Whole Foods = Starbucks

This is a follow-up to a post first written in May

The WSJ Reports:

"The souring economy is aggravating the troubles of Whole Foods Market Inc. (NASDAQ:WFMI), a onetime Wall Street darling now mired in a nearly three-year slump. Analysts say the upscale grocer probably will have to trim its earnings forecast for the current fiscal year and announce further cuts to capital spending or new-store plans when it reports fiscal fourth-quarter results Wednesday.

"They're going to have to take their punches," said Bob Summers, an analyst with Pali Research. "It's kind of the wrong time, wrong concept." The purveyor of natural and organic foods said in August it would reduce planned store openings for its fiscal 2009, which began Sept. 29, and suspend its quarterly dividend. Chief Executive John Mackey said the environment was "the most challenging I have experienced in my 30 years in retail."

Economic conditions since have worsened, making it even harder for the company, based in Austin, Texas, to attract customers to the gourmet foods that account for much of its profit, such as $15-a-pound sesame-crusted salmon and $9-a-pound mushroom-leek strudel. Whole Foods declined to comment, citing a quiet period in advance of its earnings report. But amid the credit crunch and weaker consumer spending, investors have been selling off Whole Foods shares in anticipation of further bad news. The stock was up 15 cents a share in 4 p.m. Nasdaq composite trading Friday, but the shares are down 74% this year."

Like Starbucks (NASDAQ:SBUX), Whole Foods is suffering as much from a now penny pinching consumer as it is from lower priced competition.  Now that organic food can be found not only in the loca  grocery store but evenwarehouse cliubs like Costco (NASDAQ:COST) and BJ's (NYSE:BJ), the rational for paying significantly higher prices for lettuce or carrots just isnt there for most consumers

Until the value proposition offered by each company to the customer is fixed, shareholder will have little to celebrate down the road.