(Adds co-chief executive's comments, background)
By Lisa Baertlein
May 6 Whole Foods Market Inc on Tuesday
cut its 2014 same-store sales and earnings forecast for the
third time amid rising competition in the natural and organic
grocery sector that it dominates, and shares tumbled almost 15
Austin, Texas-based Whole Foods also urged analysts and
investors to lower expectations as it works to more aggressively
lower prices and stay out in front of retailers such as Wal-Mart
Stores Inc, Trader Joe's and Fresh Market.
"We were overly optimistic ... particularly in light of the
rapidly changing competitive landscape," John Mackey, Whole
Foods' co-chief executive said on a conference call.
Americans, particularly those with more formal education,
increasingly want to know where their food comes from and how it
is made. They often are willing to spend more money on locally
grown and organic foods, areas where Whole Foods has been a
Eager to cash in on that trend, retailers have been
mimicking plays from Whole Foods, which for several years has
grown robustly despite the weak U.S. economic recovery.
For example, in Los Angeles' waterfront community of Marina
Del Rey, mainstream grocer Kroger Co's Ralphs market has
sold packaged, organic kale and Aidells artisan sausages
at lower prices than a nearby Whole Foods store.
Elsewhere, Wal-Mart's U.S. division plans to introduce 100
Wild Oats-branded organic products ranging from olive oil to
canned black beans in half of its 4,000 stores in coming months.
Walmart, which caters to lower income shoppers and sells more
groceries than other retailers, said those products would be
priced on par with conventional rivals and at least 25 percent
below branded organic foods.
Mackey said that Whole Foods continues to gain share as
organics move from niche to mainstream and would strive to lead
the sector. Whole Foods has already announced it would be the
first U.S. retailer to commit to labeling or eliminating foods
made with genetically modified ingredients.
Whole Foods' same-store sales, a major gauge of performance
for retailers, rose a weaker-than-expected 4.5 percent for the
fiscal second quarter ended April 13, compared with the 5.4
percent rise in the prior quarter. They were up 4.3 percent for
the six weeks ended May 4.
Executives blamed severe winter weather and the shift in the
timing of Easter for some of the sales disappointment.
Second-quarter net income was flat at $142 million, or 38
cents per share, compared with a year earlier.
Whole Foods' new 2014 forecasts call for earnings per share
in the range of $1.52 to $1.56, down from $1.58 to $1.65
previously, and same-store sales growth of 5 to 5.5 percent,
down from 5.5 to 6.2 percent previously.
The same-store sales outlook is below the 8 percent growth
rate Whole Foods investors have grown accustomed to, making it a
Wall Street favorite and the envy of grocers worldwide.
Shares in Whole Foods fell 14.6 percent in extended trading
to $40.96. Shares in the company hit an all-time high of around
$63 in October.
(Reporting by Lisa Baertlein in Los Angeles; Editing by James
Dalgleish and Grant McCool)