Whole Foods Stocks Dip Despite Record Sales in Q2 2014
Despite seeing record sales this quarter, Whole Foods’ most recent earnings report yesterday caused a severe 14% drop in its stock price in after-hours trading. The report slightly missed analysts’ expectations on earnings, which were 38 cents a share on $3.32 billion in revenue rather than the expected 41 cents per share on $3.34 billion in revenue, according to a consensus estimate from Thomson Reuters. As a result, the company is cutting its earnings outlook for 2014 due to increased competition in organics. Can Whole Foods bounce back?
For the quarter, total sales increased 10% to a record $3.3 billion, according to Whole Foods’ financial report. Net income was $142 million. Comparable store sales rose 4.5%, compared with 5.4% in the last quarter.
“We were overly optimistic…particularly in light of the rapidly changing competitive landscape,” John Mackey, Co-Founder and Co-CEO, said in a conference call, according to Reuters.
Both Wal-Mart and Target have taken aim at Whole Foods with further expansion into the organic food market by introducing new in-house products designed to help lower prices for the category. Whole Foods’ Co-CEO, Walter E. Robb, said that Wal-Mart is an “excellent competitor” and that their move into organics is an “affirmation that this organic food marketplace continues to grow.” To read more on his interview, check out the link below.
“The rapidly growing demand for fresh, healthy foods affirms our mission for the last 36 years and highlights the increasing growth opportunity ahead of us,” said Mackey. “Whole Foods Market is the premier brand in natural and organic foods, with unparalleled quality standards and the broadest selection. As we continue to innovate and evolve at a fast pace, we are confident in our ability to gain market share and expect our sales to approach $25 billion over the next five years.”
Despite the increase in competition, Whole Foods is continuing its series of store expansions with nine new store leases in Buffalo and Chappaqua, New York, Fayetteville, Arkansas, Fort Worth, Texas, Honolulu, Indianapolis, Metuchen, New Jersey, North Wales, Pennsylvania, and Richmond, Virginia. The company currently has 379 stores and expects to cross the 500 store mark in 2017. Over the longer term, Whole Foods sees demand for 1,200 stores in the U.S. alone.
Although analysts might be disappointed, the company’s strong growth will certainly be a force to be reckoned with as other retailers move further into the organic space.
Stay tuned to AndNowUKnow as we continue to follow this developing story.
