A Whole Lot Of Changes At Whole Foods Market

Barclays does not want to dismiss the management changes announced by Whole Foods Market, Inc. WFM. The firm thinks the new management will have to make some hard decisions to make progress on its nine-point program as sales have not improved.

On Wednesday, the company announced its decision to remove co-CEO structure and named John Mackey as the sole CEO. Whole Foods also reported its EPS of $0.28 for the fourth quarter, which came in $0.04 above the estimates, while revenue of $3.5 billion came in line with the expectations. As a result, shares traded in the green.

However, the brokerage felt that the company’s EPS outlook of $1.42 is below the consensus estimate of $1.51 though it is above its estimate of $1.39. Pointing out that there are limited downside risks citing that the bar is re-set at lower levels, the firm thinks that the stock will trade range-bound in the next few quarters. Therefore, the firm reiterated its Equal-Weight rating and target price of $30 on the stock.

Barclays cited the following four positives:

• Sees considerable cost saving opportunities.
• Sees stability with $100+ baskets.
• POS system is providing the path for affinity program.
• Slowing unit growth to restrict cannibalization so that the format could be tweaked.

Similarly, the brokerage listed the following three negatives:

1. Structurally, gross margin remains high.
2. Traffic fell 4.2 percent in the fourth quarter.
3. Comps deteriorated.

At last check, the stock traded up 1.86 percent to $29.04.