, the market is largely forward-looking. So while results from the past quarter are certainly important, investors will be looking for the company's guidance in determining how to price its stock as well.

With Whole Foods having taken the route to cut prices over the past year -- in part because of competition from large players Safeway (NYSE: SWY) and Kroger (KR 1.32%), as well as organic-focused Natural Grocers (NGVC -0.72%) and Sprouts Farmers Market (SFM -0.50%) -- it will be important for the company to meet revenue expectations.

Then, we get a little more technical
There's no secondary metric grocery investors watch more than same-store sales. While it's possible for virtually any company to grow its revenue by simply building more stores, only companies that have truly won favor with shoppers can increase sales in the base of existing stores.

Whole Foods has posted amazing same-store growth for some time now. Those numbers are starting to come down, but that should be kept in context. As the company's store base continues to expand, it will likely post smaller same-store sales than upstarts like Sprouts and Natural Grocers. At the same time, it should easily come in ahead of more mature stores like Safeway and Kroger.

Here's how all of those stores have fared over the past year.

Source: SEC filings.

In order for Whole Foods to show that it still has the strength to grow in the face of competition, investors should hope for same-store sales growth of at least 5.5%, with 6% or above being a very positive sign.

Finally, you need to listen to the conference call
Ever since its founding, Whole Foods has eschewed the use of rewards cards. However, by lowering prices and trying to bring even more shoppers into the realm of organic food buyers, the company is now exploring their use.

The program has been test-run in select markets, and aims to give customers a 10% discount on the company's private "365" labeled products. If the program is able to entice a sales increase that offsets the discount, it would definitely be seen as positive news.

John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool’s board of directors. Brian Stoffel owns shares of Whole Foods Market. The Motley Fool recommends and owns shares of Whole Foods Market. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Stocks Mentioned

Whole Foods Market, Inc. Stock Quote
Whole Foods Market, Inc.
Kroger Stock Quote
$46.94 (1.32%) $0.61
Natural Grocers by Vitamin Cottage Stock Quote
Natural Grocers by Vitamin Cottage
$9.59 (-0.72%) $0.07
Sprouts Farmers Market Stock Quote
Sprouts Farmers Market
$33.75 (-0.50%) $0.17

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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