Natural food grocery Whole Foods Market Inc. is scheduled to announce its fiscal third-quarter earnings after the market closes Wednesday.
Here’s what you need to know:
FORECAST: Analysts forecast net income of 37 cents a share for the fiscal quarter ending July 3, down from 43 cents a share a year earlier, according to those polled by Thomson Reuters.
REVENUE FORECAST: Analysts forecast revenue of $3.73 billion for the quarter, a 3% increase from $3.6 billion a year earlier.
WHAT TO WATCH:
SLUGGISH SALES: Whole Foods comparable stores sales growth, a closely tracked indicator for retailers, has been slowing for more than two years. The grocer has cut costs, invested in price discounts and piloted a loyalty program.
But sales have remained soft and analysts expect it will take years to convince customers that the chain’s prices have become more competitive. Food retail analysts predict comparable-store sales declines of between 2.4% and 3.5% for the quarter, compared with a 3% decrease during the previous quarter’s reporting period.
Traditional supermarket chains such as Kroger Co. have undercut Whole Foods’ dominance in organic and natural foods, hurting sales. William Kirk, a U.S. food retail analyst from RBC Capital Markets, says the other grocers aren’t stealing Whole Foods’ existing customers but preventing it from attracting new ones.
--NEW CHAIN PERFORMANCE: Whole Foods opened the first two of its new 365 by Whole Foods Market stores during the quarter in an attempt to lure millennials and more price-conscious shoppers. Early indicators showed strong sales volume in its new Los Angeles store, and analysts will be looking for an update on performance and how a newer location near Portland, Ore., has fared. Investors will also be closely watching if 365 stores have cannibalized sales from Whole Foods’ pricier full-format stores.
--SAFETY SCARE: Federal regulators issued a warning letter last month about serious health violations at a Massachusetts plant serving the natural grocer, and analysts are watching if media attention hurt sales. A BMO Capital Markets survey of 1,000 customers found that only 27% of shoppers had heard about the warning letter, and 64% of those who knew about it said it didn’t influence their decision to shop there. Still, says Mark Wiltamuth of Jefferies LLC, the incident could weaken Whole Foods’ comparable-store sales.
By: Heather Haddon (The Wall Street Journal).
Photo 1: Clean Yield.
Photo 2: MarketWatch.
Photo 3: Getty Images (via Fortune).
Review: Emerging Market Formulations & Research Unit, FLAGSHIP RECORDS.
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