Whole Foods hitting on limits of growth?

11/07/2013 03:37:00 PM
Tom Karst

Tom KarstThe postmortem on the Whole Foods earnings report is mixed. In its quarterly report, the company said comparable store sales increased 5.9% in the quarter that ended Sept. 29. Identical store sales, excluding five relocations and two expansions, were up 5.5%.

For the fiscal year that ended Sept. 29, Whole Foods reported comparable store sales increased 6.9%; identical store sales, excluding six relocations and four expansions, increased 6.6%, according to the financial.

 But revised guidance for fiscal year 2014 pulled the stock price down after the financials were issued.

Reuters coverage noted greater competitive pressure for the organic dollar from Kroger, Costco and even Wal-Mart has taken a toll.

 On the sunny side of the street, Whole Foods opened a best-ever 12 stores in the fourth quarter, the quarterly report said, resulting in a record 32 store openings in the fiscal year. For the upcoming year, Whole Foods said that in the first quarter of fiscal year 2014, WF has opened five stores so far and expects to open five additional stores. The Company currently has 367 stores open totaling approximately 13.9 million square feet. Estimated store openings for fiscal years 2014 and 2015 will range between 33 and 38 stores in 2014 and between 35 and 40 for fiscal year 2015.

 “Over the long term, the Company considers 1,000 stores to be a reasonable indication of its market opportunity in the United States as the Whole Foods Market brand continues to strengthen, consumer demand for natural and organic products continues to increase, and the company’s flexibility on new store size opens up additional market opportunities,” the report said. WF believes Canada and the United Kingdom hold “great promise” as well.

 The Whole Foods earning calls transcript on Seeking Alpha saw commentary on record fourth quarter results, average weekly sales per store of $694,000, gross margin of 35.6%, direct store expenses of 25.4% of sales, a store contribution profit of 10.3%, operating margin of 6.4%, But the call did say growth trends were not quite as robust as the last two years in the third quarter. Economic uncertainty may be stalling some growth in “crossover consumers,” but WF core customers appear resilient, WF executives said.


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