Whole Foods Market Inc. (WFMI) reports earnings for the fiscal second quarter on Tuesday (After Market Close). As much as I loved to shop when I was in Austin, TX, I would love to be wrong if they deliver good results. It has seen its double-digit profit growth starting to erode due to costs associated with opening new stores and to buy its smaller rival Wild Oats Markets. Now that the deal has closed, the company is facing costs for cutting Wild Oats jobs and increasing the wages and training of the Wild Oats employees.
Whole Foods is also facing a slowdown in consumer spending in the U.S. A loyal customer base should help but how much? There is a positive argument as well, that it’s customers might not have been yet hit by slowdown in consumer spending as they are little middle to high class. But how much moat? Margins might be squeezed as well…
This is from one of OPN subscriber-
Whole Foods is my favorite company on the planet, but everytime I go in I can clearly see a difference in the amount of people that are there and what they are buying. I usually let loose and buy everything in sight, but I’ve even tamed myself a bit. Rising food prices, lower spending and their tiny margins–plus the way other grocers have been doing….
The company has not offered any guidance for the quarter so it may work out in their favor (sort of). The estimates for the organic food grocer from First Call are $0.30 EPS on $1.89 billion in revenues. Next quarter estimates are $0.35 EPS on $1.96 billion in revenues. Estimates for fiscal Sept-2008 are $1.28 EPS on $8.27 billion in revenues. The company expects total sales to grow 25 percent to 30 percent for the year, with comparable store sales rising 7.5 percent to 9.5 percent.
I like bearish position on WFMI. And I like Wal-Mart (WMT) for exactly the opposite reason with a bullish bias.
Disclaimer- Pls do your own due diligence before investing. My past wins doesn’t mean this will be win as well. This is not a recommendation and directional trades are speculative by nature. You may lose your investment completely.
Profitable trading, OP
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{ 4 comments… read them below or add one }
wow, nice call OP. looks like whole foods is a bit hard to digest tonight. just got a couple of puts for fun.
might cash tomorrow.
F.
Hi OP :
Spot on. Congrats.
Regards,
Tony Chai
great insight! nice trade!
Franco, Tony and Marie, Thanks.