Whole Foods 2Q profit falls 32 percent

PORTLAND, Ore. (AP) — Whole Foods Market Inc. said Wednesday that its quarterly profit fell 32 percent as shoppers spent conservatively during the recession, but the results narrowly beat Wall Street expectations.

Shares of the organic and natural foods grocer jumped 5.1 percent on the news, rising $1.02 to $20.02 in after-hours trading. They had closed the regular session down 9.4 percent at $20.

The Austin-based company earned $27.3 million, or 19 cents per share, for the quarter that ended April 12, down from $40 million, or 29 cents per share, for the quarter last year. Sales were flat at $1.86 billion.

Analysts expected the company to earn 18 cents per share on revenue of $1.87 billion.

The company said cost-controls and steps to appeal to more value-oriented shoppers helped results for the quarter, and it reaffirmed its full-year outlook.

Same-store sales, or sales at stores open at least a year, decreased 4.8 percent in the quarter, versus a 6.7 percent increase in the prior year period. Same-store sales are considered a key measure of a retailer's performance.

The company said it has seen the biggest same-store sales drops in markets hit hardest by unemployment and weak housing markets.

Across the nation, Whole Foods shoppers focused their buying on its lower-priced items. In the first four weeks of the third quarter, while comparable store sales are still down, the company said its results have improved from the second quarter.

"While it is still too early to say our sales are stabilizing, we are encouraged by these improving trends," CEO John Mackey said.

Whole Foods, known more for high-end goods than low prices, thrived in better economic times. But as consumers dialed back their spending at Whole Foods during the recession, the company increased the store brands on its shelves and other value options. It marketed its deals heavily, trying to draw consumers back.

"While it hasn't been an overnight shift, we believe we are starting to change the dialogue about our prices and hopefully the perception as well," Mackey said.

Mackey pointed to the company's free cash flow of $98 million and expense controls as positive highlights for the second quarter.

"We remain very bullish on our long-term growth prospects as demand for natural and organic products continues to grow and our company continues to evolve," Mackey told investors in a conference call.

He said the company's loyal customer base, investments and other efforts position it to grow when the economy rebounds.

"We look forward to getting past this recession and back on an upward growth trajectory," Mackey said.

For the full year, Whole Foods expects sales of roughly $8 billion and a profit of 71 cents to 76 cents per share, including costs related to its settlement with the Federal Trade Commission and preferred stock issue.

In March, Whole Foods agreed to sell 13 of its stores to settle the FTC's challenge of its $565 million acquisition of Wild Oats Markets.

Analysts expect the company to earn 71 cents per share for the year on sales of $8.04 billion.

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