Whole Foods stock rises after grocery chain edges analyst expectations for fiscal 1st quarter

MarketsAssociated Press

Shares of Whole Foods Markets rallied in premarket trading Thursday, a day after the grocery chain reported a jump of nearly 6 percent in fiscal first-quarter profits in a performance that topped Wall Street expectations.

The upscale, Austin, Texas-based grocery chain launched a national advertising campaign last year called "Values Matter" and is seeking to shake its pricey image and separate itself from competitors now that organic and natural products have become more mainstream.

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The company said Wednesday that revenue from its established stores picked up in its latest quarter after five straight quarters of slowing growth. Overall, the company earned $167 million, or 46 cents per share, in the quarter that ended Jan. 18. That beat average analyst expectations by a penny.

Cantor Fitzgerald analyst Ajay Jain gave the retailer "good marks" for consistent income growth. But the analyst said in a research note that while Whole Foods' market share is stable across its top regions, he hasn't seen a lot of incremental improvement in the past two quarters.

"We continue to have persistent concerns about competitive pricing pressures and competitive store openings," Jain wrote in a research note. "We also see a widening disconnection between the valuation and fundamentals."

Shares of Whole Foods Markets Inc. rose $1.30, or 2.4 percent, to $54.81 in premarket trading Thursday about an hour before the U.S. market open.

Those gains come after a year in which the price of Whole Foods Markets Inc. stock sank 13 percent while the broader Standard & Poor's 500 index rose 11.4 percent.