Whole Foods: Rough patch?

This AP story reports that Whole Foods has been downgraded by one analyst to "underperform."

Given the challenging economic times, the analyst said the company may have trouble improving its profile in the months ahead. In fact, he said, maintaining even flat sales looks to be an uphill climb late this year and into next.

When the organic market sneezes, Whole Foods will catch a cold, and so this anticipated belt tightening by consumers shouldn't be surprising. The company is scheduled to report its quarterly earnings Nov. 5.

What may be surprising is that the most recent retail sales figures reflect continued double digit growth for the organic produce category.

The United Fresh Fresh Facts report showed second quarter 2008 sales of organic fruits and vegetables were up strongly, with weekly sales of organic fruit up 26% over last year in the second quarter and organic fruit volume up 16%. Likewise, organic vegetables showed a 22% gain in weekly sales per store and a 14% increase in weekly volume per store in the second quarter. Overall, Fresh Facts reported that the average price of organic fruit was $.371 per pound, up 17% from last year. The average price for organic vegetable was $3.46 per pound, up 8% from a year ago.

Fresh Facts said organic fruit contributed 7.2% to total produce sales in the second quarter, while vegetables accounted to 5.5% of total produce sales.

Looking ahead, it will be closely watched to see how much sales of organic produce decelerate from second quarter performance to the July through September third quarter.