Whole Foods Market Inc on Tuesday posted third-quarter earnings that beat Wall Street's expectations, as sales rose, and the seller of organic and gourmet food items raised its full-year earnings forecast.
Whole Foods, which specializes in organic, natural, gourmet, and often pricey products, has shed jobs and pared spending as it works to be more competitive on prices amid a weak economy.
Though it raised its profit outlook, the company chose to remain guarded about its sales expectations for the fourth quarter -- possibly to avoid disappointing investors, according to one analyst.
They want to get back to the model of underpromising and overdelivering, said Pali Capital analyst Robert Summers. It is the right call to be a bit cautious.
But its results and outlook won over investors, Summers said, and its shares rose 13.2 percent in extended trading.
Austin, Texas-based Whole Foods said net income rose to $42.8 million, or 25 cents per share, for the fiscal third-quarter ended July 5, from $33.9 million, or 24 cents per share, a year earlier.
Income available to its common shareholders rose to $34.96 million from $33.91 million, Whole Foods said.
Analysts, on average, expected 20 cents a share, according to Reuters Estimates.
Sales rose to $1.88 billion from $1.84 billion.
Same-store sales, which tracks sales at stores open at least one year, fell 2.5 percent. Identical store sales, excluding nine relocations and two expansions, fell 3.8 percent.
Whole Foods is known for being more expensive than supermarkets run by major operators like Kroger Co , Supervalu Inc or Safeway Inc . Still, it has been working on its prices to draw consumers who are hesitant to spend more for the organic or gourmet tag in the recession.
For instance, it is studying prices at chain supermarkets and regional stores across 12 markets respond in a timely manner, executives said in a conference call.
We want to make sure we are prepared to respond and to deal and stay ahead of that, they said.
For the first four weeks of the fourth quarter ended August 2, same-store sales fell 1.1 percent and identical store sales declined 2.7 percent, Whole Foods said.
If its same-store and identical store sales stay in line with results so far in the quarter, Whole Foods forecast sales to rise about 2.9 percent for the fourth quarter and about 1 percent for the full year.
The company said it was raising it full-year earnings outlook based on its better-than-expected performance so far this year.
It now expects full-year, per-share earnings of 80 cents to 82 cents. It had previously expected to earn 65 cents a share to 70 cents a share, including asset impairment charges.
For the fourth quarter, Whole Foods forecast earnings of 16 cents a share to 18 cents a share.
The company said it would issue a sales and earnings outlook for fiscal year 2010 near the end of the fourth quarter, given the economic uncertainty.
Whole Foods shares were up 13.2 percent to $28.10 from their closing price of $24.82 on the Nasdaq.
(Reporting by Aarthi Sivaraman; editing by Carol Bishopric, Leslie Gevirtz)