Whole Foods stocks sag by 13 %

The Texas-based organic grocer Whole Foods posted a 13 % drop in fiscal second-quarter earnings. The company still continues to work on integrating last year’s purchase of Wild Oats chain. Earnings fell to $ 40 million or 29 cents a share for the quarter which ended April 13. One year ago, earnings came to $ 46 million or 32 cents a share. Analysts had predicted a profit of 30 cents per share.

Revenue rose to $1.87 billion from $1.46 billion a year earlier, or by 28 %. It fell short of analyst's forecast of $ 1.89 million, however. The acquisition of Wild Oats Markets Inc. cost $ 8.6 million, or 6 cents per share. Sales at stores open at least a year had risen by 6.7%, but slowed to 5.7 % in the first four weeks of the new quarter. The company blamed this on changes in some store location.
 
Even though this still seemed like a quite strong performance when compared with other retailers, Whole Foods had spoiled investors with years of massive growth before. In its earnings release, the same-store sales growth averaged almost 11% for the five years that ended in fiscal year 2007. The full-year same-store sales gain of 7.5% to 9.5% shows the company is now going through a slowdown.

CEO John Mackey, however, rather took the long view, stating that their business model was very successful by continuing to produce higher sales, comps and sales per square foot than public competitors. The investments being made would result in strong earnings growth in the future, he continued.

The company has changed 27 of the Wild Oats stores over to Whole Foods, and it said sales growth doubled at those locations. Others, however, are being closed. Whole Foods operates about 270 stores and has 89 in development, which are much larger on average than its existing ones.