Whole Foods acquisition crimps profit, shares fall

LOS ANGELES (Reuters) - Whole Foods Market Inc (WFMI.O) on Tuesday posted lower quarterly net profit, missing analysts' estimates by a penny, as it booked charges related to its $565 million acquisition of rival Wild Oats Markets in August.

Despite a 28 percent rise in sales during the quarter, the natural and organic foods seller left its fiscal 2008 sales outlook unchanged, and shares fell 8.6 percent in after-hours trade.

The Austin, Texas-based company had fiscal second-quarter net income of $40.0 million, or 29 cents per share, compared with its year-earlier net income of $46.0 million, or 33 cents per share.

Analysts, on average, had been expecting net earnings of 30 cents, according to Reuters Estimates.

Charges related to its Wild Oats acquisition lowered earnings by about 6 cents per share, Whole Foods said.

Revenue rose nearly 28 percent in the quarter to $1.9 billion, matching Wall Street estimates, on average, while sales at established stores rose nearly 7 percent. Sales from Wild Oats stores contributed some 9 percent of total sales.

Identical store sales, excluding four relocated stores and two major expansions, rose 5 percent, the company said.

Whole Foods bought Wild Oats to strengthen its market position as mainstream grocers begin carrying more organic, natural and prepared foods.

The company reiterated a fiscal 2008 outlook it gave in February of total sales growth of 25 to 30 percent, and same-store sales growth of 7.5 to 9.5 percent.

Whole Foods' outlook for the year implies revenue between $8.2 billion and $8.6 billion compared with Wall Street's average target of $8.3 billion, according to Reuters Estimates.

The company said it does not expect to produce operating leverage in fiscal 2008, due in part to more labor and benefits from Wild Oats stores.

Whole Foods shares fell 8.6 percent to $30.74 in after hours trade from a close of $33.64 on Nasdaq.

(Reporting by Alexandria Sage; Editing by Gary Hill and Carol Bishopric)