AP News

Whole Foods drops on softer 2013 outlook


NEW YORK (AP) — Whole Foods' stock slid nearly 9 percent Thursday following the natural grocery store chain's disappointing fiscal 2013 forecast.

THE SPARK: Late Wednesday Whole Foods Market Inc. revised its 2013 revenue outlook. The Austin, Texas, company now expects revenue to climb 10 to 11 percent. Its previous guidance was a 10 to 12 percent increase. Based on 2012's $11.7 billion, that implies revenue of $12.87 billion to $12.99 billion. Analysts polled by FactSet expect revenue of $13.2 billion.

Whole Foods also narrowed its range of expected revenue from stores open at least a year, forecasting gains of 6.6 to 8 percent, versus a prior outlook for a 6.5 to 8.5 percent increase. Analysts forecast an increase 7.7 percent.

Sales at stores open at least a year, or same-store sales, is a key indicator of a retailer's health because it excludes results from stores recently opened or closed.

The company, which also reported fiscal first-quarter results Wednesday, still expects 2013 earnings between $2.83 and $2.87 per share. That is below the $2.90 per share that analysts predicted.

THE ANALYSIS: Kate Wendt of Wells Fargo Securities said in a client note that Whole Foods' more conservative full-year outlook was likely because the company saw an opportunity to make revisions since Wall Street's estimates were already above its prior guidance before it released its first-quarter results Wednesday.

Wendt remains upbeat on the company, maintaining an "Outperform" rating, and saying that the shift by consumers to natural and organic food is likely to speed up, which gives Whole Foods a chance to capture more business, given its plan to lower prices.

SHARE ACTION: Shares of Whole Foods fell $9.26, or 9.6 percent, to $87.64 in morning trading. The stock has traded in a 52-week range of $79.58 to $101.86.


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