Whole Foods Stock Plummets More than 20 Percent

Rick Newman of Yahoo Finance breaks down what is behind investors dropping the grocery chain's stock.
4:32 | 05/07/14

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Transcript for Whole Foods Stock Plummets More than 20 Percent
I'm Michelle Franzen -- the financial markets in New York close -- Sixty sevens this story stock today a week take a look at whole foods the organic and healthy living superstore. -- a bad taste in the mouth of investors and here to explain what spoiled things -- the high -- supermarket. Rick Newman of Yahoo! finance Rick what's happening here. Well whole foods simply disappointed analysts and investors their -- their profits were lower than expected all the numbers were lower than expected more than that. They have lowered their outlook for the rest of the year and it's not the first time they've done that. So this has been a high flying stock for a long time and I think -- errors finally coming out of this stock which we're seeing almost -- 20% decline today. The stock is has been down something like 30% so far this year while the overall market has been flat I think what's going on -- -- -- -- foothold foods as the CEO said today has had this market have -- premium. In organic foods to itself in almost kind of invented this part of the retail market and now a lot of competitors are getting in merits obviously beginning to impact their business. And that has sent investors heading for the exits. Yes of course you know John MacKey of course giving us that quote let's read it she at least at for a long time. We have the field to ourselves but we don't anymore so. Who's the competition -- -- coming from. Well here's part of it what scares investors Wal-Mart. They're so big that once they get into any segment of the retail industry they tend to. You know -- competitors and Wal-Mart is now. Starting to sell. Organic foods and healthy foods and things like that of course Wal-Mart focuses on price. You know when the big sell for whole foods up till now has been premium foods. And haven't come out so this -- at a premium foods at premium prices which I think is why investors have loved it. And it you know what you've heard John McEnroe CEO been saying recently. Is whole foods is not so much a premium retailer anymore he's trying to transform it into a value. Retailer now that's tricky how do you tell your existing customers you know we know you're willing to spend top dollar for all this. The best of the best. Now we're gonna sort of tell you that you're getting that you know and -- other consumers that there -- they should come here to get a good value those are two different messages. And I think they got up to figure out their -- -- for that's gonna take awhile. And they've got to figure out how -- some way to respond competitors. In the meantime as you mentioned that is reflective and these stocks let's take a look at the -- -- chart as investors flee from whole foods you mentioned that big drops. Walk us through that again as a horrifying what that's -- -- way to drop the. I you know I think it is important to point out. It this is what is kind of interesting about big stock changes like this whole foods is still making money they're still profitable they're still forecasting profits are not losing money. It's just that -- -- competitive picture has changed by quite a -- they've got new competitors now. This seems to be the first big acknowledgment the competitors are -- their bottom line they're gonna have to adjust so. There are some people out there are saying hey maybe this is a buy opportunity this is a good retailer they will figure figure out how to deal with the competition but for right now. The movement is in one direction and it's out of this stock it's sort of sounds like it could be a byproduct of their own success to many -- moving towards that healthier food and warm supermarkets getting in on the action. So what do you think whole foods can do to separate itself from the pack now. While they need they need to come up with a -- a better value proposition right to -- -- industry jargon. They they can't just rely on having this sort of small. A group of consumers are willing to spend top dollar for this money they they just -- cannot take those customers for granted anymore because some of those customers not all of them. Meanwhile are not -- -- shop at Wal-Mart because they like the experience of whole food's better it's a much more upscale experience. But they're gonna lose some customers as competition intensifies so they have to come up with new ways to get those customers win those customers back in expand their own market they've got -- Probably reach deeper into different parts of the market they haven't tapped yet the -- and the president does of the parts of the market that wal mart's going after there's another. Change starting up called sprouts and they're going after the middle market if you will so. Whole foods can't just sit there at the top anymore and say. We -- made. Very good Rick Newman from Yahoo! finance thank you for joining us thanks Michelle. You of course can keep up with the latest headlines right here on abcnews.com. If you've been watching story -- I'm Michelle Franzen in New York.

This transcript has been automatically generated and may not be 100% accurate.

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