Whole Foods down 12% on Profit, Sales

Elena
10 May, 2007
New York City

Wall Street saw a weak opening Thursday, hurt by disappointing retail sales. Whole Foods dropped 12% after the natural and organic foods grocery retailer missed Q1 profit expectations, posting a profit decline and slowing same-store sales growth. Urban Outfitters fell 5% after it posted in-line-with estimates Q1 net income rise of 17 cents a share, up from 12 cents a share, with sales rising 16%.

[R]9:45AM U.S. markets opened lower on weak retail sales. Whole foods dropped 12%.[/R]
Wall Street saw a weak opening Thursday, hurt by disappointing retail sales due to unfavorable weather conditions and an earlier Easter holiday. Adding to concerns about consumer spending, darta showing that trade deficit widened sharply in March also generated negative sentiment. The Dow Jones was led lower by losses for Alcoa ((AA)), DuPont ((DD)), and JP Morgan ((JPM)), each falling over 1%. Blue-chip retailer Wal-Mart ((WMT)) traded flat after it posted 3.5% decline in April sales, vs. the expected 1.1% drop.

Weak earnings reports also contributed to the decline. Whole Foods ((WFMI)) dropped 12% after the natural and organic foods grocery retailer missed Q1 profit expectations, posting a profit decline and slowing same-store sales growth. Urban Outfitters ((URBN)) fell 5% after it posted in-line-with estimates Q1 net income rise of 17 cents a share, up from 12 cents a share, with sales rising 16%.

In the first hour of trading, the Dow Jones industrial average fell 48.03, or 0.36%, to 13,314.84. The Standard & Poor's 500 index was down 5.57, or 0.37%, to 1,507.01, and the Nasdaq composite index declined 10.22, or 0.40%, to 2,566.12. Bonds rose slightly after the weak economic data, with the yield on the benchmark 10-year Treasury note falling to 4.66% from 4.67% late Wednesday.

[R]Trade deficit widened 10.4% in March.[/R]
Thursday morning, the Department of Commerce released its report on U.S. international trade in goods and services in the month of March, showing that the trade deficit widened much more than economists had been expecting. The report showed that the trade deficit widened to $63.9 billion in March from a revised $57.9 billion in February. Economists had expected the deficit to widen to $60.0 billion from the $58.4 billion originally reported for the previous month. The wider trade deficit came as an increase in the value of imports far outpaced an increase in the value of exports. The report showed that the value of imports rose 4.5 percent to $190.1 billion, while the value of exports rose 1.8 percent to $126.2 billion.

A significant increase in imports of industrial supplies and materials contributed to the increase in the value of imports. Imports of automotive vehicles, parts, and engines also showed a notable increase compared to the previous month. The Commerce Department added that the goods deficit widened to $70.2 billion in March from $64.1 billion in February, while the services surplus was nearly unchanged at $6.3 billion. At the same time, the report also showed that the politically sensitive trade deficit with China narrowed to $17.2 billion in March from $18.4 billion in February.


[R]9:30AM FTSE almost unchanged despite Bank of England decision to hike rates.[/R]

The UK market was traidng virtually unchanged Thursday. The FTSE 100 was off 13.5 points at 6,536.9.

Economic and political news

Tony Blair on Thursday announced his decision to step aside as prime minister, after holding the post for a decade. Blair will officially step down on June 27, paving the way for a transfer of power to Gordon Brown, the chancellor of the exchequer.

The Bank of England raised interest rates to their highest level for six years. The decision to lift rates by a quarter point to 5.5% was widely anticipated.

The latest Halifax house prices survey showed that the UK property market was beginning to cool. House prices in April gained at their slowest pace this year and seemed to suggest that recent rate hikes are taking effect.

Advancers

Reports suggested that KKR, the private equity group, was mulling a bid for Hammerson, the UK property company, which is valued at about 4.5 billion pounds. Shares of Hammerson moved 7.4% higher.

The talk supported the rest of the sector - British Land gained 3% while Land Securities was up 3%.

Venture capital company 3i advanced 2.4% after it reports of strong full-year numbers, rasing realised profits on investments to 830 million pounds from 579 million pounds. Bid talk also boosted Yell Group, the directories company, up 2.2%.

