Whole Foods (WFMI) Gets Broken Apart

May 14, 2008 11:07 AM EDT

Whole Foods Market Inc. (Nasdaq: WFMI) dropped 12% in early trading after reporting Q1 earnings of $0.29 (including EPS dilution from the Wild Oats acquisition of $0.06), which was $0.01 worse than estimates. Revenues were in-line for the quarter. However, many have high expectations for the company, especially with the recent merger and because people are becoming more health conscience...or are we? McDonald's (NYSE: MCD) recently reported Q1 earnings that beat the consensus by $0.11 and had global comparable sales rise 5.0% in April (U.S. comparable sales rose 2.0% for the month).

For WFMI, a Piper Jaffray analyst wrote, "We expect moderate decline in 2H earnings, with 3Q EPS of $0.31 below last year's $0.35. While we expect earnings to decline y-o-y in the 2H, the magnitude of decline should be less than in 1H. It now does appear that a weak consumer is having a negative sales impact on the natural/organic universe. 3Q SSS comps were ahead of inflation, but fell below 7% against the easiest comparison the company will face this year...Investors will need to look through headwinds this year and possibly through early next year. In our view, these headwinds will restrain EPS growth and share price appreciation in 2008."

The Piper analyst also trimmed FY09 EPS est. to $1.61 to lower sales growth and store contribution estimates than previously forecast. He also reduced FY08 EPS estimate to $1.17 from $1.30.

Whole Foods Market, Inc. (Whole Foods Market) owns and operates a chain of natural and organic foods supermarket. [SM]

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