Traders and investors on the New York Stock Exchange took one big, organic bite out of the shares in Whole Foods Market Inc. (WFM). Wednesday, as the stock of Whole Foods dropped more than 20 percent, said Marketwatch.com. As of noon Chicago time today (CDT), Whole Foods Market, Inc. (WFM) was selling at 38.56, down 9.40 at a minus 19.58 percent. The news is bad for the Austin, Texas-based Company and does not bode well for the future for the basic, fundamental reasons of this increased competition.
The company cut its 2014 same-store sales and earnings forecast for the third time, amid rising competition in the natural and organic grocery sector from companies like Wal-Mart (WMT) and Kroger (KR), said the Chicago Tribune.
Here in Chicago, the question is being raised: Will this "bad news" impact the proposed store in the Englewood neighborhood on Chicago’s South Side?
Mayor Rahm Emanuel's communications staff said that the project was "still on track."
And a spokesperson for Whole Foods said, “Still business as usual, “to the inquiry from the Chicago Finance Examiner about the impact of this "bad news" on the expansion into the Englewood community.
Mayor Rahm Emanuel and Whole Foods co-CEO Walter Robb, made the announcement on the site of the proposed Whole Foods store in Englewood. That store is not scheduled to be completed until 2016, but the 18,000 square-foot store is part of a 13-acre development located at a four-way intersection near Kennedy King Community College.
Emanuel was hoping to bring more choices to Chicago's "food desert," and praised the willingness of Whole Foods to locate there.
This cannot bode well for the future, should these trends at Whole Foods continue, and the aggressive expansion program thus far could be the first victims of a downturn. There are increased market pressures to bring down prices and those cutting of prices impacts "margins."
That is coupled with the increased competition in the organic food business, with the aforementioned stores of Wal-Mart and Kroger, but also including, up-and-comers like Trader Joe's and Fresh Market.
The store was expected to bring an estimated 100 jobs to the intersection of South Halsted and West 63rd Streets and provide convenient access to fresh, healthy natural and organic food for residents of Englewood and South Side neighborhoods. The development of that property was expected to spur a lot of interest and traffic to the Whole Foods Market. The project was being developed by DL3, which is led by Leon Walker, and will be responsible for the development of the property.
Partnering with Whole Foods Market to bring a full-service grocery store with healthy and affordable options into the Englewood community is part of Mayor Emanuel’s economic development and food access plans, which includes efforts to work with the community and local businesses to develop the areas surrounding the new Whole Foods Market.
Last September, Michael Bashaw, regional president for the Midwest region of Whole Food Market, said of the inner-city move. "Whole Foods Market has been in Chicago since 1993 and we are excited to serve more neighborhoods as we open our first store on the City’s South Side."
Bashaw added, "We have been looking to expand further south for many years and this new store will help offer more Chicagoans fresh, high quality foods right in their neighborhood. We’re excited to work together with the city and local community long before we open our actual doors to build a custom store that meets the needs of Englewood."
Whole Foods Market’s Chicago stores have supported nonprofits and community organizations in Englewood including Fresh Moves and Growing Home for several years, and the company is currently expanding its relationships with local producers and suppliers, schools and government officials.
Whole Kids Foundation, the company’s nonprofit dedicated to improving childhood nutrition through school salad bars, gardens, and nutrition education classes for teachers, will direct $20,000 in funding to support schools and community organizations in the Englewood area. Additionally, the foundation will make its free Healthy Teacher nutrition education and cooking program available to educators in Englewood and citywide. The company also plans to help local business and entrepreneurs through its Local Producer Loan Program and Whole Planet Foundation, which provides microcredit loans.
"When we come to a new community, our first step involves listening to the wants and needs of our future shoppers, which is why we’re excited to start building meaningful relationships with existing neighborhood organizations now. We will host free educational classes on healthy eating and nutrition, shopping on a budget and cooking demonstrations with the hope of making our store a true community partner and a trusted resource for quality natural and organic foods, and health and wellness information," added Bashaw.
In view of the problems reported by Whole Foods, questions will be raised as to the viability of this project, given the date of completion in 2016. Most Chicagoans hope this will not impact the project.
Some of the other problems reported today were Whole Foods' same-store sales, a major gauge of performance for retailers, rose a weaker-than-expected 4.5 percent for the fiscal second quarter ended April 13, compared with the 5.4 percent rise in the prior quarter. They were up 4.3 percent for the six weeks ended May 4.
Executives blamed severe winter weather and the shift in the timing of Easter for some of the sales disappointment.
Second-quarter net income was flat at $142 million, or 38 cents per share, compared with a year earlier.
Whole Foods' new 2014 forecasts call for earnings per share in the range of $1.52 to $1.56, down from $1.58 to $1.65 previously, and same-store sales growth of 5 to 5.5 percent, down from 5.5 to 6.2 percent previously.
The same-store sales outlook is below the 8 percent growth rate Whole Foods investors have grown accustomed to, making it a Wall Street favorite and the envy of grocers worldwide.
Disclosure: I have no position in Whole Foods.
Marketwatch.com - Whole Foods’ loss is your gain
Chicago Tribune - Emanuel promotes new Whole Foods in Englewood
Chicago Tribune - Whole Foods shares tank 20% under pressure in organics