Whole Foods Market is still rocking food retail, earnings show

Last week, Whole Foods Market was a victim of its own success. The publicly traded mega natural grocery chain reported its earnings on Nov. 2; and although net income for its fiscal fourth quarter jumped 31 percent to $75.5 million and fourth quarter revenue increased 12 percent to $2.4 billion, the performance didn’t quite meet analyst expectations. The result? Whole Foods’ shares fell nearly 5 percent.

The company’s stock price has rebounded some since and most analysts acknowledge that, after several quarters of blowing the numbers out of the water, Whole Foods is currently being held to some very high performance standards. “Expectations were incredibly high going into the quarter,” Jefferies & Co. Analyst Scott Mushkin told Reuters.

One key performance metric that was off in Whole Foods’ latest earnings round was its same-store sales, which grew 8.4 percent but missed analyst expectations of a 9.1 percent gain. Whole Foods was also off slightly on its expected earnings for its next fiscal year. The company is forecasting earnings of $11.4 billion to $11.6 billion, or $2.21 to $2.26 per share. Analysts were expecting $2.26 per share and revenue of $11.6 billion.

Despite last week’s stock drop, Whole Foods continues to shine in the grocery sector. In fact, the company continues is expanding at a faster rater than nearly every other U.S. food retailer. Whole Foods is also on an expansion spree that continues to gain steam. The retailer opened 18 stores between November 2010 and November 2011, and it plans to open another 27 between now and September 2012 and another 28 to 32 in 2013. In all, Whole Foods now operates 316 stores—some 684 shy of the 1,000 stores Whole Foods says it believes it could eventually operate in the United States.

“We consider 1,000 stores to be a reasonable indication of our market opportunity in the U.S.,” Whole Foods CEO John Mackey told analysts during the company’s Nov. 2 earnings call. “We are not yet saturated in any major metro area, and our flexibility on new store size has opened up additional market opportunities. In addition, through acquisitions and our own store development, we have learned that select secondary markets are ready and waiting for Whole Foods Market to come to town.” Mackey said Whole Foods sees Canada and the United Kingdom as promising expansion ground, as well.

Overall, Whole Foods’ share price is up 39 percent this year. In comparison, Safeway’s stock is down 14 percent, Supervalu down 18 percent and Fresh Market down 1 percent, according to the website WallStCheatSheet.com.

"I give Whole Foods credit for correcting their mistakes and becoming a better retailer, (but) they're also harnessing a nice tailwind that many other retailers do not have access to right now," Matt Arnold, consumer analyst for Edward Jones, told Austin American-Statesman.