Whole Foods says consumers may be ‘trading down’ less
This article was originally on a blog post platform and may be missing photos, graphics or links. See About archive blog posts.
Shares of natural-foods grocer Whole Foods Market Inc. soared to their highest level in more than a year late Tuesday after the company reported better-than-expected quarterly earnings and raised its profit estimate for fiscal 2009.
Whole Foods, for years nicknamed ‘whole paycheck’ for many consumers’ perceptions of its prices, said its sales trends hinted that cost-conscious shoppers were ‘trading down’ less in their buying.
Although same-store sales were off 2.5% in the company’s fiscal third quarter ended July 5 compared with a year earlier, the rate of decline slowed sharply from the 4.8% year-over-year decline in the second quarter and a 4% drop in the first quarter.
The Austin, Texas-based chain said that cost controls helped it generate earnings of nearly $35 million in the quarter, or 25 cents a share, compared with $33.9 million, or 24 cents, a year earlier. Analysts had expected a profit of 20 cents a share.
The company raised its earnings estimate for fiscal 2009 (ending in September) to a range of 80 cents to 82 cents a share, up from its previous estimate of 65 cents to 70 cents.
Whole Foods’ shares rocketed to $28.25 in after-hours trading. The price was up 2 cents to $24.82 in regular trading before the results were announced.
The stock, which had been sliding since early 2006 as the company faced rising competition in organic foods from major grocery chains, has more than tripled since it hit a low of $8.19 last November.
Whole Foods, which had total sales of nearly $1.9 billion last quarter, said its average shopper basket size stabilized during the three months and began to improve toward the end of the period. What’s more, in the first four weeks of the current quarter same-store sales slipped 1.1% from a year earlier, continuing the better tone of business, the company said.
‘We hope these trends are an indication that the level of ‘trading down’ might be easing somewhat,’ the firm said on its conference call with analysts.
The company also said that ‘while some competitors appear to be pulling back on organic as they emphasize value more, we are refocusing on our core customers and expanding our organic offerings.’ In an interview published on the Wall Street Journal’s website late Tuesday, Whole Foods CEO John Mackey said the company wanted to return to its roots as a retailer of healthy foods.
From the Journal:
Mr. Mackey said in an interview prior to Tuesday’s results that Whole Foods this fall will launch a ‘healthy eating’ initiative with cooking demonstrations and recipes. The blunt-speaking Mr. Mackey said the company’s product selection had veered off-course. ‘We sell a bunch of junk,’ he said, vowing to promote healthier lifestyles for its customers and employees. ‘We’ve decided if Whole Foods doesn’t take a leadership role in educating people about a healthy diet, who the heck is going to do it?’
-- Tom Petruno