Whole Foods Market Inc (NASDAQ:WFM) reported fiscal Q3 earnings and sales after the closing bell on Wednesday, and the results again failed to thrill investors. Though earnings per share (EPS) reached 41 cents in the quarter -- beating the Zacks consensus estimate of 29 cents per share -- revenues came in a tad light of expectations at $3.38 billion.
Whole Foods shares are currently experiencing a sell-off of over 5% in the after-market, based on the news. This follows a hopeful regular-day trading increase of 3.8%. Year-to-date, Whole Foods stock is down 32%, making it the second-worst performer on the S&P 500 in 2014 thus far.
Comparable store sales disappointed investors, reporting an increase of 3.9%; analysts had been expecting 4.6% (and that was including the shift of the Easter holiday to Whole Foods' fiscal Q3, which was supposed to have provided a boost; it did, but only 60 basis points). Comp store sales through July (Q4) are up 1% so far. Whole Foods had earlier made mention of lowering prices to fight off a growing number of competitors, and gross margins are expecting to fall in line with historical norms in the mid-30% range.
None of this points toward explosive growth in the near future. Whole Foods produced $240 million in cash flow from operations in the quarter. Whether share buybacks or acquisitions -- or neither -- are in the cards for Whole Foods near term remains to be seen.
Another big name in Consumer Non-durables, Kraft Foods Group Inc (NASDAQ:KRFT), also reported after the bell, and missed on both top and bottom lines: EPS of 80 cents per share missed the Zacks consensus of 83 cents, and quarterly sales of $4.7 billion missed our expectation of $4.85 billion. Like Whole Foods, top-line foods costs are weighing on profitability, though the company also cited strong free cash flow for the quarter.
Apparently, the processed food business is showing some of the same growth concerns as the organic foods market is. Perhaps it's time for two companies like Whole Foods and Kraft, with their decent sources of cash-flow, to consider helping each other out.