| LOS ANGELES
LOS ANGELES Whole Foods Market Inc WFMI.O reported a quarterly profit that topped Wall Street's view and raised its full-year profit forecast, sending its shares up 5.4 percent.
The upscale grocer's second-quarter results contrast with retailers that serve a greater proportion of less-affluent customers. For example, discount giant Wal-Mart Stores Inc (WMT.N) -- which sells more groceries than any other U.S. retailer -- still sees signs that some customers are running short of cash at the end of the month.
Whole Foods' report, issued on Wednesday, calmed worries that the sales growth that has driven a healthy 50 percent gain in the stock over the past year would significantly slow.
"The premium consumer came back sooner and she is still spending. I think you're seeing that in the Whole Foods Market results," said Canaccord Genuity analyst Scott Van Winkle, who added that store profitability returned to pre-recession levels and drove the second-quarter's profit upside.
U.S. gasoline prices are running at around $4 per gallon and costs for staples like beef, dairy and produce are higher -- feeding concern about a possible pull-back in consumer spending that could make it difficult for grocers to raise prices to cover increasing costs.
"We did see some product cost increases in the quarter, which we were able to selectively pass through at retail," John Mackey, Whole Foods' co-chief executive officer, said on a conference call with analysts.
"While we can't say how our customers may react going forward, our quarterly results underscore signs that consumer confidence continue to improve, even as gas prices rose," Mackey said.
Austin, Texas-based Whole Foods said it is seeing healthy demand for organic products and discretionary items like cheese, body care products and gift sets.
At the same time, it continues to lower prices on some items to better compete with supermarket rivals such as Kroger Co (KR.N), Safeway Inc SWY.N and Supervalu Inc (SVU.N). That move, aimed at shaking its unflattering nickname "Whole Paycheck", has helped boost traffic to its stores.
"We are going to continue to pound on value," said co-Chief Executive Walter Robb. To that end, he said the company is adding cheese to its "extreme value" line that already includes wines that sell for just a few dollars per bottle.
Whole Foods, the biggest seller of organic and natural food products in the United States, said net income in its fiscal second quarter ended April 10 rose 33 percent to $89.9 million, or 51 cents per share. That topped analysts' average call for a profit of 46 cents per share, according to Thomson Reuters I/B/E/S.
Sales for the quarter increased 12 percent to $2.4 billion. Closely watched same-store sales increased 7.8 percent.
Whole Foods' new fiscal 2011 forecast calls for a profit of $1.87 to $1.90 per share. Its prior forecast was for earnings per share of $1.76 to $1.80.
Its shares rose to $62.99 in extended trading after closing the regular session at $59.74.
(Reporting by Lisa Baertlein; Editing by Matthew Lewis, Bernard Orr)