Whole Foods Market Inc ( WFM ), benefiting from a successful new ad campaign and continued store growth, reported quarterly earnings Wednesday that beat Wall Street estimates.
Net income at the world's largest natural foods purveyor rose to $167 million, or 46 cents per share, an increase of 5.7 percent from $158 million, or 42 cents per share, a year earlier. That topped by a penny the 45 cents projected by the Zacks Consensus Estimate.
Revenues met analyst estimates, rising 10 percent to $4.67 billion from $4.24 billion a year earlier. Sales growth in stores open more than 53 weeks grew 4.5 percent in the quarter.
The first-quarter results "reflect accelerating comparable store sales growth and healthy returns," said Walter Robb, co-chief executive officer of Whole Foods. "We attribute our broad-based sales momentum to our customers' positive response to our many strategic initiatives, along with improving consumer confidence."
The continued earnings and revenue growth indicate the Austin, Texas-based company is rebounding from its 2014 slump. The grocer's national "Values Matter" ad campaign, which included the first Whole Foods TV spot, has chiseled away at the store's "Whole Paycheck" image. Now as the company plans to accelerate its rapid store growth, Whole Foods is positioning itself for a comeback.
For years Whole foods has sought to shake its image as an expensive chain, out of touch with everyday consumers. Increasing competition from stores such as Kroger ( KR ), which now offers a broader selection of organic foods, cast doubt on whether Whole Foods could ever establish itself as a household brand. As management continually slashed revenue projections, Whole Foods lost 31 percent of its stock value in the past year.
But competing grocers have been unable to replicate the unique customer experience Whole Foods has cultivated. The early adoption of Apple Pay and an upcoming app-based rewards program are aiming to enhance shopper's relationship with the store and build loyalty.
"Changing technology has fundamentally altered how and when customers choose to connect with us, and we are rapidly building out an extended experience beyond the four walls of our stores," Robb said.
While Whole Foods seems to be making progress on its image, the company has also continued its physical expansion. Nine new stores opened in the most recent quarter, bringing the current total to 408.
Management expects to open 38 to 42 stores in 2015, including five to six relocations, and expects to cross the 500-store mark by 2017. In the long term, the company expects to triple its current store count to 1,200 across the U.S.
Based on its successful tactics and its growth prospects, Whole Foods currently holds a Zacks Rank #2 (Buy). Shares closed up 49 cents, less than 1 percent, at $53.51 Wednesday. Following its positive earnings beat, Whole Food's stock price was up as much as $1.69, or 3.2 percent, to $55.20 in after-hours trading.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report >>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report