Protests, Wall Street pressures cap tough week at Whole Foods
AUSTIN, Texas — It was a tough week for Whole Foods Market.
The Austin-based natural foods grocer saw scattered protests after a Chicago employee said she was unjustly fired last month. And the company’s stock took a beating after an earnings report that disappointed Wall Street.
Protesters delivered petitions to Whole Foods’ Austin and Chicago offices Friday after an employee said she was fired after choosing to stay home with her special-needs child instead of going to work during cold weather on Jan. 28.
Chicago Teachers Union President Karen Lewis was among those supporting Rhiannon Broschat, 25, during a protest last week. “We have companies that claim to have family values,” Lewis told the Chicago Sun-Times. “We have a government that claims to promote family values, and yet, when we see what family values are, they do not look like what happened to Rhiannon ... Rhiannon’s son needed her. And if we don’t hear the voices — the needs of children, then I don’t even know why we are selling food.”
Whole Foods officials would not discuss the specifics of Broschat’s termination but said that no employee would be fired for an isolated attendance issue.
Spokeswoman Libba Letton said the company has a flexible schedule policy, which allows for six unexcused absences within a six-month period.
“Many single mothers and fathers choose specifically to work at Whole Foods Market because they know we provide the most flexible work schedule, which allows them the best work-life balance,” Letton said.
There were reports of a handful of protesters outside the company’s downtown Austin location on Friday. Also this week, the company’s torrid sales growth showed signs of cooling after a Wednesday earnings report showed a sales shortfall due to increased competition. The company’s same-store sales — a key indicator of growth — rose by 5.4 percent in the first quarter after a 5.9 percent gain in the prior quarter. Analysts were expecting a 5.6 percent gain.
That number is significant because investors have become used to same-store sales increases in the 7 percent to 8 percent range. Whole Foods’ stock typically drops when the sales numbers fall short of that mark.
The company’s stock sank on the news - closing at $51.46 a share on Thursday, more than 7 percent down from the previous day’s close. The stock rebounded somewhat Friday, closing at $52.25 a share.
“While one-time issues (weather, calendar) may be playing some role in recent results and the disappointments have not been too large, we also believe it’s becoming clearer that the business is being pressured by some underlying consumer and competitive pressures,” Credit Suisse analyst Edward J. Kelly wrote in a note published Thursday.
The earnings results show that Whole Foods is facing an increasingly competitive landscape. The chain had been able to boost sales in large part because of its healthy product selection fits with Americans’ changing eating habits. But more mainstream competitors like Kroger Co. are increasingly tapping into that trend as well, and rolling out more products or sections labels as natural or organic.
Whole Foods has cut prices in some areas because of those competitive pressures.
Still other analysts remain bullish on Whole Foods’ growth prospects. The company has more than 370 locations in the U.S., Canada and the U.K. and sees demand for 1,200 stores in the U.S., long term.
“I think at the end of the day, as we all know, Wall Street is an expectations game,” said Brian Yarbrough, an industry analyst for Edward Jones. “And expectations were a little bit higher.”
Still, any other retailer would love to put up sales numbers similar to Whole Foods’, he said.
And in the long term, Yarbrough thinks Whole Foods’ brand is strong and the company will weather competition from other retailers.
“I still think, longer-term, this is still a great story,” Yarbrough said. “They can triple their store base in the U.S. alone; there’s not many retailers out there that can say that.”
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