Whole Foods downgraded at BMO Capital Markets based on negative price perception

Whole Foods Market Inc. was downgraded to underform from market perform at BMO Capital Markets based on the bank's Dirty Dozen survey, which found price perception at the grocer has not improved. They lowered their price target to $23 from $26. Analysts said they continue to view Whole Foods as an "innovation leader in food retail" but see risk in its stock valuation because it's in the early stages of a multiyear transition. The company unveiled a nine-point turnaround plan in November. According to the bank's research, 71% of the more than 1,000 active Whole Foods shoppers who participated in the BMO Dirty Dozen survey saw no change in prices over the past three months. And only 24% believe Whole Foods' organic products are definitely better than those found at conventional markets. More than two-thirds of respondents (69%) said they supplement their grocery needs at traditional supermarkets. "With new competition across the retail landscape in both natural and organics, and more likely coming, we see increasing risk that Whole Foods will have to accelerate and broaden its price investments beyond current expectations to change consumer perception," analysts wrote in a note published Monday. BMO believes Whole Foods will do more price investments, but maintain premium pricing in some categories by conveying its high quality standards, which could be a risk. Whole Foods shares are down 3% in premarket trading and down 42.8% for the past 12 months. The S&P is down 7% for the past year.

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