UPDATE 1-Whole Foods cuts 2014 forecasts again as competitors bite

(Adds shares drop more than 12 percent and details on Whole Foods' competitors)

May 6 (Reuters) - Whole Foods Market Inc on Tuesday cut its 2014 same-store sales and earnings forecast for the third time amid rising competition in the natural and organic grocery sector that it dominates and shares tumbled more than 12 percent.

Same-store sales, a major gauge of performance for retailers, rose 4.5 percent for the fiscal second quarter ended April 13, compared with the 5.4 percent rise in the prior quarter. Those sales were up 4.3 percent for the six weeks ended May 4.

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 in recent years and which had made the retailer a Wall Street darling and the envy of grocers worldwide.

Americans, particularly those with more formal education, increasingly want to know where their food comes from and how it is made. And, they often are willing to spend more money on locally grown and organic foods, two areas where Whole Foods has been a retailing pioneer.

Eager to cash in on that trend, retailers such as Wal-Mart Stores Inc, Kroger Co and Safeway Inc have been expanding their selections of organic and locally sourced products.

Walmart's U.S. division plans to introduce 100 Wild Oats-branded organic products ranging from olive oil to canned black beans in half of its 4,000 stores in the coming months. Walmart said those products would be priced on par with conventional rivals and at least 25 percent below branded organic foods.

Whole Foods' newer and direct rivals also include Sprouts Farmers Market Inc and Fresh Market Inc.

Shares in Whole Foods fell 12.2 percent in extended trading to $42.08.

(Reporting by Lisa Baertlein in Los Angeles; Editing by James Dalgleish and Grant McCool)