Whole Foods Market, Inc. (NASDAQ:WFM) is a Austin, Texas based grocery store chain mostly known for its abundant selection of organic and natural food. Whole Foods operates over 400 stores throughout the US, Canada, and the United Kingdom. On Wednesday, November 5th, Whole Foods released their Q4 results.
Whole Foods in the News
Highlights of the Q4 report included $0.35 diluted earnings per share, a $0.03 year-over-year increase from $0.32. This earnings per share beat analyst estimates by $0.03. Whole Foods delivered quarterly sales of $3.256 million as compared to $2.976 million in the same quarter of last year. Despite this 9.4% year-over-year increase, sales fell short of the $3.268 million estimate. In addition, the grocery store chain opened 13 new stores.
Co-founder and co-CEO John Mackey was pleased with the quarterly report, noting “extremely high team member morale, heightened brand visibility and positive sales momentum.” Co-CEO Walter Robb attributed Whole Foods’ success to the unique shopping experience they offer and consequently allows them to “maintain a broad base of loyal customers and attract new customers aspiring to a natural and organic lifestyle.” He continued, “As we accelerate our growth, we are evolving and differentiating our shopping experience faster than ever before. Our leadership in retail innovation is one of our many competitive advantages, and it is exciting to see our new stores from Palm Desert, California to Toronto, Canada perform so well.”
Whole Foods is making changes to shed its image of an overpriced grocery store. By lowering prices and introducing a loyalty program, Whole Foods is actively competing with other grocery store chains that are selling more organic produce. Strong profits in the report came as a relief to shareholders who were concerned about slow sales growth.
A Financial Expert’s Opinion
Robert Ohmes of Bank of America/Merrill Lynch reiterated a Buy rating for Whole Foods on Thursday, November 6th with a price target of $50. Ohmes noted, “We believe the comp-driving initiatives that began in F4Q14 are beginning to show positive results as F1Q15 comps to date have accelerated to 4.6%.” Ohmes continued to stress the positive, emphasizing “1) the competitive benefits of Whole Foods Market, Inc. (NASDAQ:WFM)’s difficult-to-replicate, decentralized operating structure… ; 2) the growing importance of a well-executed natural/organic perishables and prepared foods offering… and 3) WFM’s accelerating evolution toward a more accessibly priced assortment through broad-based & regional strategic price investments & promotions.”
Ohmes has a 70% overall success rate recommending stocks with an average return of +8.9% per recommendation. Ohmes has a history rating stocks in the services sector, including Nike Inc (NYSE:NKE) and Michael Kors Holdings Ltd (NYSE:KORS). Ohmes made four correct Nike recommendations, earning him a 100% success rate for the stock and an average return of +23.7% per recommendation.
However, Ohmes was not as accurate recommending Michael Kors. He rated the stock Buy three times since July, earning him a success rate of 33% with a negative return per recommendation of -5.2%.
Whole Foods was pleased with its quarterly report, but will the grocery store chain be able to keep up profits as other supermarkets break into the organic market?
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Sarah Roden writes about stock market news. She can be reached at [email protected]