(Reuters) - Shares of upscale supermarket chain Whole Foods Market Inc <WFM.O> are likely to rise over the next year, driven by cost cuts that have allowed for more competitive pricing and the launch of a new chain of smaller stores featuring value-priced items, the financial newspaper Barron's reported.

It may take several quarters for profits to take off, but the shares could return 20 percent over the next year including its dividend yield, the paper reported in its June 6 edition.

Same-store sales are expected to decline at a slowing pace over the current and next quarter before returning to growth as Whole Foods closes the pricing gap with rivals, it said.

The company expects its new 365 value chain, which launched last month in Los Angeles, to eventually reach 1,200 stores.

Whole Foods shares rose early this month after Credit Suisse raised it rating and price target on the stock.

The shares could rise to $40 over the next year, the newspaper forecast. They closed at $34.07, down 0.7 percent, on Nasdaq on Friday.

(Reporting by Bill Berkrot; Editing by Jeffrey Benkoe)