Whole Foods Falls After Cutting Forecast

Whole Foods Market Inc. (WFM), the largest natural-foods grocer in the U.S., fell in extended trading yesterday after saying fiscal 2014 profit would be less than it previously forecast as same-store sales growth slows.

Profit excluding certain items will be as much as $1.69 a share in the year ending in September, compared with a previous projection of as much as $1.72, Austin, Texas-based Whole Foods said in a statement yesterday. Analysts estimate $1.73 a share, on average, according to data compiled by Bloomberg.

Whole Foods is facing increased competition from expanding organic and natural-food sellers including Fairway Group Holdings Corp. (FWM) and Sprouts Farmers Market Inc. (SFM) The chain has been adding more of its 365 private-label brand items to attract price-conscious shoppers. Sales at stores open at least a year rose 5.9 percent in the fourth quarter, which ended Sept. 29, the slowest growth in 15 quarters.

"You've had Sprouts and you've had several other companies come public that are playing in the same space as Whole Foods," Brian Yarbrough, an analyst at Edward Jones & Co. in St. Louis who advises buying the shares, said in an interview. "That just heightens the concerns around the Whole Foods story."

The shares fell as much as 12 percent to $57.01 in extended trading yesterday, after closing up 1.2 percent to $64.47 in New York. Whole Foods gained 41 percent this year through yesterday, while the Standard & Poor's 500 Index increased 24 percent.

Net income in the fourth quarter rose 7.1 percent to $121 million, or 32 cents a share, from a year earlier. Analysts projected 31 cents, the average of 28 estimates compiled by Bloomberg.

Revenue Forecast

The grocer also lowered its revenue growth forecast for fiscal 2014 to as much as 13 percent from a prior estimate of as much as 14 percent.

Whole Foods, which has said it can expand to 1,000 U.S. locations, plans to open as many as 38 new stores in fiscal 2014 after opening 32 in 2013. It's moving to smaller markets and recently signed leases to open stores in Dayton, Ohio, and Germantown, Tennessee.