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Whole Foods Lowers Guidance to Reflect Planned Store Closures

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WFM looks to improve margins, plans to close nine stores

In an attempt to improve its falling profitability, Whole Foods Market’s (WFM) management has decided to shut down nine stores in the coming quarter.

Whole Foods Market’s CEO, John Mackey, said, “As we work to position Whole Foods Market for long-term success, we have carefully evaluated our portfolio of stores and have made the difficult but prudent decision to close nine stores in the second quarter.

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“We believe our targeted and disciplined site selection and continued moderation in ending square footage growth will result in a healthier bottom line, increased free cash flow and higher returns as we minimize the negative impact from cannibalization and redirect our energy and capital on improving comps, EBITDA, and ROIC.”

WFM lowers fiscal 2017 guidance

Whole Foods Market (WFM) also revised its fiscal 2017 guidance to reflect the year-to-date sales trends and the impact of planned store closures.

The company lowered its sales growth target from the 2.5%–4.5% range to a growth target of 1.5% or greater. Its same-store sales and square footage have also been adjusted accordingly.

Sales comps are predicted to fall 2.5% compared to the -2%–0% range provided earlier. Its square footage growth fell to 5% compared its previous guidance of 6%. Mackey noted that Whole Foods Market would “no longer have a goal of 1,200-plus stores.”

The outlook for its diluted EPS was also dialed down from $1.42 to $1.33 per share.

Whole Foods Market (WFM) comprises ~1.4% of the Market Vectors Retail ETF (RTH). Walmart (WMT), Costco (COST), and Kroger (KR) have respective weights of 6.3%, 5.6%, and 4.2% in RTH.

The final article in this series covers Whole Foods Market’s valuations, stock market performance, and analyst recommendations.

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