In recent years, American consumers have shown a preference for healthier food options, whether they eat at home or elsewhere. Austin, Texas-based Whole Foods Market (WFM, Financial) has been striving to serve the segment of the market that wants to eat natural organic foods at home, but, in these trying economic times, price has continued to be a barrier for many.
Lower-priced competitors – Sprouts Farmers Market (SFM, Financial), The Fresh Market (TFM, Financial) and privately held Trader Joe’s – helped hold Whole Foods’ comparable stores sales increase to under 4% in the quarter that ended in July. Indirect competitors – Kroger (KR, Financial), Walmart (WMT, Financial) and Target (TGT, Financial) – have been expanding their organic offerings as well.
But Whole Foods may have turned the corner. Its fourth-quarter earnings – $128 million, or 35 cents a share – exceeded Wall Street’s expectations (32 cents a share). Whole Foods lowered its prices on many items and took steps management hopes will make it easier for customers to pay by becoming one of the first retailers to accept Apple Pay, Apple’s (AAPL) newly announced mobile payment system.
Shares in Whole Foods went up 7% in after-hours trading Wednesday.
Revenue growth was higher than the industry average (2.8%). Compared to the same quarter a year ago, Whole Foods’ earnings per share were up nearly 8%.
Whole Foods also recently introduced a ratings system to help customers determine whether the fruits, vegetables and flowers in Whole Foods’ stores were grown in an environmentally responsible way.
Nine of the gurus we follow at GuruFocus traded in Whole Foods stock at the end of June. Four – Ray Dalio (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Chris Davis (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) – added to existing holdings. It was a new buy for Frank Sands (Trades, Portfolio) and Robert Olstein (Trades, Portfolio). Jim Simons (Trades, Portfolio) reduced his stake in Whole Foods while Pioneer Investments (Trades, Portfolio) and Manning & Napier Advisors sold out.
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