Natural and organic food provider Whole Foods Market, Inc. (NASDAQ:WFM) posted a mixed first-quarter recently. Though investors were not very happy with the results and the stock plunged sharply, I believe there are more reasons for joy and merriment. Let us check how.
The Quarter in Detail
Driven by higher product prices and more demand for healthy products, revenue surged 14% to $3.86 billion over last year. The company caters to a niche market where consumers are willing to pay a premium for good quality natural products. Most of them are unmoved by the price changes. Moreover, the supermarket operator’s new product offerings grabbed the attention of the customers, leading to higher sales.
Moving onto the bottom line, it exceeded the Street’s expectations. Earnings jumped 20% over last year, clocking 78 cents a share. Earnings increased in spite of huge costs incurred on opening 10 new stores as well as remodeling some of the stores. Whole Foods Market, Inc. (NASDAQ:WFM) managed its costs quite well and deserves appreciation.
Market for organic foods has been growing rapidly as customers get more and more health conscious, so much so that even beverage makers such as PepsiCo (NYSE:PEP) are entering this market. PepsiCo and many other beverage players have been expanding their product lines to include healthier beverages such as juices and other energy drinks. For instance, PepsiCo had launched a low calorie drink called Pepsi Next, which is being well received by consumers and has managed to register annual sales of $100 million. This has helped customers in keeping away from sodas, which are harmful for health. Also, it has helped the company witness a 5% organic growth in its fourth quarter and full year results.
In fact, PepsiCo also eyes the growing yogurt business, which has been the hottest product for all organic food companies. A typical example here is General Mills (NYSE:GIS), which has a wide range of frozen yogurts to attract customers in hordes. Also, General Mills’ addition of different flavors to the product has made people go gaga over it, leading to increased sales each quarter. Mills’ acquisition of Yoplait, a yogurt giant in Paris, proved to be remarkably beneficial to the company, helping its top line grow each quarter. General Mills registered 9% surge in yogurt category sales in Canada. Also, the company expects the yogurt sales category to perform even better with the introduction of Greek 100-calorie yogurts, which is the third best performing product in the segment.