Is the love affair with Whole Foods over?

Michael Bow
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Whole Foods, the supermarket of choice for health conscious organic food lovers, is being stalked by scores of hedge funds betting on a further fall in its share price, figures out today show.

Short selling interest in the business – which is measured by calculating the number of shares out on loan in a company – has tripled since the start of the year, nudging above the four per cent mark for the amount of stock out on loan, according to Markit data. This is a two year high, and suggests an increasing lack of confidence in Whole Foods' position as top dog in the organic grocery sector.

The US listed business, which has nine stores in the UK - most of them in affluent areas of London - cut its full year forecasts earlier this month as it loses ground to increasing competition in the sector. Shares were down a further 1.4 per cent today (at 1500 GMT), and they now rest at a two-year low.

With short selling interest rising in one of its organic competitors, US grocer Sprouts Farmers Market, which has up to between 2.5 per cent three per cent of stock out on loan, Markit believes this signals a move against the market leaders in the organic sector, rather than part of a broader negative move against the grocery sector.

Why does it think this? Primarily it's because the level of short selling interest in mainstream retailers in the US is very low. “Most conventional retailers have not seen a large jump in demand to borrow, which may indicate that the recent storm around organics may only be centred on specialist firms,” its analysts say.

Indeed, figures show demand to borrow shares in normal supermarkets has halved over the past 18 months to an all time low, hinting that hedge funds are betting on a downturn on Whole Foods in isolation rather than the sector more generally.

Whole Foods has been synonymous with organic food since the foodie movement took off. With the wheels coming off its share price, hedge funds mounting at the gates, it could only be a matter of time before another name comes to symbolise the organic trend.

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