Updated Research Report on Whole Foods - Analyst Blog

Whole Foods Market, Inc. WFM posted lower-than-expected first-quarter fiscal 2014 results and trimmed its sales and earnings forecast thereafter.

The quarterly earnings came in at 42 cents a share, falling short of the Zacks Consensus Estimate by a couple of cents. Revenue for this natural and organic foods supermarket chain operator came in at $4,239 million, which also missed Zacks' projection of $4,289 million. Whole Foods' comparable-store sales rose 5.4% in the quarter but fell short of its expectations and shriveled 50 basis points sequentially.

Increasing competition and aggressive pricing weigh upon the company's performance as more and more companies are entering into the Organic & Natural food business, specifically The Kroger Co. KR.

Following the results, Whole Foods lowered its outlook. Since Nov 2013, the company lowered its outlook for the second time. Management now projects an escalation of 11% to 12% in total sales for fiscal 2014 on the back of an expected 5.5% to 6.2% rise in comparable-store sales. Earlier, management had forecasted 11% to 13% sales growth buoyed by a 5.5% to 7% rise in comparable-store sales.

Management now envisions earnings in the band of $1.58 to $1.65 per share, portraying a year-over-year jump of 7% to 12%, down from a range of $1.65 to $1.69 forecasted earlier.

The softness in results triggered a downtrend in the estimates, as analysts become less constructive on the stock's future performance. The current Zacks Consensus Estimate for fiscal 2014 and 2015 tumbled 3.6% and 5% to $1.62 and $1.89, respectively, in the past 60 days.

Currently, Whole Foods carries a Zacks Rank #4 (Sell).

Stocks that Warrant a Look

There are certain other stocks that warrant a look, such as J&J Snack Foods Corp. JJSF and Diamond Foods, Inc. DMND both carrying a Zacks Rank #2 (Buy).