By Annie Gasparro
Whole Foods Market Inc. reported a 5.8% increase in quarterly
earnings and said its efforts to attract more customers with lower
prices and nifty technology are making headway.
The natural- and organic-focused grocery chain has struggled
over the past year as mainstream supermarkets like Kroger Co. and
Wal-Mart Stores Inc. are selling more natural and organic foods and
other high-end supermarkets pop up nationwide. The company was
forced to cut its outlook four times over the year for fiscal 2014,
which ended in September.
Its shares had fallen 37% through Wednesday's close. But in
after-hours trading they were up 7% after the company said its
sales in the current quarter were off to a strong start.
Comparable-store sales, or sales at stores open at least year, were
up 4.6% from the year-earlier period.
Co-Chief Executive Walter Robb said lower prices and efforts to
emphasize value are working, as are technology initiatives like
grocery delivery through Instacart and the company's acceptance of
Apple Pay.
"All of these things are driving an increase," he said on a call
with investors. "This is a legitimate--a real--increase, and we're
really pleased to see it happening."
Whole Foods also recently launched its first national TV
commercials and announced a loyalty program.
For more than two years, Whole Foods has been working to shed
its image as an overpriced grocer by offering better deals. But
lowering its prices has cut into sales and profit margin.
For the period ended Sept. 28, Whole Foods' comparable-store
sales rose 3.1%, in line with its expectations, but marking its
worst growth rate in over four years.
It "was a challenging year on many fronts. We faced a dynamic
competitive landscape, a lukewarm economy, and headwinds from our
own growth and value initiatives," said co-Chief Executive John
Mackey.
Whole Foods posted profit of $128 million, or 35 cents a share,
for the quarter, up from $121 million, or 32 cents a share, a year
earlier. Revenue rose 9.4% to $3.26 billion. The company expected a
per-share profit of 31 cents to 33 cents and sales growth of 8.5%
to 9.5%.
Gross margin fell to 35.4% from 35.7%, and will continue to be
pressured by lower prices.
For the recently started business year, the company forecast
revenue growth of more than 9% and said earnings may grow at a
slightly higher rate. Analysts polled by Thomson Reuters, however,
expected a 12% increase in revenue and an 11% rise in earnings.
Write to Annie Gasparro at annie.gasparro@wsj.com
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