Whole Foods Market Inc. proved that it is good to be a grocer that marches to a different beat, reporting a 35 percent jump in its third-quarter net income and raising its full-year forecast. The glowing second-quarter report came last week, when many a mainstream grocer laid an egg.
Whole Foods, which sells natural and organic foods across the country, is beating grocery industry trends on a number of fronts. Traditional grocers are struggling with higher food prices, razor-thin margins and consumers who are slow to spend. But Whole Foods is seeing more shoppers, theyre spending more, and its margins have been improving for some time. The company is even adding stores while others look to sell off or close unprofitable sites.
Whole Foods was hit hard during the recession, but it revamped: It cut costs, slowed growth and increased its lower-priced options. The company has been on an upward swing since and credited this quarters results to its improved price perception among shoppers and increased emphasis on health and wellness.
We see a new era of possibility for Whole Foods Market as customers increasingly embrace healthier lifestyles, and we look forward to accelerating our growth in the coming years, said Walter Robb, co-CEO of the company, last week when results were announced.
The company reported earnings of $88.5 million, or 50 cents per share, for the quarter that ended July 3. Thats up from $65.7 million, or 38 cents per share, in 2010. Revenue rose 11 percent to $2.4 billion.
Analysts expected the company to earn 47 cents per share on revenue of $2.42 billion, according to FactSet.
It was a very good quarter and a continuation of a great trend, said Edward Jones analyst Matt Arnold. There is truly a lot to like about Whole Foods from an investors standpoint.
Whole Foods leaders said the company is performing at near-peak levels again, operating more efficiently than ever and gaining market share faster than traditional grocers.
The company said revenue at its stores open at least a year a key measure of retailers financial performance rose 8.4 percent during the quarter.
By comparison, Kroger Co. saw the measure rise 4.6 percent in its most recent quarter, while Safeway Inc. posted a 0.5 percent increase, and Supervalu Inc. reported a 3.9 percent drop.
Like competitors, Whole Foods is seeing higher prices and passing those along to consumers. But analysts say the chains higher-income shoppers are able to absorb increases.
Company leaders said they still see shoppers looking for value.
All upscale retailers are doing better, Arnold said. In grocery, we are seeing it; in jewelry, we are seeing it. Name the category in retail, and we are seeing it. Its been that way as we come out of the downturn; it isnt new.
Whole Foods, which has 309 stores, also said it plans to ramp up new store openings in coming quarters and sees potential for growth in the United Kingdom and Canada.
The company, based in Austin, Texas, raised its full-year forecast to $1.91 to $1.92 per share; analysts expect $1.90. The company earlier forecast earnings of $1.87 to $1.90 per share.