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Whole Foods Initiatives Struggling Against Competitive Environment

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Whole Foods Initiatives Struggling Against Competitive Environment

Whole Foods Market, Inc. (NASDAQ: WFM) reported its Q4 results, with the traffic and comps missing expectations.

Deutsche Bank’s Shane Higgins maintains a Hold rating on the company, while lowering the price target from $32 to $29.

The company reported its Q4 WPS at $0.28, beating the consensus and the estimate.

Q4 Results

“However, comps missed and while comp trends in the first 5 weeks of 1Q were a sequential improvement vs. 4Q, the 2-yr stacked continued to decline,” Higgins mentioned.

On the other hand, gross margin decline was less than expected, despite the weaker comp, which the analyst said was surprising, given Whole Food Market’s greater focus on value.

“While WFM is making a lot of needed investments to position the business for long-term growth, we expect comps and margins to stay under pressure in FY17 and FY18,” Higgins went on to say.

The analyst also believes the company has a long way to go toward improving relative price and value positioning, as seen in the 4.2 percent traffic decline during the quarter.

“Management expects traffic to improve as initiatives roll-out throughout the year. However, we believe that traffic could be choppy as competition remains intense,” Higgins noted.

Guidance

The guidance provided by Whole Foods Market was better than anticipated, implying that cost cuts might be able to support earnings.

The company guided to sales growth of 2.5–4.5 percent, comps of -2 to 0 percent and EPS of $1.42 or higher.

Sole CEO

Whole Foods Market also announced that Walter Robb would be stepping down from his role as co-CEO on December 31, while co-founder John Mackey will take over as the sole CEO.

According to a Wall Street Journal report, eliminating the co-CEO structure could add pressure on Mackey, who will become the sole leader of the “struggling grocery chain.”

In addition, executive vice president and chief financial officer Glenda Flanagan is due to retire at the end of FY17.

Latest Ratings for WFM

DateFirmActionFromTo
Aug 2017BarclaysDowngradesOverweightEqual-Weight
Aug 2017Tigress FinancialDowngradesBuyNeutral
Jul 2017Wells FargoDowngradesOutperformMarket Perform

View More Analyst Ratings for WFM
View the Latest Analyst Ratings

 

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