Whole Foods shares fall after hours on forecast

AUSTIN, Texas (AP) -- Natural and organic grocery chain Whole Foods Market Inc. reported Wednesday that its fiscal first-quarter profit jumped 24 percent on stronger revenue. But the company narrowed its revenue forecast and said its earnings growth may slow through the remainder of the fiscal year as it faces higher store-opening costs and plans to increase the number of lower-priced products in its stores to remain competitive with other grocers.

The news sent Whole Foods' stock down 6 percent in after-hours trading Wednesday.

Whole Foods, based in Austin, Texas, struggled when the recession hit and shoppers cut back on their spending. The company was able to make a comeback after it cut costs, slowed growth and began offering more value-priced items to attract shoppers. The grocery industry, however, remains highly competitive.

The company reported after the market closed that it earned $146 million, or 78 cents per share, for the 16-week period that ended Jan. 20. This includes $3 million from product losses and other costs related to Hurricane Sandy, although the company said the impact on sales was insignificant because it got a boost from customers stocking up before the storm and replenishing afterward. It earned $118 million, or 65 cents per share, in the first quarter of the prior year.

Whole Foods said its revenue increased nearly 14 percent to $3.86 billion from $3.39 billion.

The quarter's profit exceeded market expectations but the revenue fell just short. Analysts polled by FactSet were expecting the company to earn 77 cents per share on revenue of $3.87 billion for the quarter.

Whole Foods co-CEO Walter Robb said the company opened a record number of stores during the quarter, which helped drive the gains. Its revenue from stores open at least a year increased 7.2 percent. This is considered a key indicator of a retailer's financial performance as it strips away the impact of recently opened or closed stores.

The company opened 10 stores in the first quarter and has opened one store so far in the second quarter. It has 345 stores in the U.S., Canada and U.K. and expects to open five additional stores in the current quarter. It also closed on the purchase of six locations from Johnnie's Foodmaster on Nov.30, which expands its presence in the Boston area. The company is currently remodeling these stores and plans to reopen them as Whole Foods Market stores in its 2013 fiscal year.

Whole Foods said that it expects significant year-over-year increases in pre-opening and relocation expenses due to a large number of openings in the fourth and first quarters. It also said that it does not expect to produce the same level of earnings per share growth for the remainder of the year as seen in the first quarter, due to the comparison to the prior years when margins were high. It also pointed to its plans to offer more lower-priced items as adding pressure to this year's margins. It expects its gross margins will fall in the remainder of the year by comparison to the prior.

The grocer stood by its earnings forecast of $2.83 to $2.87 per share for the 2013 fiscal year, which is below the $2.90 per share that analysts had forecast. It narrowed its revenue forecast, saying it expects gains of 10 to 11 percent, versus its prior forecast of a 10 to 12 percent increase. The revenue forecast is based on a comparable 52-week period although there was an added week in its most recent fiscal year. It also narrowed its range of expected revenue from stores open at least a year, forecasting gains of 6.6 to 8 percent, versus its prior outlook of a 6.5 to 8.5 percent increase. Analysts had forecast this measure would increase 7.7 percent.

Whole Foods shares fell $6.15 to $90.75 in after-hours trading on the disappointing forecast. Its shares had gained 79 cents to close regular trading at $96.90. The company's stock has traded between $79.58 and $101.86 in the past 52 weeks.