Whole Foods picked by Barron's as summer retail stock to watch

Jul 22, 2014
Austin Business Journal

Whole Foods Market Inc. shares have been the second-worst performer so far this year in the S&P 500 index following a string of tough earnings reports. Looking behind the numbers, however, a report in Barron's picks Whole Foods as one of six inexpensive growth stocks to watch

In the report, titled "Summer Bargains," the publication notes that Austin-based Whole Foods is still the nation's organic grocery leader despite more competition from organic players such as Sprouts Farmers Market and traditional grocers such as The Kroger Co. that are expanding organic offerings — sparking rumors earlier this year that Florida supermarket giant Publix was considering Whole Foods as a possible takeover target

Whole Foods tops the Austin Business Journal list of the area's largest public companies based on 2013 revenue. It has more than 78,000 employees

In May, Whole Foods shares were beaten up after the company reported net income of $142 million, or 38 cents per share, for the second quarter of fiscal 2014, about three cents lower than analysts' expectations.The shares have dropped more than 30 percent this year, closing Friday at $37.11

Whole Foods has already started cutting some product prices in response to the competition, which in turn nibbles into profit margins, the report noted, which has helped to heighten worries on Wall Street

Nonetheless, the Barron's report points out that despite the pressures, Whole Foods has projected that earnings will jump 13 percent in fiscal 2015, and pick up again in the next three years — and cites one high-profile analyst who has recently put a buy rating on the stock with a $50 target price. In June, Los Angeles research firm Imperial Capital also began coverage of Whole Foods shares, with a $48 target price

The company also plans to boost its total number of stores by nearly 200 to 575 by fiscal 2018

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