It was true in May and still is today, Whole Foods (WFMI) and Starbucks (SBUX) are the same company selling different items.
Whole Foods had fiscal third-quarter net income of $33.9 million, or 24 cents per diluted share, compared with its year-earlier net income of $49.1 million, or 35 cents per share. Analysts had expected a profit of 31 cents a share.
Charges related to the $565 million Wild Oats acquisition lowered earnings by about 3 cents per share, Whole Foods said. It would now appear that Whole Foods dramatically overpaid for Wild Oats at the peak of the market. Comparable store sales rose 2.6 percent and identical store sales, excluding two relocated stores and two major expansions, rose 1.9 percent. This down from the company’s forecast of “high single digit growth”.
Whole Foods said it was cutting store growth for fiscal 2009 to about 15. The company had previously planned 25 to 30 new stores for 2009.
They also suspended the dividend but added $100 million to their share repurchase plan. It is a wash because WFMI gives shareholders about $28 million a quarter in dividends so they are effectively “robbing Peter to pay Paul”.
Is there anywhere I cannot get organic food today? I can go to the local 7-11 and grab some. Now, if I need some Taiwanese organic corn feed lamb chops, I will probably have to go to Whole Foods. But if I just want salad items and a steak, my local grocer will do just fine organically speaking and cost a whole lot less.
Same goes for Starbucks and my coffee.
The only thing Whole foods needs to do is the same as Starbucks, become more affordable for most folks. When they were the only game in town they could charge what they wanted. Now that they aren’t, price rules.
They’ll figure it out someday…
Read The StockMaster’s take
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2 replies on “Whole Foods Still = Starbucks”
They’re fine. They’re still highly profitable and growing. The fundamentals are tremendous. It’s a tough macro environment but they’ll ride it out and be one of the best performers once the economy improves. They don’t need to change anything or try to become like conventional grocers. That’s not what they do and it’d be a big mistake. Sometimes things outside of your control affect the business. That’s all that’s happening right now.
i am not saying they are going under…just that the glory days are over..
even with the 15% sell off today, at 20 times earnings …too rich