Whole Foods Market Inc. lost 23% of its value this month, making it the worst-performing stock in the S&P 500. The stock is near its lowest level in more than two years after the Austin-based company on May 6 reported disappointing fiscal second-quarter profit and sales and cut its full-year outlook for a third straight quarter. Same-store sales rose 4.5%, the smallest increase in at least 13 quarters and missed the consensus estimate of a 5.2% gain.
The stock: Whole Foods shares plunged 19% on May 7, their biggest daily percentage drop since 2006. As of Friday’s close, the stock has lost more than two-fifths of its value since the record close of $65 set in October.
Bull case: Those bullish on the stock liked the company’s plan to up its game after it acknowledged that it was “overly optimistic” in its ability to compete against the record-breaking results of the past few years, especially as competition has intensified.
BB&T analyst Andrew Wolf, who rates Whole Foods hold, said in a note this week that the company has cut prices on over 500 items at its greater Boston area stores since Wegmans opened a store in Chestnut Hill nearby Boston this year.
Next catalyst: The next big driver for Whole Foods’ stock likely won’t come until after the company reports its fiscal third-quarter results in July. Analysts said the company will have to show that it will be able to deliver on its forecast and at least maintain its full-year outlook. Any additional accelerated share repurchase also may help lift bottom line.
“From a longer-term standpoint, the key questions are whether Whole Foods can continue to differentiate itself as it has in the past, and will consumers respond to sharper pricing?” Miller said.