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Whole Foods profit tops estimates

[CHICAGO] Whole Foods Market Inc reported quarterly earnings that topped analysts' estimates after cost-cutting measures helped cushion the blow of slowing sales growth.

Net income was 44 cents a share in the period ended April 10, the Austin, Texas-based company said in a statement on Wednesday. Analysts projected 41 cents, on average.

Whole Foods, which has spent years trying to shed its "Whole Paycheck" image, is reducing expenses to help cut prices at its more than 430 locations. Selling, general and administrative costs were little changed in the quarter, while sales eked out a 1.3 percent gain, rising to US$3.7 billion. Analysts estimated US$3.74 billion.

"Whole Foods is doing a lot to improve its operations, to control its expenses - there's definitely some good things that happened," said Joe Feldman, an analyst at Telsey Advisory Group. "But their issue is they need to drive traffic and drive people into stores to improve sales." The shares rose as much as 3.4 percent to US$29.48 in New York. Through Wednesday's close, Whole Foods had slid 15 per cent this year, while the Standard & Poor's 500 Index gained 0.4 per cent.

Last year, Whole Foods said it would lower annual costs by US$300 million by the end of fiscal 2017. It eliminated about 2,000 jobs in an effort to trim expenses.

The lower costs have been helping Whole Foods cut prices and offer coupons to better compete with larger supermarket rivals, such as Wal-Mart Stores Inc and Kroger Co, that are selling more organic and natural fare. Cheaper goods, however, have been hurting Whole Foods' revenue. Comparable-store sales dropped 3 per cent last quarter and 1.8 per cent in the previous quarter.

The company lowered its full-year sales forecast, saying revenue would gain as much as 3 per cent, compared with a previous estimate of as much as 5 per cent.

Whole Foods also has been working to introduce a rewards program nationwide to help lock in customers. In February, Co- Chief Executive Officer Walter Robb said the grocery chain is expanding its loyalty test.

BLOOMBERG