Here's One Analyst Who Believes Whole Foods Can Regain Its Competitive Edge

Analyst William Kirk believes the company can take on competition only by increasing spending. Though noting the negative impact of conventional grocers to same-store sales, the analyst said peers aren't stealing Whole Foods' existing customers or preventing it from recruiting new.

According to the analyst, targeted couponing, selective price investment and 365 rollout would help the company gain incremental customers. The analyst, however, does not believe conventional grocers give Whole Foods competition of the same magnitude as they have in the past, given the low level of penetration levels of natural/organic food at these companies.

3Q Review And Outlook

RBC Capital noted that Whole Foods' fourth-quarter earnings per share beat estimates, although revenues were just shy of estimates, as comps fell 2.6 percent. The firm also noted that comp trends thus far into the first quarter showed a 1.6 percent drop. For 2017, the company expects net sales growth of 2.5–4.5 percent, comps growth of -2 percent to 0 percent and adjusted earnings of over $1.42.

Lowering Estimates

The firm believes the company can end traffic degradation by marketing and promotional initiatives, which are being funded by cost savings. Citing increased marketing costs and fixed cost deleverage, the firm lowered its 2017 earnings per share estimate.

Though maintaining its first quarter comps. growth forecast of -2 percent, the firm indicated likely upside, given the quarter-to-date performance and easing last year's intra-quarter comparisons.

The firm has an Outperform rating and a $37 price target for the shares of the company.

At last check, shares of Whole Foods were up 1.56 percent at $28.95.