(NASDAQ:WFM) and offer projections on earnings and future stock movement. Wedbush downgraded Whole Foods Market from an “outperform” rating to a “neutral” rating and dropped their price target for the stock from $54.00 to $40.00 in a research note on Thursday.
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Total revenue was $3.63 billion, also short of the $3.7 billion that analysts expected. Institutional Investors own 82.2% of Company shares. The rating by Morgan Stanley was issued on Jul 30, 2015.
The slump in third-quarter earnings could also be due to the revelation that Whole Foods overcharged customers in New York City earlier this month.
Whole Foods has been cutting prices to try and counter its bad reputation for being too expensive. These companies include The Kroger Co. Specialty stores, such as Sprouts Farmers Market Inc., are expanding as well. (SFM – Snapshot Report) and Wal-Mart Stores Inc. The company is set at a mean analysts’ recommendation of 2.60.
This will be the company’s first store in Akron. The new chain will be equipped with innovative technology, compelling products at value prices and a much modern look to target millennials and stave off competition.
Analysts at Cowen and Company said cannibalization was a big concern given that the first five 365 stores were in locations where Whole Foods already has a strong presence. The company’s new 365 format expands the growth opportunity beyond 1,200 stores. Analysts have questioned how profitable the new 365 stores will be and whether they will significantly steal sales from the existing chain. The store is expected to open in the second half of 2016 and will be located in the former home of Albertsons, which left the 31,150-square-foot space in February after 25 years in downtown Lake Oswego.
Despite the potential upside associated with penetrating the large target market with the 365 stores, not everyone is convinced this initiative is appropriate for the Whole Foods business model. If however, the reports misses expectations, Whole Foods may continue to experience share price weakness.
He added: “We actually think we’ll get superior ROIC (return on invested capital) with the 365 format. While we acknowledge it is taking longer than we would have hoped, we believe continuing to invest in our price relevancy, our marketing and our technology is the right strategy to regain the sales momentum”. Shares are trading -1.80% below their 50-day moving average, and -2.24% below their 200-day moving average.
The mislabeling fueled Whole Foods’ image of being an overpriced grocer-something it has been trying to combat in recent years amid slowing sales growth. The upper end of the range was previously in the mid-single digits. Management anticipates EBITDA margin of about 9% and ROIC of over 14%.
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The company shares have rallied 11.89% in the past 52 Weeks. Whole Foods forecast fiscal fourth-quarter earnings of between 34 cents to 35 cents a share, while analysts had estimated 38 cents a share.
