UPDATE: Sell-Side Response To Whole Foods (WFM) Strategy Shift

Whole Foods (NASDAQ: WFM) dropped the ball Wednesday after-hours when the company reported disappointing Q4 earnings data.

Not surprising to see the sell-side dog pile the company. The following are updated comments we at Street Insider have been able to round up for you:

BMO Capital's Kelly Bania (maintains Underperform & $23 PT):
"Whole Foods Market's adjusted F1Q17 EPS was in line with consensus (above our below-consensus forecast) but the company lowered its F2017 EPS and comp guidance below consensus as comps continue to decelerate on a two-year stack basis."

Barclays Karen Short (maintains Equal-weight & $30 PT):
"WFM’s tone and view of the business has evolved, and while traffic remains elusive, we are cautiously optimistic several initiatives could eventually result in an inflection because we firmly believe WFM remains relevant with its core customer. However, timing remains uncertain given the persistence of declining traffic. As a result, while we believe all is not lost and that there are opportunities to create value (e.g., accelerate remodels, re-invigorate the core, focus on prepared foods), we continue to believe WFM will be range bound for now and is fairly valued at our $30 PT (7x CY17 EV/EBITDA)."

RBC Capital's William Kirk (maintains Outperform, lowers PT from $37 to $35):
"While today's earnings rebase surprised us, it was a large part of the pervasive bear thesis. We still believe downside is limited to the 7x EV/NTM EBITDA multiple (5% downside from yesterday's close on rebased numbers). Though 2QTD comp is disappointing, transaction count improved. Increased spending behind better understanding of their shoppers (e.g. dunnhumby) and marketing lead to long-term improvement."

Morgan Stanley's Vincent Sinisi (maintains Equal-weight, lowers PT from $32 to $29 ):
"At the core of Whole Foods' reset strategy is an accelerated focus on Category Management. Through Category Management, WFM hopes to better execute on all initiatives, including its pricing strategy, advertising and affinity programs. We see room for further expense discipline, with WFM targeting technologies that can reduce expenses while enhancing the store experience and brand image. We like the sound of this new strategy, though it's now about proving through execution, and this will likely take time to gauge."

Deutsche Bank's Shane Higgins (maintains Hold, lowers PT from $29 to $28):
"...we have concerns that WFM's focus on serving its core customer could turn off less dedicated shoppers, particularly Millennials (these customers could be difficult to win back). So, we see risks to the new strategy."

Credit Suisse's Ed Kelly (maintains Outperform, lowers PT from $40 to $36):
"While industry weakness is certainly playing a role in the company's difficult results, the turnaround is progressing slower than we had hoped. We are maintaining our Outperform rating, as we continue to see value in the brand, believe there is a path for improved performance over time (especially with today's news of accelerated strategic change), and like the stock's risk/reward. Downside looks to be supported by valuation and potential activist/M&A interest, while any sign of progress would yield material upside."

Jefferies' Chris Mandeville (maintains Hold, lower PT from $31 to $27):
"Given little insight on its oppty. to improve N-T sales under a newly announced strategy, we fail to understand mgmt's decision to focus its efforts on WFM's core customer as lost (and an inability to gain new) mkt. share is an issue. Our primary concern lies with the belief it is no longer necessary for potential customers to seek out WFM in order to gain exposure to quality nat/org. as conventionals and various other formats have meaningfully improved their offering in recent yrs. Also, these newer entrants often provide prices that are well below WFM and online retailers provide greater convenience, providing less of a reason for a consumer to travel out of their way."

Goldman Sachs' Stephen Tanal (maintains Sell & PT of $24):
"The company is not ignoring its issues. It conceded that it is losing trips from customers that are increasingly shopping at competitors that have pushed deeper into natural and organic. It is not, however, actively investing in price, focusing instead on marketing and category management, now with outside help from dunnhumby (but without a loyalty program or wealth of CRM data to support this effort)."

Guggenheim's John Heinbockel (maintains Neutral):
"A fundamental shift in customer focus lies at the heart of the strategic plan. Rather than attempt to substantially expand the brand’s customer appeal through significant price investments, the focus will turn to maximizing share with the many loyal customers who shop in the stores every day. This makes sense to us. WFM has some of the most loyal customers in retail—getting them to further concentrate their food purchases is not a hard sell. On the other hand, needlessly spending gross profit dollars to temporarily poach other retailers’ shoppers who don’t fully value the WFM experience is a fruitless exercise."

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Whole Foods has milked their clients for long enough and now they will need to transition their strategy. A simple Google search yields numerous memes and gifs about Whole Foods and most are not too flattering. For the shake of shareholders, let's hope Whole Foods can turn this trend around.

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