By Jessica Menton -
Shares of Whole Foods Market Inc. NASDAQ:WFM plunged 12 percent Thursday, a day after the organic foods retailer announced sales cooled last quarter after the company fell “victim†to overcharging allegations. An investigation that found several stores were overcharging customers for food, resulting in overcharges of 80 cents to nearly $15 per package, according to officials.
In morning trading, Whole Foods'Â stock tumbled 12Â percent to a 52-week low of $35.82.
The New York City Department of Consumer Affairs (DCA) in June released the results of its ongoing investigation that found the high-end grocer routinely overcharged customers by overstating the contents of prepackaged foods. The negative publicity weighed on sales in the final two weeks of the quarter.
“It's just something that went viral in the media, and it has hurt our trust and yet, we do feel like we're victims,†John Mackey, co-chief executive officer & director, said during an earnings call with shareholders Wednesday.
“We don't know exactly why the DCA went after Whole Foods like this, and we're not sure why the media went crazy with it, but it did happen. We are taking steps to not give cause for this in the future,†Mackey added.
Shares of Whole Foods have lost more than 20Â percent so far this year.
Whole Foods Market Inc. - Trailing Year | FindTheCompany
The Austin, Texas-based company, which has a market value of $14.6 billion, reported a fiscal third-quarter profit of $154 million, or 43 cents per share, on revenue of $3.4 billion, compared with a profit of $151 million, or 41 cents per share, on sales of $3.6 billion a year ago.
Wall Street had expected the company to turn in earnings of 45 cents a share on $3.69 billion in revenue, according to analysts polled by Thomson Reuters.
Meanwhile, the company’s same store-sales, which compares the sales of stores that have been open for at least one year, rose 1.3 percent in the quarter, well below expectations of a rise of 2.8 percent, according to estimates from Consensus Metrix.
To combat growing competition, the company announced plans to open a new chain last quarter, targeted toward millennials, beginning next year. During the earnings call Wednesday, the company said the new stores will be called "365 by Whole Foods Market," which the grocer anticipates will expands its growth opportunity beyond the 1,200 stores.
Whole Foods expects to open five 365 stores in the second half of next year, with the expectation of doubling that number of openings in 2017. The company, which currently has 424 stores, has opened 2 new locations during the current quarter and plans to open 8 new stores, including 1 relocation.
For the current quarter, Whole Foods forecasts sales growth of 7 percent, on earnings per share 34 to 35 cents in the fiscal fourth quarter, below analysts' estimates of 38 cents, according to Thomson Reuters' data.Â