WFMI Whole Foods Market, Inc. (MM)

Whole Foods Market Inc.'s (WFMI) fiscal second-quarter earnings grew 33% as same-store sales increased and gross margins expanded. The company said the results were the strongest it has reported in the past five years.

Despite reports last week that Whole Foods' (WFMI) suppliers were seeing fewer orders in April, the natural-foods supermarket chain brought in comparable-store sales up 7.8% for the quarter ended April 10, even though the shift in the Easter holiday to the current quarter hurt comps by 50 basis points.

Whole Foods shares were up 4.4% to $62.97 in after hours trading, following its quarterly conference call.

Whole Foods says it isn't experiencing commodity inflation to the extent of its competitors, giving it the ability to keep prices reasonable.

The high-end grocery chain also benefits from more pricing elasticity, given its average patrons have more discretionary income, making them less sensitive to small changes. For the same reason, Whole Foods' is also seeing less of an effect from major industry headwinds like unemployment and rising gas prices.

While gas is a real issue for the industry, said Co-Chief Executive Walter Robb, "this is a very different time than in 2008 and a very different customer. This customer is way more adaptive ... and has a stronger commitment to lifestyle." As a result, the impact on sales and margins has been minimal.

"We have to continue to power through this," Robb said. "It'll have some effect on margins -- we don't know where it goes from here -- but we like the results so far given the circumstances."

The company also raised its full-year earnings estimate to $1.87 to $1.90 a share from its prior view of $1.76 to $1.80. It sees sales growth of 11.7% to 12.6%, compared with the February view of a 10.7% to 12.8% gain.

But some analysts caution that the upside is limited for Whole Foods, given its fast-paced growth in recent years. The shares were priced as low as $10 in February 2009.

Whole Foods has big growth plans focused on Canada, the U.K., and the U.S. "heartland" region. The company expects to open six more stores, including two relocations, in the current quarter, after already relocating one this quarter and opening three, including one relocation, in the last quarter. Whole Foods currently operates 304 locations totaling about 11.5 million square feet.

In the past, investing extensive capital in to the opening of new stores has put pressure on Whole Foods' margins.

"But now our base of stores is so great that we would have to accelerate our growth rate so considerably to have an impact on margins," said Co-Chief Executive John Mackey, simply because of the ratio of new stores to existing ones is more drastic.

"So the growth paradox is still there, only I don't think we're going to feel it too much," he added.

The company says it is also being pickier when it comes to choosing real estate, and that it is taking more opportunities to build smaller square-footage stores.

For the quarter ended April 10, Whole Foods reported a profit of $89.9 million, or 51 cents a share, up from $67.5 million, or 39 cents a share, a year earlier. Sales jumped 12% to $2.35 billion as same-store sales increased 7.8%.

Analysts surveyed by Thomson Reuters expected a profit of 46 cents on revenue of $2.37 billion.

Gross margin widened to 35.6% from 35.3%.

The company also said it would change its trading symbol to WFM from WFMI, effective Friday.

--By Annie Gasparro, Dow Jones Newswires; 212-416-2244; annie.gasparro@dowjones.com

--John Kell contributed to this article.

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