Whole Foods earnings up 35 percent

Whole Foods beats grocery industry with higher margins and more customers. Whole Foods beat expectations with earnings of 50 cents per share.

Shannon Stapleton/Reuters/File
A woman shops for groceries at a Whole Foods supermarket in New York May 18, 2010. On July 27, 2011, the company reported higher-than-expected earnings for its third quarter, with rising margins and a growing customer base.

Whole Foods Market Inc. proved that it is good to be different on Wednesday, reporting a 35 percent jump in its third-quarter net income and raising its full-year forecast while the rest of the industry struggles.

Whole Foods, which sells natural and organic foods across the country, is beating grocery industry trends on a number of fronts. Traditional grocers are struggling with higher food prices, razor-thin margins and consumers who are slow to spend. But Whole Foods is seeing more shoppers, they're spending more and its margins have been improving for some time. The company is even adding stores while others look to sell off or close unprofitable sites.

Whole Foods was hit hard during the recession but revamped: It cut costs, slowed growth and increased its lower-priced options. The company has been on an upward swing since and credited this quarter's results to its improved price perception among shoppers and increased emphasis on health and wellness.

"We see a new era of possibility for Whole Foods Market as customers increasingly embrace healthier lifestyles, and we look forward to accelerating our growth in the coming years," said Walter Robb, co-CEO of the company.

The company said Wednesday that it earned $88.5 million, or 50 cents per share, for the quarter that ended July 3. That's up from $65.7 million, or 38 cents per share, a year earlier. Revenue rose 11 percent to $2.4 billion.

Analysts expected the company to earn 47 cents per share on revenue of $2.42 billion, according to FactSet.

"It was a very good quarter and a continuation of a great trend," said Edward Jones analyst Matt Arnold. "There is truly a lot to like about Whole Foods from an investor's standpoint."

Whole Foods leaders said the company is performing at near-peak levels again, operating more efficiently than ever and gaining market share faster than traditional grocers.

The company said revenue at its stores open at least a year — a key measure of retailers' financial performance — rose 8.4 percent during the quarter. By comparison, Kroger Co. saw the measure rise 4.6 percent in its most recent quarter, while Safeway Inc. posted a 0.5 percent increase and Supervalu Inc. reported a 3.9 percent drop.

Like competitors, Whole Foods is seeing higher prices and passing those along to consumers. But the analysts say the chain's higher-income shoppers are readier to absorb increases.

Company leaders said they still see shoppers looking for value.

"All upscale retailers doing better," Arnold said. "In grocery we are seeing it; in jewelry we are seeing it. Name the category in retail, and we are seeing it. It's been that way as we come out of the downturn; it isn't new."

Whole Foods, which has 309 stores, also said it plans to ramp up new store openings in coming quarters and sees potential for growth in the U.K. and Canada.

The company, based in Austin, Texas, raised its full-year forecast to $1.91 to $1.92 per share; analysts expect $1.90. The company earlier forecast earnings of $1.87 to $1.90 per share.

Whole Foods shares rose $2.33, more than 3 percent, to $67.51 in after-hours trading.

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