Whole Foods shares will continue to fall
Posted May 14th, 2008 by Ben Stevens
Whole Foods Market, Inc. (NASDAQ:WFMI) shares are down 12% today and hit a new 52-week low of $28.96. It's been a rough go for WFMI this past year, shares are down 25% and YOY sales at their stores fell to 6.7% from 12% two years ago. Add to it the increasing cost of groceries and it equals a lower stock price for Whole Foods.
The U.S. Labor Department reported this morning that the cost of a bag of groceries jumped 1.5% last month, its steepest one-month rise in 18 years.
How do you think this will impact Whole Foods? Badly.
To make matters worse, Whole Foods has 89 new stores under development. And most of them will be larger than its 270 existing stores. Starbucks (SBUX) anyone? We've seen this story before. Growth slows and you keep opening more stores, down the ship goes -- corporate saturation.
Company executives say the weakening economy and tougher competition might have curbed their sales growth. You think?
The Austin, Texas-based grocer says profit in the quarter ended April 13 fell to $40 million, or 29 cents per share, from $46 million, or 32 cents, a year earlier.
Analysts surveyed by Thomson Financial had predicted a profit of 30 cents per share.
The target price reductions have been coming in fast this morning, with the worse reduction by Lehman, they cut their target to $28.
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Masters, let the stock continue to take a beating, when we get to $25, then buy.
Disclaimer: No positions in WFMI.
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