Whole Foods tumbles as guidance disappoints

NEW YORK - Shares of Whole Foods Market Inc. tumbled Thursday after the upscale grocery chain offered a cautious outlook for its new fiscal year.

Shares fell $5.22, or 16.3 percent, to $26.84 in afternoon trading. In the past 12 months, shares have traded between $7.04 and $34.40.

On Wednesday after the market close, Whole Foods said it earned $28.7 million, or 20 cents per share, in its recently completed fiscal fourth quarter. That beat expectations of 18 cents per share among analysts polled by Thomson Reuters.

But the grocer's guidance for 2010 earnings between $1.05 and $1.10 per share "seems conservative, as it implies further deterioration on a 2-year basis," said RBC Capital Markets analyst Edward Aaron in a client note Thursday. He maintained an "Outperform" rating.

On average, analysts predict earnings of $1.11 per share for fiscal 2010.

The "guidance reflects a cautious outlook, despite positive sales momentum," said Deutsche Bank analyst Shane Higgins in a note to investors Thursday. "Investors may have wanted more given recent improvement in both sales trends and the economy."

The disappointing guidance comes from expectations that new stores will not be as profitable as quickly as they have been in the past, while price investments well weigh on profit margins, said Credit Suisse analyst Edward Kelly.

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