Whole Foods Downgraded to Neutral - Analyst Blog
20 Febbraio 2013 - 11:40AM
Zacks
Whole Foods Downgraded to
Neutral
On Feb 14, 2013, we downgraded our
recommendation on Whole Foods Market, Inc. (WFM),
the natural and organic foods supermarket, to Neutral based on the
company’s cautious stance for the remainder part of fiscal 2013.
The stock currently holds a Zacks Rank #3 (Hold).
Why the
Downgrade?
Whole Foods has been witnessing
downward estimate revisions since the company came out with its
first-quarter fiscal 2013 results and provided a conservative
outlook for the remaining quarters. The company’s first-quarter
earnings of 78 cents a share jumped 20% year over year and came a
penny ahead of the Zacks Consensus Estimate. Revenue of $3,856
million rose 13.7% but fell short of the Zacks Consensus Estimate
of $3,875 million.
Management hinted that the rate of
growth in earnings per share in the remaining part of the fiscal
2013 would not be at a similar level as that of the first quarter
as gross margin would remain under pressure, primarily in the
second and third quarters. This is due to tough year-over-year
comparison, along with competitive pricing strategy to gain market
share against other supermarket chains.
The Zacks Consensus Estimates for
fiscal 2013 fell by 1% to $2.87 per share over the last 7 days. For
the second and third quarter, the Zacks Consensus Estimates dropped
by 1.4% and 1.3% to 73 cents and 74 cents, respectively, over the
same time frame.
Causes for
Concern
We observe that comparable and
identical store sales growth trend is softening. Whole Foods said
that comparable-store sales rose 7.2% in the quarter, down from
8.7% in the prior-year quarter and from 8.5% in the previous
quarter. Identical-store sales climbed 7.1% in the quarter compared
with 8.2% in the year-ago quarter and 8.3% in the preceding
quarter.
Consequently, Whole Foods narrowed
its sales outlook. Whole Foods now projects an escalation of 10% to
11% in total sales compared with 10% to 12% growth forecasted
earlier.
Other Stocks to
Consider
There are certain other stocks that
warrant a look, such as Flowers Foods, Inc. (FLO)
and J&J Snack Foods Corp. (JJSF), both of
which hold a Zacks Rank #1 (Strong Buy) and are expected to
continue with their upbeat performances. Another stock that should
be merited is The Hershey Company (HSY), which
holds a Zacks Rank #2 (Buy).
FLOWERS FOODS (FLO): Free Stock Analysis Report
HERSHEY CO/THE (HSY): Free Stock Analysis Report
J&J SNACK FOODS (JJSF): Free Stock Analysis Report
WHOLE FOODS MKT (WFM): Free Stock Analysis Report
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