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Shares of Whole Foods Market Inc. (NASDAQ:WFMI) tumbled more than 23% by midday in heavy trading to $46. Indications of this happening could already be seen yesterday in after-hours and this morning in pre-market trading as WFMI shares lost more than 17%.
Organics are bad for you, financially
Whole Foods $100 million stock buyback
Yesterday, the organic and natural foods retailer reported earnings of $39.8 billion, or 28 cent per share, a significant rise from last year's $9 million or 6 cents a share. Revenues also rose from $1.12 billion in the same period last year to $1.29 billion. Analysts were expecting $1.32 billion. Also same-stores sales rose 8.6%, but that is after a good run of double digits growth. To top it all, the company warned of slower growth in sales next year.
So despite what may sound as good growth for a retailer, it doesn't come close to the growth rate WFMI has experienced so far. It is also below what analysts had expected and worse, the outlook for 2007 is below estimates as well. This has caused analysts to warn that slowing consumer spending combined with tougher competition from mainstream grocery stores (remember even Wal-mart Stores, Inc. (NYSE:WMT) is now getting into organics) could squeeze Whole Foods. Alas, no more double-digit same-store sales figures in the foreseeable future.
Already B of A cut rating from "buy" to "neutral" and lowered the target price from $77.50 to $43. Morgan Stanley cut its price target on WFMI from $70 to $63.
If this continues, I wonder whether WFMI would cut prices enough for more people to shop there.
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Reader Comments (Page 2 of 2)
11-10-2006 @ 12:36AM
George S. Davis said...
Interesting conversation. Now I have a method using 2 & 3 liter recycled plastic bottles to grow Sweet corn, beefsteak tomato's, cantaloupes, cabbage, eggplant, peppers, swish chard. How about growing potato's in 9 liter buckets. It's called the Dark Garden Method of growing. Modern Agriculture is full of incredibly wasteful methods. With
regular farms and gardens the majority of fertilizer, herbicide and pesticide used is wasted as water runoff. The Basic thought of The Dark Gardening Method is that the only truly sustainable way to make agriculture work is to stop farming crops and start manufacturing them. In the space a farmer takes to grow one stalk of Sweet corn I can grow 32. There's no digging, no farm equipment needed. No fuel costs. Each plant is in it's own container. It can be lifted out an inspected. Hanicapped? The weight of pods can be reduced futher by one third volume by Styrofoam inserts. Only have a balcony? I have instructions for an 80 plant vegetable rack that's 2'x4'x6'. You make these yourself. Just pick the bottles out on recycle day. Better yet the methods of production are already in place. You can make a garden 10, 100 or thousands plants like me in your backyard. An for anyone who's interested it's complely organic. Email me. I have pictures. Oh by the way, think the gardening season is over? That same 80 plant rack converts to a Mini-Greenhouse and it keeps right on producing. It's heated by a 100 watt bulb. Did you know tomato's live for 3 years? Pepper's can live for 10 and you never have to take them off the rack. Thank you for taking the time to listen.
11-10-2006 @ 4:00AM
Joh Petrowski said...
I love the Whole Foods chain except the ones in New York City and New Jersey. They suck! The staff is rude the prices aren't displayed and they have "thugs" working there.
11-10-2006 @ 5:15AM
Mark said...
The quality is generally good....but it takes very little effort to spend $100.00 there especially if you add in a couple of items from the prepared foods section. No wonder many of us refer to it as "Whole Paycheck".
11-10-2006 @ 12:29PM
robert laurel said...
Hello.. Where can we find these 45 cent "Whole Food" meals discussed by Scott Parsons. Also, tell us where to find info on constructing these "mega-gardens" posted by George S. Davis. Regarding Whole Foods, this is one place you can shop and not have to check every label for hydrogenated oils & high fructose corn syrup. This is just one of many "no-brainer reasons to support such an intelligent choice for a place to purchase your food. Thanks!