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NEW YORK -- Shares of Wild Oats Markets Inc. gained in early trading Wednesday but later declined, despite an analyst's rating upgrade on expectations that the organic food retailer can return to a profit this year.
Wild Oats shares climbed as much as 7.5 percent in early activity, but dropped 9 cents to $6.37 during late afternoon trading on the Nasdaq, according to reports by the Associated Press.
The day before, Boulder, Colo.-based Wild Oats said it swung to a loss in the fourth quarter ended Jan. 1 after a spate of new stores and holiday promotions increased expenses and thinned its gross margin. The stock plunged more than 9 percent to close at $6.46 Tuesday, edging near its October 52-week low of $5.60.
But Charles Cerankosky, an analyst with KeyBanc Capital Markets, noted an upswing in sales that has continued into the current quarter and said projected figures for the year are "encouraging."
He added that Wild Oats' stock price "does seem to discount" the company's accounting issues and slower profit recovery in Southern California, where a late 2003 labor strike has intensified the competitive landscape.
Cerankosky upgraded Wild Oats to "Hold" from "Underweight," saying his opinion assumes that further problems will not arise while the company restates past results to fix its accounting of legal and lease reserves.
The analyst also said he expects Wild Oats to break even in fiscal 2005. On average, analysts polled by Thomson First Call currently predict 2005 earnings of 2 cents per share -- with estimates ranging from a loss of 8 cents to a profit of 10 cents -- on $1.14 billion in sales.
In the latest quarter, Wild Oats posted a loss of $3.8 million, or 13 cents per share, after logging earnings of $829,000, or 3 cents, a year ago. Sales grew 11 percent to total $281.9 million, with sales at stores open at least a year falling 3.2 percent.
Wild Oats' full-year loss was $7.1 million, or 25 cents per share, with sales totaling $1.05 billion. Its results included about 21 cents per share in charges from restructuring, severance and write-offs. In 2003, the company earned $3.6 million, or 12 cents per share, on sales of $969.2 million.
Elsewhere in the sector, Whole Foods Market Inc. rose 54 cents to $99.82, Kroger Co. gained 2 cents to $17.67 and Albertsons Inc. jumped 29 cents to $22.93.