Whole Foods' Profit Rises, but Stock Falls

Whole Foods Market Inc.'s profit rose 11% as the grocery chain reported higher sales in the second quarter, which this year included the Easter holiday, but investors were disappointed by margins and the pace of sales.

Shares, down 0.48% over the past 12 months, fell 10% to $42.85 in late trading.

The health-food retailer's gross margin remains under pressure, and same-store sales growth for the past five weeks was just 2.8%, down from historic averages of 7% to 8%.

The company didn't disclose customer traffic figures in its release.

In response to growing competition in the natural and organic food industry, the Austin, Texas, chain has added more store-branded foods, introduced a customer loyalty program, and last October launched its first national brand campaign.

Whole Foods, which has more than 400 stores in the U.S. and targets about 1,200 stores, has sought to stand out by opening or remodeling stores to add unique features, like rooftop beer gardens, and technology initiatives.

On Wednesday, the company said it planned to launch a new store concept geared to "millennial shoppers," but offered few details in a news release.

For the 12 weeks that ended April 12, sales at stores open at least 13 months rose 3.6%, adjusted for currency fluctuations.

Overall, Whole Foods reported a profit of $158 million, or 44 cents a share, up from $142 million, or 38 cents a share, a year earlier.

Revenue increased nearly 10% to $3.65 billion.

Analysts surveyed by Thomson Reuters expected a profit of 43 cents on revenue of $3.70 billion.

(By Maria Armental)