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Why WFM Stock Got Obliterated Yesterday

Same-stores sales prove that overpriced organics aren't for everyone

If hot tech startups and fresh, organic food are two staples of San Francisco, it’s fair to say Wall Street was more than a little bearish on the city by the bay yesterday.

whole foods stock earnings wfm stockFor starters, the West Coast woke up to two big-time tech earnings disasters, with investors sprinting away from Twitter (TWTR) and Yelp (YELP) to the tune of 15% and 25% one-day losses.

The story wasn’t much better for Whole Foods Market (WFM), which reported earnings after the bell. Investors sent WFM stock down a painful 11% after-hours.

To be fair, the organic grocery chain is actually headquartered in San Francisco’s hipster cousin Austin. But it still has a strong San Francisco presence and symbolizes the broader food-conscious trend that SF is known for.

Besides, the parallels between the two tech stocks and Whole Foods don’t end there. Whether we’re talking about tweeting or tofu shopping, the lesson from yesterday’s disaster is that very few trends are for everyone. Even if the company is riding a true trend as opposed to a fleeting fad, that doesn’t mean growth is is limitless.

WFM Stock Is Stuck in Its Niche

Investors turned bearish on WFM stock, for example, after the company missed on both top- and bottom-line growth. The company posted a record $3.6 billion in revenue, but that 8% growth wasn’t enough to meet analyst expectations of $3.68 billion. That revenue translated to earnings of 43 cents per share, but analysts were hoping for 45 cents.

The miss was partially because of that whole “we were overcharging you even though our stuff is arguably already overpriced” fiasco in New York. But more importantly, the miss proves that even though Whole Foods found a niche that translated to quick growth, a niche is still a niche.

And as more consumers focus on healthy and organic options, there continue to be more places to find those healthy and organic options. Heck, even Walmart (WMT) has latched onto the trend, leaving Whole Foods for a certain kind of well-off urbanite. Whole Foods prices are hardly for the masses — and it’s hardly going to keeping growing at the same clip (hence the most dismal number of all in the earnings report: same-store sales growth of just 1.3%).

For the record, the story was very similar for the Twitter earnings report. The social media platform has a loyal group of users as well, but Jack Dorsey admitted that the platform remains confusing to non-users.

In both cases, you have a successful product or concept … but when it comes to rolling that out to a wider audience, things get a bit bumpier.

Some of the best businesses are the ones that don’t try to take over the world. Companies like Whole Foods and Twitter, though, seem to be vying to do just that — and many more may be in for a rude awakening.

Alyssa Oursler is based in San Francisco and writes about technology, investing, gender and entrepreneurship. Her work has appeared on Forbes, Business Insider, MSN Money and more. You can follow her on Twitter here or check out her personal site here. As of this writing, she did not hold a position in any of the aforementioned securities.

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