Whole Foods beats 1Q profit forecasts, stock rises

In this March 27, 2014 photo, a woman shops at a Whole Foods Market. (AP Photo/Tony Dejak)
In this March 27, 2014 photo, a woman shops at a Whole Foods Market. (AP Photo/Tony Dejak)

AUSTIN (AP) — Whole Foods Market’s moves to cut prices and retool its image appear to be resonating with shoppers.

The upscale grocery chain reported a nearly 6 percent increase in fiscal first-quarter profits, beating Wall Street estimates and showing growth in a key sales measure.

The company’s stock rose more than 3 percent in after-market trading on Wednesday.

The Austin, Texas-based chain, which has more than 400 stores mostly in the U.S, is seeking to differentiate itself from competitors now that organic and natural products have become increasingly mainstream. Last year, it launched a national advertising campaign called “Values Matter” and introduced a “good, better, best” ranking system that rates produce based on the supplier’s farming practices.

At the same time, Whole Foods is also trying to appeal to a broader audience by shaking its pricey image that garnered it the nickname “Whole Paycheck.” One way it has sought to keep prices competitive is by expanding its store brands. It’s also testing a customer loyalty program.

Whole Foods is also catering to an increasingly tech-savvy shopper and is rolling out an online delivery service with Instacart. Since launching the service in 15 markets last fall, it is averaging weekly online delivery sales of over $1 million, executives said on a conference call after the earnings results were announced.

For its latest quarter, Whole Foods reported that revenue at stores opened at least a year picked up from the previous period, after five straight quarters of slowing sales growth. That sales measure rose 4.5 percent, up from the 3.1 percent in the previous quarter. The metric is a key indicator of a retailer’s health because it excludes results from stores recently opened or closed.

“We attribute our broad-based sales momentum to our customers’ positive response to our many strategic initiatives, along with improving consumer confidence,” Walter Robb, co-chief executive officer of Whole Foods Markets Inc., said in a statement.

The Austin, Texas-based company said it had net income of $167 million, or 46 cents per share, in the quarter ended Jan. 18. That compares with $158 million, or 42 cents per share, in the year-ago period.

The results beat Wall Street expectations. The average estimate of analysts surveyed by Zacks Investment Research was for earnings of 45 cents per share.

The grocery chain posted revenue of $4.67 billion in the period, which fell just short of Street forecasts. Analysts expected $4.68 billion, according to Zacks.

The company’s shares rose $1.89 to $55.40 in after-hours trading after climbing 49 cents to close at $53.51 in regular-session trading Wednesday.

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Elements of the story were generated by Automated Insights using data from Zacks Investment Research. Access a Zacks stock report on WFM.

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Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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