Among the mid-caps, Babcock International gained 8.3% on news of its 350 million pounds purchase of the Devonport naval dockyard. Premier Foods rose 5.8% after a reassuring trading update.

Decliners

Mining stocks eased as the takeover speculation that sent the sector sharply higher in the previous session subsided. Rio Tinto fell 1.9% and BHP Billiton fell 2.5%.


[R]9:00AM U.S. stock futures traded lower on weak retail sales and wider trade deficit.[/R]
U.S. stock futures traded lower Thursday, as investors digested disappointing April retail sales and bigger-than-expected increases in the trade deficit and import prices. The Commerce Department said that U.S trade deficit for March widened by 10.4% to $63.9 billion, compared with expectations of a deficit of $59.6 billion. Import prices rose 1.3% in April driven by sharply higher petroleum prices, topping the average economist estimate of a 0.9% increase. In another economic report, the Labor Department said that initial jobless claims fell by 9,000 to 297,000 last week.

Retailers disappointed with much weaker-than-anticipated April same-store sales, although the declines were largely expected because of the robust sales in March, helped by an early Easter. The list of companies missing expectations include Wal-Mart Stores, ((WMT)), Federated ((FD)), Gap ((GPS)), AnnTaylor Stores ((ANN)), Nordstrom ((JWN)), Pacific Sunwear ((PSUN)), New York & Co. ((NWY)), Limited Brands ((LTD)), Abercrombie & Fitch ((ANF)) and others. Costco Wholesale ((COST)) was one of the very few retailers posting better-than-expected sales.

Among companies releasing quarterly earnings, Whole Foods Market Inc. ((WFMI)) plunged 12% in pre-market trading after the natural and organic foods grocery retailer missed Q1 profit expectations. The company said that quarterly earnings fell 11.2%, and that federal regulators raised antitrust concerns about its proposed purchase of smaller rival Wild Oats Markets Inc. ((OATS)). Urban Outfitters ((URBN)) said Q1 net income rose to 17 cents a share, up from 12 cents a share, with sales rising 16% to $314.5 million. Quarterly results came in line with expectations.

Viacom ((VIA)) reported 36% earnings drop in Q1, pressured by higher marketing expenses for movies and a restructuring charge at MTV. The media company posted earnings of 29 cents a share, down from 43 cents a share a year earlier. Revenues grew 16% to $2.75 billion. S&P 500 futures dropped 3.80 points to 1,511.80 and Nasdaq 100 futures slid 6.00 points to 1,906.25. Dow industrial futures slumped 33 points to 13,351.


[R]8:30AM Asian markets finish broadly higher Thursday, Japan, HK decline.[/R]
Asian markets ended broadly higher on Thursday. The 225-issue Nikkei in Tokyo closed 0.1% lower at 17,736.96. Toyota dipped1.9% after the company reported weak earnings growth Wednesday, hurt by higher raw-material costs and softer demand in the U.S. Mitsui Fudosan bucked the downtrend and gained 3.2%, as the compny forecast operating income of 220 billion yen for the year ending March 2010, a rise of 36% from the past business year.

Hong Kong Hang Seng Index closed 0.5% lower at 20,746.2. Hong Kong Exchanges & Clearing rose 1.7%, keeping the uptrend from the previous session, after the operator of the city stock and derivatives exchanges posted higher first-quarter net profit growth mid-session Wednesday. South Korean Kospi index reached a record 1,611.03, then retreated to 1,599.68, notching a 0.4% advance. Hyundai Heavy Industries advanced 3.9% to a record high tracking a brokerage upgrade from Citigroup.

Chinese Shanghai Composite Index set an intraday record of 4,054.75, before easing to 4049.70, for a gain of 0.9% on the day. The index closed at a record high for the fourth consecutive session, as more retail investors appeared into the market expecting to profit from its strongl run. On Wednesday, Chinese stock markets recorded greater than the rest of Asia combined value of shares, including Japan.

In terms of turnover, China is now the second-largest market in the world but in terms of market capitalization it is less than half the size of Japan. The two major indices, Shenzhen and Shanghai have a combined market capitalization of $2,200 billion compared to Japan’s $4,700 billion, the UK almost $4,000 billion and the $16,500 billion of the U.S.

