Whole Foods Market Inc. said Tuesday that its fiscal third-quarter profit grew nearly 3 percent — beating expectations — as sales improved at the natural and organic grocery store chain.
The Austin, Texas-based company said it earned $35 million, or 25 cents per share, for the quarter, up from $34 million, or 24 cents per share, in the same quarter last year.
The results include a non-cash charge of $6.8 million, or 3 cents per share, related to a settlement reached this spring with federal regulators over its acquisition of Wild Oats Markets Inc. It also includes a credit of $5.8 million, or 2 cents per share, based on the way the company accounts for its inventory.
Whole Foods total sales grew 2 percent to $1.9 billion, ending a slump several quarters long. However, sales at stores open at least a year slipped by 2.5 percent.
Analysts polled by Thomson Financial had expected the company to earn 20 cents per share on revenue of $1.86 billion for the quarter. Analyst estimates typically exclude one-time items.
Whole Foods management said better pricing and increased promotions helped improve its perception among consumers, who remain focused on value. The company said traffic is up as well as the size of the average transaction in its stores.
"It's green shoots," said Whole Foods CEO John Mackey. "It's a sign of stability but it's too early to call where this is going."
The company is also seeing the payoff of internal cost controls and the benefit of commodity prices for some foods stabilizing after recent peaks.
Whole Foods wasn't ready to say it was in a recovery but said it is seeing signs that consumers' tendency to trade-down is slowing, such as less emphasis on private-label items.
Given the uncertain economy, the company held off on issuing guidance for 2010. But it did raise its guidance for 2009, which helped send shares up more than 13 percent in after-hours trading.
The company now expects to earn 80 cents to 82 cents per share, up from a previous estimate of 65 cents to 70 cents per share. Analysts are anticipating 75 cents per share for the year, excluding any special items.
Shares of Whole Foods rose $3.43, or more than 13 percent, to $28.25 in after-hours trading Tuesday on the news.