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Whole Foods, Cuts Prices, Earnings & Revenues Slump

Whole Foods Market reported earnings after the bell today, posting an EPS of $0.42 missing the Zacks Consensus Estimate of $0.44.  On the Revenue front, Whole Foods also missed the Zacks Consensus Revenue Estimate of $4.3 billion, by posting revenues of $4.24 billion.  

There was not much excitement going into the earnings announcement because of the recent decrease of guidance with their Same Store Sales (SSS), and total sales growth for 2014.  SSS was revised from 6.5%-8% for 2014 to 5.5%-6.5%, while sales growth was reduced from 12%-14% for 2014 to 11%-12%.  These revisions caused the street to lower expectations for both 2014 and 2015 (before this earnings announcement).

Unfortunately for Whole Foods, analysts were intensely looking at SSS, which came in below the expected 5.5% growth by posting 5.4% growth, extending the continued deteriorating SSS comps another quarter. Moreover, sales growth year over year only grew 9.96%, while the street was expecting 11% growth.  The misses on both major benchmarks will negatively impact the stock price.  

Over the past quarter Whole Foods was cutting prices due to increased competition by companies entering the Organic & Natural food business; specifically, Kroger (KR - Free Report) , Sprouts Farmers Markets (SFM - Free Report) , and Costco (COST - Free Report) .  This increased competition will continue to weigh on the top and bottom lines for the foreseeable future.

On the positive, the company still plans on opening between 33-38 stores in 2014; which would bring the total store count to about 400.  Moreover, the recent agreement with Square, to introduce Square Register, Stand, and Wallet services.   The services are designed to make shopping easier, faster, and more convenient.  The Square machines will be placed at venues inside Whole Foods Markets; specifically the beer and wine bar, coffee and juice bars, pizzerias, and sandwich counters.  This is supposed to expedite checkouts, and make the customers overall shopping experience more enjoyable.

In afterhours trading, Whole Foods has declined over 6% on increased volume.  

Tomorrow, Zacks will have a full earnings report on Whole Foods. 

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