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UPDATE: UBS Downgrades Whole Foods Market (WFM) to Neutral

July 31, 2014 8:07 AM EDT
Get Alerts WFM Hot Sheet
Price: $41.99 --0%

Rating Summary:
    6 Buy, 25 Hold, 6 Sell

Rating Trend: = Flat

Today's Overall Ratings:
    Up: 20 | Down: 14 | New: 22
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(Updated - July 31, 2014 10:03 AM EDT)

UBS downgraded Whole Foods Market (NASDAQ: WFM) from Buy to Neutral with a price target of $41 (from $48). Analyst Jason DeRise tinks a fast trend recovery is unlikely.

"WFM's underlying comparable store sales growth slowed yet again to 3.3% in Q3FY. New store growth explained the majority of its 10% sales growth. We see the natural food category still growing ~9%-10% per year. But, incremental competition has caused WFM's share gains in natural food to stall. We model 3.3% comps in Q4 and 4.6% comps in 15FY (keeping its current ~9% 2-year stack trend constant). We previously assumed recovery to 6% in 15FY," said DeRise.

"We believe WFM won early adopters of natural/organic foods with its high service and differentiated assortment. But, to win the next wave of natural food customers, we think it must reduce its opening price points. Its oldest stores have reached their limits, requiring it to self-cannibalize to support its long-term growth. It announced it will run national marketing to promote its differentiation, which should help support its differentiation. A loyalty program and eCommerce efforts can also help. We model comps to improve to 5% by 16FY on a slightly accelerating 2-year stacked trend, driven by these efforts," he added.

For an analyst ratings summary and ratings history on Whole Foods Market click here. For more ratings news on Whole Foods Market click here.

Shares of Whole Foods Market closed at $39.11 yesterday.



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