China Petroleum & Chemical added 5.5% after gaining 1.3% Wednesday, Baoshan Iron & Steel rose 6% following a 4.7% gain in the previous session and China Yangtze Power advanced 2.7% after adding 2.9% Wednesday.

Australian S&P/ASX 200 closed up 0.2% to 6,355.50 on gains in banking shares. Rio Tinto fended down 2.8% as hopes for an imminent takeover bid from larger rival BHP Billiton subsided. Shares of BHP Billiton dropped 0.3%. New Zealand NZSX-50 also set a new record, adding 0.4% and Indonesian JSX Composite edged 0.1% higher to 2,040.26.


[R]8:15AM Retailers posted weaker-than-expected April sales.[/R]
Retailers attracted attention early Thursday with the release of April sales figures. The majority of them reported robust March same-store sales due largely to an early Easter, tipping off investors that their April sales would come below expectations. Among the first to report April same-store sales were Costco Wholesale, Claire’s Stores, Mothers Work, and Chico FAS.

Costco Wholesale ((COST)) posted 7% increase in its same-store sales in April, beating expectations of 6.3% growth. Costco said it benefited from one extra day of sales, which resulted in a 2% lift. In the four weeks to May 6, total sales rose 12% to $4.94 billion. Wal-Mart ((WMT)) posted a 3.5% decline in same-store sales, well below estimates of a 1.1% decrease. The world''s biggest retailer said it expects May same-store sales to rise 1% to 2%.

Claire''s Stores, Inc. ((CLE)) said its April same-store sales fell 6%, missing estimates of same-store sales drop of 2%. Total sales for the four-week period rose 1% to $105 million.

Maternity clothing retailer Mothers Work ((MWRK)) said its April sales at stores open at least one year dropped 14.8%, missing analyst expectations of a decline by 12%. The retailer attributed the decline to the earlier timing of Easter. Total sales for the period slipped 9.9% to $52.3 million.

Gap ((GPS)) said its April same-store sales tumbled 16%, down from expectations of a decline of 7.1%. Total sales fell 11% in the period to $1.09 billion from $1.23 billion. Chico FAS Inc. ((CHS)) reported comparable sales drop of 7.3%, compared to the estimate for a loss of 0.6%. Total sales increased 9.8% to $148.7 million from $135.5 million.

J. C. Penney Company, Inc. ((JCP)) said its comparable department store sales fell 4.7%, compared to the initial guidance to be flat. Total department store sales decreased 2.7%. Limited Brands Inc. ((LTD)) said same-store sales slipped 1% in April, slightly below expectations of 0.6% decline. Total sales rose to $688 million from $653.2 million a year earlier.

Federated Department Stores ((FD)) posted same-store sales decline of 2.2%, missing its forecast for an increase of 2.5% to 4%. Analysts had been expecting a rise of 1.7%. Total sales dropped 2.1% to $1.84 billion.


[R]8:00AM NY-7:00PM Mumbai Sensex ends lower on late sell-off in large-caps.[/R]

The Sensex] on BSE finished 10.28 points, or 0.07%, lower at 13,771.23. The market-breadth ended slightly negative as 1,238 stocks advanced, while 1,328 stocks declined and 68 stocks remained unchanged. Of the 30 stocks in the Sensex, 14 advanced, while the rest declined. The turnover on NSE was Rs 9,225.37 crore, compared with Rs 8,394.44 crore on Wednesday.

Economic news

Assembly poll results in Uttar Pradesh are due tomorrow. Polling for the seventh and final phase got over on Tuesday, May 8th. The UP vote is seen as a barometer of national political trends and had some influence on trading today.

Passenger car sales in the domestic market during April increased 11.26% while motorcycle sales were down, reporting a decline of 9.68%. According to figures posted by the Society of Indian Automobile Manufacturers, domestic passenger car sales during April stood at 82,934 units compared to 74,542 units in the same period last year. Motorcycle sales during the month, however, stood at 4,63,091 units as against 5,12,695 units in April 2006.

The Telecom Regulatory Authority of India may impose a revenue-sharing or an entry fee on internet service providers. Currently, internet service providers pay virtually no licence fee, unless they offer virtual private network services. Trai''s suggestions, if accepted, could raise the cost of internet and broadband services in the country. TRAI will lower the Foreign Direct Investment requirement from 100% to 74% as the requirement is for telephone service.

