Whole Foods Market Inc.
), one of the leading natural and organic food supermarkets and
an S&P 500 company, is slated to report its fourth-quarter
2012 financial results on Wednesday, November 7, 2012. The
current Zacks Consensus Estimate for the quarter stands at 60
cents a share, reflecting an estimated year-over-year increase of
about 42.9%. Revenue, as per the Zacks Consensus Estimate, is
The current Zacks Consensus Estimate for fiscal 2012 is $2.52
per share. Further, analysts polled by Zacks expect full year
revenue to be $11,696 million.
Recap of Third-Quarter 2012
Austin, Texas based Whole Foods, posted quarterly earnings of
63 cents a share that beat the Zacks Consensus Estimate by a
couple of cents, and jumped substantially from 50 cents earned in
the prior-year quarter.
Whole Foods sustained its top-line growth momentum with
revenue climbing 13.6% to $2,727.3 million in the quarter.
However, it fell short of the Zacks Consensus Estimate of $2,733
million. Comparable-store sales rose 8.2% in the quarter,
although it was down from 8.4% in the prior-year quarter and 9.5%
in the previous quarter.
Whole Foods now expects total sales to increase from 15.6% to
15.8%, underpinned by expectations of an 8.6% to 8.8% rise in
comparable-store sales and an 8.2% to 8.4% growth in
identical-store sales in fiscal 2012.
The company predicts earnings between $2.51 and $2.52 per
share for fiscal 2012, reflecting year-over-year growth of 30% to
Agreement of Estimate Revisions
During the last 30 days, only 1out of 24 analysts covering the
stock revised the estimate upwards for the fourth quarter and
fiscal 2012, while none lowered the estimates over the same time
frame. Moreover, none of the analysts revisited their estimates
in the last 7 days.
Magnitude of Estimate Revisions
No movement was noticed in the Zacks Consensus Estimate for
the fourth quarter and fiscal 2012 either in the last 30 or 7
Positive Surprise History
With respect to earnings surprises, Whole Foods has topped the
Zacks Consensus Estimate over the last four quarters in the range
of 2.4% to 8.5%. The average remained at 5.6%, indicating that
the company has surpassed the Zacks Consensus Estimate by the
same magnitude in the trailing four quarters. Given the past
performance, we expect the company to outperform the Zacks
Consensus Estimate in the upcoming quarterly results.
Being one of the leading natural and organic foods
supermarkets, Whole Foods Market with a strong brand image, and
marketing and merchandising expertise, offers investors one of
the strongest growth profiles in the industry. The stock is
poised to surge once the economy revives and demand for healthier
and natural food improves.
The stringent cost-control measures, effective inventory
management, and improved store-level performance are driving
earnings growth. Whole Foods has also been revamping its pricing
strategy and concentrating more on value offerings, while
maintaining healthy margins. In the last five fiscal years, gross
margin has been in the range of 34% to 35%.
All these are well defined from the company's Zacks #2 Rank
that translates into a short-term 'Buy' recommendation.
Despite these growth catalysts, lingering macro concerns and
cautious consumer spending limits growth in the near term.
Whole Foods' top-line growth faces downside risk from a shift
in consumers focus from higher priced organic products to cheaper
private label brands triggered by negative impact of interest
rate hikes, credit availability, unemployment levels, and high
household debt levels on disposable income. Moreover, rising
competitive pressure from
The Kroger Company
) is raising concerns for the stock.
Consequently, we have a long-term 'Neutral' recommendation on
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