Whole Foods issues earnings report

Minutes after today's close, the leader in natural-food groceries, Whole Foods Market (NASDAQ: WFMI), reported second-quarter earnings results that failed to meet Street estimates. The firm's net income dropped to $46 million, or 32 cents per share, from $51.8 million (36 cents) in the year-ago period. Adjusted earnings per share reached 34 cents, two cents shy of analysts' expectations. Revenue rose 11.6% to $1.46 billion, with comparable-store sales growing by 6.0% (identical-store sales rose 5.1%). Analysts were predicting revenue of $1.49 billion from WFMI.

For the full year, WFMI officials expect comparable sales growth in the 6-8% range, while total sales growth is projected in the neighborhood of 13-17%. Looking further down the road, the grocer expects total sales to hit $12 billion by 2010. The company's guidance does not include any contribution from Wild Oats Markets (NASDAQ: OATS), which WFMI plans to acquire.

Investors are responding to this report like PETA members at an Omaha Steaks convention. In less than a half-hour's time, WFMI has dropped nearly 5% in after-hours action. Earlier this week, I looked at Whole Foods in anticipation of today's earnings release. I mentioned that sentiment figures were pointing toward a fair amount of pessimism toward the shares (which have displayed weak price action of late) and noted that a positive earnings surprise could spur some buying power. An earnings miss, however? Is just what the pessimists were looking for.

Beth Gaston Moon is an analyst at Schaeffer's Investment Research.