Earnings Preview: Whole Foods Market - Analyst Blog

Whole Foods Market, Inc. (WFMI), one of the world's leading natural and organic foods supermarket chains, is scheduled to report its fourth-quarter 2010 financial results after the bell on Wednesday, November 3, 2010. The current Zacks Consensus Estimate for the quarter is 28 cents a share. For the quarter under review, revenues are $2,070 million, according to the Zacks Consensus Estimate.

Fourth-Quarter 2010, a Synopsis

Whole Foods Market posted better-than-expected third-quarter 2010 results on the back of strong sales as shoppers flocked to the high-end grocery. The quarterly earnings of 38 cents a share remained in line with the Zacks Consensus Estimate, but jumped from 25 cents posted in the prior-year quarter.

Whole Foods sustained its growth momentum in the top-line with revenue climbing 15.2% year-over-year to $2,163.2 million in the quarter and comfortably surpassing the Zacks Consensus Revenue Estimate of $2,143 million.

Fourth-Quarter 2010 Zacks Consensus

Analysts considered by Zacks expect Whole Foods Market to post fourth-quarter 2010 earnings of 28 cents a share. The current Zacks Consensus Estimate reflects growth of 40% from the prior-year quarter earnings. The current Zacks Consensus Estimates for the quarter range between 26 cents and 37 cents.

Zacks Agreement & Magnitude

The Zacks Consensus Estimate remained stagnant in the last 30 days with only 2 out of 19 analysts following the stock having revised their estimates upward. In the last 7 days, only one analyst has revisited his estimate, keeping the consensus unchanged at 28 cents.        

Positive Earnings Surprise History

With respect to earnings surprises, Whole Foods Market has met as well as topped the Zacks Consensus Estimate over the last four quarters in the range of 0.0% to 23.1%, for an average of 15.3%. This suggests that Whole Foods Market has beaten the Zacks Consensus Estimate by an average of 15.3% in the last four quarters.

Whole Foods Market in Neutral Lane

Whole Foods Market with a strong brand image offers investors one of the strongest growth profiles in the industry, and the stock is poised to surge, as the demand for natural and organic products improves. Effective inventory management and improved store-level performance have helped the company sustain through the economic downturn and achieve improved sales and profit.

Whole Foods has also been revamping its pricing strategy and concentrating more on value offerings, while maintaining healthy margins. Moreover, a prudent capital investment is also translating into improved cash flows.

However, stiff competition and the uncertainty prevailing in the economy have compelled Whole Foods to temper its sales outlook. After registering a growth of 15.2% in total sales, on the heels of an 8.8% rise in comparable-store sales and an 8.4% growth in identical-store sales in the quarter under review, Whole Foods now expects an increase of 12.8% to 13.8% in total sales, driven by a 6.5%-7.5% rise in both comparable-store sales and identical-store sales in fourth-quarter 2010.

Currently, we have a Neutral recommendation on Whole Foods Market. Moreover, the Zacks #3 Rank, which translates into a short-term Hold rating, correlates with our long-term recommendation.