Trading highlights

Indiabulls Real Estate was the most-active stocks with a turnover of Rs 190 crore followed by Page Industries and Tata Steel.

Advancers

HDFC led the gainers today, soaring 5.3% to Rs 1,680. Tata Steel surged 2.5% to Rs 576. The stock traded lower from the session high of Rs 584.70. Tata Steel is to report strong numbers when it unveils its fiscal 2007 results on May 17 2007 on higher steel prices.

HDFC Bank and ITC rallied 1.7% each to Rs 1,014 and Rs 163, respectively. Bajaj Auto and Hindalco gained around 1.5% each to Rs 2,604 and Rs 146, respectively. Hero Honda also finished 0.5% higher at Rs 705.

Decliners

Oil exploration large-cap ONGC led decliners, losing 2.2% to Rs 889, in contrast to an early 2.2% increase in the stock to Rs 929.70 that was sparked by reports the government had decided to cut the subsidy share of upstream companies by nearly Rs 5,000 crore.

NTPC slipped over 2% to Rs 151 and Ranbaxy dropped 1.8% to Rs 386. Tata Motors and Larsen & Toubro declined around 1% each at Rs 714 and Rs 1,691, respectively. Index heavy Reliance Industries was down around 1% at Rs 1,581.

Auto maker Maruti Udyog declined 1% to Rs 795. The stock had advanced 1.1% to Rs 835 in early trade. The Group of Ministers will probably finish today the selling of the government 10.27% stake in the car maker. The stake is to be sold to banks, mutual funds, and financial institutions.


[R]6:30AM European markets were little changed Thursday ahead of important rate decisions.[/R]

The U.K. FTSE 100 index edged down 0.1% at 6,545.80, the German DAX Xetra 30 index was up 0.1% at 7,483.90 and the French CAC-40 index traded 0.1% lower at 6,045.08. National benchmarks decreased in all of the 17 western European markets that were open except Denmark, Greece and Luxembourg.

Economic news

The Bank of England is expected to hike rates by a quarter point to 5.5% in an attempt to curb inflation, while the European Central Bank is expected to keep rates on hold at 3.75% while at the same time hinting at a June rate increase.

Advancers

Hammerson shares rallied 8.6% after reports that New York-based buyout firm Kohlberg Kravis Roberts & Co. and Vornado Realty Trust may bid for the U.K. owner of malls and offices.

Premiere shares advanced 2.6% after it reversed to a profit of 4.5 million euros in the first quarter of the year. Last year, it posted a loss of 18.3 million euros.

BMW climbed 2.6% after Goldman, Sachs & Co. added the shares of the world biggest luxury carmaker to its conviction buy list and lifted its price estimate.

Decliners

French bank Societe Generale plunged 2.5% after its first-quarter profit dropped 2% to 1.43 billion euros on a decline in retail and corporate and investment banking performance, a drop in equity portfolio income and the negative impact from marking-to-market interest rate swaps.

Rio Tinto, mining company, lost 2.4%. BHP Billiton, the world biggest mining company, declined 2.6%. E.ON dropped 1.1% and RWE declined 1.3 %.

Commodities

Crude oil was little changed on concern that supplies will be further disrupted in Nigeria. Crude oil for June delivery slipped to $61.45 a barrel in after-hours trading on the New York Mercantile Exchange. Brent crude oil for June settlement gained 42 cents, or 0.6%, to $65.62 a barrel in electronic trading on the ICE Futures exchange.

Gold and silver were virtually unchanged as the reopening of Newmont Mining Corp. Yanacocha gold mine in Peru reduced concern over supply. Gold for immediate delivery fell $1.10, or 0.2%, to $679.45 an ounce and silver for immediate delivery declined as much as 2 cents, or 0.2%, to $13.34 an ounce.

Currencies

The euro advanced slightly against the U.S. dollar on Thursday ahead of a meeting by the European Central Bank that is expected to see interest rates left unchanged at 3.75%. The euro bought $1.3541 in morning European trading, compared with the $1.3529 it bought in New York late Wednesday. The British pound slipped to $1.9904 from $1.9941 and traded at $1.9962 during Thursday session. The dollar rose to 120.27 Japanese yen from 120.02 yen the night before.