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Wednesday, November 05, 2008

Whole Foods Profit Slips Due to Weak Economy

By Erik Berte

FOXBusiness

Whole Foods Market (WFMI) reported its fourth-quarter profits dropped due to acquisition costs and a weak economic environment. The company also announced it was able to raise $425 million from the sale of preferred stock to an affiliate of Leonard Green & Partners, L.P.

“This investment, combined with our strong cash flow from operations, gives us the financial flexibility to manage through these difficult economic times while continuing to prudently invest in our long-term growth,” said John Mackey, chairman and CEO of Whole Foods.

Whole Foods reported earnings of $1.5 million, or one cent a share, a huge drop from $34 million, or 24 cents per share, in its fourth quarter of last year. Analysts, according to Thomson Reuters data, were expecting 13 cents per share.

The company had reported a drop of 30% in earnings in the previous quarter. This raises the question of whether consumers are willing to shell out the extra cash for premium and organic foods in the face of rising food costs and worries of job cuts.

Whole Foods sales, however, increased 13% to $1.8 billion from last year, just below expectations for $1.82 billion.

The acquisition of Wild Oats stores has continued to face regulatory scrutiny due to potential antitrust issues, although the deal is still going through.

The deal, however, has cut into the company’s profits. The company reported costs of $14.7 million incurred for idle Wild Oats properties.

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