Whole Foods shares fall after sales disappoint

Staff Writer
Columbus CEO

AUSTIN, Texas (AP) — Whole Foods reported quarterly sales that fell shy of Wall Street expectations and lowered its outlook for the year, raising worries about the intensifying competition the organic and natural products grocer is facing.

The company, based in Austin, Texas, has enjoyed growth as more Americans move to eat diets they feel are wholesome. More recently, however, products that cater to such lifestyles have become part of the mainstream, with bigger players such as Wal-Mart Stores Inc. and Kroger Co. expanding their organic and natural food offerings.

As such, Whole Foods Market Inc., which has about 380 locations, is facing formidable competitors in a niche it once dominated.

For the quarter, it said sales at established locations rose 3.9 percent, helped by a shift in the timing of Easter into the period. That's a slowdown from the 7.5 percent increase it saw a year ago. The figure is important because it strips out the impact of newly opened and closed locations.

The company, based in Austin, Texas, said it now expects the figure to rise 4.1 to 4.4 percent for the year, down from its previous forecast of 5 to 5.5 percent.

To appeal to a broader range of customers, Whole Foods is trying to keep prices down and change its pricey image, which has led to it being dubbed "Whole Paycheck" by some. Part of the strategy has entailed pushing store brands, which are cheaper for Whole Foods to stock. Those store brands also help cultivate loyalty, since customers can't find the products elsewhere.

For the quarter, the company said it earned $151 million, or 41 cents per share, which is two cents more than Wall Street expected.

A year ago, it earned $142 million, or 38 cents per share.

Revenue rose 10 percent to $3.38 billion, but missed Wall Street forecasts for $3.4 billion, according to Zacks.

Shares of Whole Foods fell 5.4 percent to $36.99.