Why Whole Foods Is Continuing to Underwhelm Investors

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Whole Foods Market, Inc. (NASDAQ: WFM) reported fiscal first-quarter financial results after markets closed on Wednesday. The company posted $0.39 in earnings per share (EPS) and $4.92 billion in revenue, versus consensus estimates from Thomson Reuters that called for $0.39 in EPS and $4.98 billion in revenue. The same period from last year had $0.46 in EPS and $4.83 billion in revenue.

Comparable sales for the quarter were down 2.4% for the quarter, with transactions dropping by 3.9%. The company also mentioned that comparable sales in the fiscal second quarter were down 3.2% so far in Q2, with transactions down 1.9%.

Looking at the guidance for the 2017 fiscal year, Whole Foods expects to see $1.33 or greater in EPS, sales growth of 1.5% or greater, and comparable sales of “approximately -2.5% or better.” The consensus estimates for the fiscal year are calling for $1.44 in EPS and $16.26 billion in revenue.

During the quarter, the company generated $284 million in cash flow from operations, invested $245 million in capital expenditures, and returned $43 million in quarterly dividends to shareholders.

On the books, cash, cash equivalents, and short-term investments totaled $724 million at the end of the quarter, versus $730 million in the same period from last year.

John Mackey, co-founder and CEO of Whole Foods, commented:

In this increasingly competitive marketplace, we are committed to taking every step necessary to improve comps and deliver higher returns for our shareholders. To this end, we are refining our growth strategy, refocusing our efforts on best serving our core customers, and moving faster to fully implement category management. Evolving our purchasing operating model while developing data-rich, customer-centric category management capabilities is critical to our go-forward merchandising, pricing, marketing and affinity strategies.

Shares of Whole Foods closed Wednesday up 1.1% at $29.30, with a consensus analyst price target of $29.95 and a 52-week trading range of $27.67 to $35.58. Following the release of the earnings report, the stock was initially down 4.4% at $28.00 in the after-hours trading session.