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McClatchy-Tribune  05/06/2014 8:29 AM ET
Analyst downgrades Whole Foods stock ahead of earnings report [Austin American-Statesman :: ]

May 06--Whole Foods Market saw another analyst downgrade its stock rating Monday, a day before the Austin-based organic grocery chain releases its quarterly earnings report.

New York-based Wolfe Research said Monday it is downgrading Whole Foods' stock from "outperform" to "underperform," largely over the challenges facing the Austin-based retailer in an increasingly competitive market.

"Whole Foods is probably one of the finest retailers out there's made this downgrade difficult," said Wolfe Research analyst Scott Mushkin. "The problem is that a lot of companies understand that this 'pure foods' movement has gone very mainstream so a lot of products that were once available at Whole Foods and hard to get at other places are now more widely available."

Wolfe Research said store performance has seen a slow decline for Whole Foods since the fourth quarter of 2012, and there are concerns that erosion will continue. Competitors from national chains such as Kroger to local brands such as H-E-B in Texas, are providing an alternative for one-stop shopping especially for middle-class shoppers, Mushkin said.

"It is one of the finest companies I know with one of the finest management teams I know, but it does seem the market opportunity is not as great as we estimated," Mushkin said. "This is a great company and sometimes great companies don't make great stocks and this is one of those situations."

Whole Foods has been making aggressive moves to fend off competitors and expand its footprint. The retailer, who has more than 370 stores, is breaking into more nontraditional markets such as Detroit while adding to its store count in larger markets such as Chicago.

Shares in Whole Foods closed down $1.37, or 2.8 percent, to $48.28 on the Nasdaq exchange Monday. The 52-week range is $45.43 to $65.59. Whole Foods shares are down 15 percent since the start of the year.

The retailer has seen some activity on the analyst rating front in recent weeks.

Last week, Credit Suisse reiterated a neutral rating of the grocer but also lowered its price target to $50 from $55, while Telsey Advisory Group reduced its price target to $55 from $58. In April, Investment firm BB&T Capital Markets downgraded Whole Foods from "buy" to "hold."

Overall, most analysts have issued a buy to hold rating for the stock, according to Yahoo! finance.


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