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How WFM Achieved a Modest Sales Rise in Fiscal 2Q16

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Top line rise of 1.3%

Whole Foods Market (WFM) reported a 1.3% year-over-year (or YoY) rise in its top line to $3.7 billion in fiscal 2Q16. The company missed analysts’ consensus estimate by $40 million.

As in the last two quarters, WFM reported a fall in same-store sales in fiscal 2Q16. Sales comps fell 3%, which meant that top line growth was primarily driven by new store openings. The company added eight new stores and expanded into two new markets in fiscal 2Q16.

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Fiscal 2Q16: The slowest growth quarter for WFM

Fiscal 2Q16 was WFM’s slowest growth quarter since the beginning of fiscal 2010. The company’s average sales growth between 2010 and 2015 stood at 11.5% compared to the current quarter’s 1.3% YoY growth.

In fact, Whole Foods’ sales have continuously fallen over the last six quarters, as have its same-store sales. The company’s sales comps have fallen from 4.5% in fiscal 1Q15 to -3% in the current quarter.

The 3% fall in same-store sales can be attributed to a 0.9% fall in average basket size and a 2.1% fall in the number of transactions of Whole Foods customers. The company has been facing tough competition over the last few years from value-oriented organic players such as Sprouts Farmers Market (SFM) and Trader Joes, which have been quite successful in attracting customers.

Also, with the entries of Walmart (WMT), Kroger (KR), and Costco (COST) into the organic and natural food space, Whole Foods has found it difficult to compete on prices with these retail giants.

Costco, Walmart, Kroger, and Whole Foods have a combined exposure of 12.2% to the Consumer Staples Select Sector SPDR ETF (XLP).

Read on to learn about Whole Foods Market’s margins and profitability in fiscal 2Q16.

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