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Whole Foods cuts profit, sales outlook as competition intensifies

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NEW YORK, N.Y. - Whole Foods cut its profit outlook for the third time in recent months on Tuesday, signalling the intensifying competition the grocery chain is facing in the market for organic and natural foods.

The company, based in Austin, Texas, has grown in popularity by positioning itself as a purveyor of wholesome foods. More recently, however, its dominance among the healthy-eating set has been challenged as traditional supermarkets, big-box stores and even online retailers step up their organic and natural offerings.

"For a long time, Whole Foods had the field to ourselves. That was nice. But the reality is that we don't anymore," said John Mackey, the company's co-founder and co-CEO, in a conference call with analysts and investors.

Whole Foods' stock fell almost 14 per cent in after-hours trading Tuesday.

Still, Mackey stood by the company's growth potential.

To appeal to a wider base of customers, Whole Foods Market Inc. has been trying to keep its prices down, in part by pushing its more affordable store brands. Those store brands are also designed to cultivate loyalty, since customers can't find them elsewhere. But most major retailers including Target and Kroger are using a similar strategy of dangling spruced up store brands.

Looking forward, Whole Foods said it still sees demand for 1,200 locations in the U.S. It currently has about 380 stores.

For the quarter ended April 13, the company said sales at established locations rose 4.5 per cent, hurt by the shift of Easter the current quarter. A year ago, the figure had climbed 6.9 per cent.

Its profit was unchanged from year ago at $142 million, or 38 cents per share. But analysts expected 41 cents per share in the latest period.

Revenue rose to $3.32 billion, but also fell short of the $3.34 billion Wall Street expected, according to FactSet.

Whole Foods now expects to earn between $1.52 and $1.56 per share for the year, down from its previous forecast of $1.58 to $1.65 per share. The company had already cut its forecast in November, then again in February.

Sales at established locations are expected to rise between 5 and 5.5 per cent, down from the latest forecast of 5.5 to 6.2 per cent.

The company's stock fell $6.70 to $41.25 in after-hours trading.

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Follow Candice Choi at www.twitter.com/candicechoi

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