Whole Foods Market is definitely one of the worst performers in the market this 2015 after its shares plummeted almost 40 percent. With the brutal competition from Kroger, Walmart and Costco with much cheaper pricing, the organic grocer suffered sluggish sales growth that disappointed several of its investors.
Aside from the sales decline, Whole Foods Market also needs to clean up after its involvement in a price-fixing scandal. In late September, the company also laid off 1,500 employees. However, it was the scandal that made matters worse for the company.
The price-fixing scandal in Whole Foods Market was discovered when New York City's Department of Consumer Affairs said in June that the company was "systematically overcharging" some pre-weighted items in its stores in the Big Apple, CNN Money noted.
While Whole Foods Market later apologized for the pricing errors, the company insisted that the errors were unintentional and also stressed that they value the consumers. However, the bad publicity caused by New York City's price gouging accusations has brutally hurt the company. In fact, their same-stores sales remarkably fell.
"The impact was really felt across the whole country, not [just] in New York City. This was national news," Whole Foods CFO Glenda Flanagan said during a conference call with analysts.
Even though Whole Foods Market has responded to the competition by lowering prices, it has dented its profit margins, which Wall Street does not like, CNBC reported. And even with the price cuts, the price-fixing allegations didn't help its reputation. However, Whole Foods is not the only organic food chain that is struggling. Shares of smaller rivals like Sprouts (SFM), Fresh Market (TFM) and Fairway (FWM) have also plunged this year.
Meanwhile, Whole Foods Markets is also trying to put its best efforts to resurrect its growth with a new chain of stores. In 2016, the company will reportedly launch their 365 by Whole Foods Market in some big cities. These stores are expected to be smaller and will have cheaper prices, a strategy that many feel is an attempt to lure the Millennials.
Despite Whole Foods Market's efforts, investment analysts are still uniformly negative on the company. Experts are also worried that competition from mainstream retailers will impede the company's growth.
"I think a lot of people are nervous here," Edward Jones analyst Brian Yarbrough said, as per Statesman. "The stock has come way down. It's priced for lots of pessimism, so if they can surprise, the stock can rally. It's gone from one of the most well-respected and higher-valued retailers to one of the most shunned."
For several straight quarters, Whole Foods Market's earnings have disappointed Wall Street. As a result, the company's stock has been trading near the $30 mark, near the low end of its 52-week range of $29.73 to $57.57. And for the fourth quarter, analysts are projecting Whole Foods' earnings per share will be 35 cents, while sales will be $3.47 billion.
