Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20
UK Supermarkets Coronavirus Panic Buying, Empty Tesco Shelves, Stock Piling, Hoarding Preppers - 22nd Mar 20
US Coronavirus Infections and Deaths Going Ballistic as Government Start to Ramp Up Testing - 21st Mar 20
Your Investment Portfolio for the Next Decade—Fix It with the “Anti-Stock” - 21st Mar 20
CORONA HOAX: This Is Almost Completely Contrived and Here’s Proof - 21st Mar 20
Gold-Silver Ratio Tops 100; Silver Headed For Sub-$10 - 21st Mar 20
Coronavirus - Don’t Ask, Don’t Test - 21st Mar 20
Napag and Napag Trading Best Petroleum & Crude Oil Company - 21st Mar 20
UK Coronavirus Infections Trend Trajectory Worse than Italy - Government PANICs! Sterling Crashes! - 20th Mar 20
UK Critical Care Nurse Cries at Empty SuperMarket Shelves, Coronavirus Panic Buying Stockpiling - 20th Mar 20
Coronavirus Is Not an Emergency. It’s a War - 20th Mar 20
Why You Should Invest in the $5 Gold Coin - 20th Mar 20
Four Key Stock Market Questions To This Coronavirus Crisis Everyone is Asking - 20th Mar 20
Gold to Silver Ratio’s Breakout – Like a Hot Knife Through Butter - 20th Mar 20
The Coronavirus Contraction - Only Cooperation Can Defeat Impending Global Crisis - 20th Mar 20
Is This What Peak Market Fear Looks Like? - 20th Mar 20
Alessandro De Dorides - Business Consultant - 20th Mar 20
Why a Second Depression is Possible but Not Likely - 20th Mar 20

Market Oracle FREE Newsletter

Coronavirus-bear-market-2020-analysis

Whole Foods' "Detroit Plan" Keeps Growth Rates Fresh

Companies / Investing 2013 Sep 24, 2013 - 03:15 PM GMT

By: Money_Morning

Companies

David Mamos writes: The organic foods business is a $60 billion global industry, and no other grocery chain has profited from this boom as much as Whole Foods Market Inc. (Nasdaq: WFM).

Whole Foods is leading the charge of supplying organic, natural, and locally grown foods to the health-conscious eater. Founded in 1980, it now has a count of 355 stores in 40 states and 3 countries.


WFM stock has shown astronomic growth as well, with shares up nearly 500% in five years.

The growth will continue. According to the U.S. Food and Drug Administration, organic food consumption has gone up 9% per year over the last five years. Future growth rates could be greater than 8% annually.

That's why competition is increasing. A slew of competitors are taking a page out of Whole Foods' book and expanding rapidly.

Can Whole Foods' industry dominance - and WFM's stock tear - continue?

Let's dig in and find out.

Whole Foods Clear Advantage

Whole Foods is doing something that may seem impossible - it is thriving in troubled economic times. Profits rose 20% in the most recently reported quarter, with earnings per share of 38 cents and revenue rising more than 12%.

Whole Foods sales of $11.7 billion in 2012 account for only 2% of the U.S. supermarket industry. To capitalize on this still-growing industry, Whole Foods has laid out plans to increase its store count to 1,000 over the long term.

One advantage Whole Foods has over the competition: the shopping experience. It's not one that other stores have duplicated.

Loyal Whole Foods patrons love the trained and educated personnel that range from experienced butchers, fishmongers, dietitians, and cheese connoisseurs to the sandwich makers and checkout clerks.

That's why same-store sales - although slightly slowing in the most recent quarter - have been increasing.

But other stores want to steal away the Whole Foods consumer...

WFM Stock Faces More Competition

Sprouts Farmers Market Inc. (Nasdaq: SFM) offers nearly the same type of products and produce as Whole Foods. It was rewarded handsomely by Wall Street with its extremely successful initial public offering (IPO) last month when it closed 120% up on its first day of trading.

Sprouts currently has 160 stores and looks to expand its number of stores by 12% annually, thanks to capital provided by the IPO.

The Fresh Market Inc. (Nasdaq: TFM), Natural Grocers by Vitamin Cottage Inc. (NYSE: NGVC), and privately held Trader Joe's are others crowding into the field.

In fact, even traditional grocery stores such as The Kroger Co. (NYSE: KR) are carving out large portions of their stores' floor spaces to accommodate the demand for organic and natural products.

But it's not just the growth rates that have lured grocers to the organic market...

They also enjoy higher profit margins than general grocery stores, which have to engage in price wars to attract customers.

Whole Foods, meanwhile, benefits from health-conscious consumers' willingness to pay more for healthy eating - which is why the store has the nickname "Whole Paycheck."

Whole Foods reported operating margins of 7.5% last quarter and expects them to be between 6.1% and 6.2% next quarter due to costs associated with store expansion. These types of numbers are the envy of many in the grocery business, but they are a direct result of charging higher prices for higher quality.

Lately, however, the chain has had to lower prices to compete. That's why Co-Chief Executive Officer (CEO) Walter Robb said "the perception is that Whole Foods is far more affordable than it was a few years ago."

These price reductions have not yet been reflected in WFM's profit margins. Investors should watch for when - and if - they are.

Something else WFM stock investors need to watch - a new demographic...

Whole Foods Breaks New Ground

In the past, this Whole Foods "lifestyle" was tailored to the affluent crowd who are not as price sensitive and can withstand the economic slowdown.

But that idea is changing - Whole Foods recently opened a store in the middle of bankrupt Detroit.

Many skeptics are wondering what Whole Foods is up to with this opening. But CEO Robb is committed to making a success of this venture. Keeping in mind his past successes, I am willing to give him the benefit of the doubt.

Robb has said that the Detroit store is "exceeding our wildest expectations."

Although the proof may not be in the "pudding" just yet, Whole Foods is committed to this new strategy, and it recently announced plans to open a new store in Englewood, IL - a poverty-stricken neighborhood in Chicago's south side.

If these stores succeed even modestly, this will give us a good indication that future stores in less-than-affluent areas will be equally successful, thus making the prospect of 1,000 more stores even more appetizing to investors.

What's Ahead for Whole Foods Stock

In addition to being in a good position to serve health-conscious consumers, the company has posted double-digit growth on both the top and bottom lines.

However, WFM stock's run has pushed its price to earnings (P/E) ratio into the upper 30s, and that introduces a note of caution into an otherwise positive outlook.


NASDAQ: WFM
Sep 24 01:40 PM
Price: 58.83 | Ch: 0.59 (1.0%)

Bottom line for Whole Foods (Nasdaq: WFM) stock: Although I am a buyer of Whole Foods stock, with economic conditions and the market at lofty levels, I would be wary of buying a full position at this time. A better approach may be to dollar-cost average into a position over the next few months.

Note: In yield-poor times like these, every investor should have at least a few dividend stocks in their portfolio. We've identified five dividend stocks that are stable and have particularly attractive yields...

Which stock do you want us to analyze? Send us a note in the comments section below and we'll add your pick to our list.

About the Author: David Mamos brings nearly 15 years of analytical experience to the table, with a background ranging from big-picture fundamental analysis to highly technical trading decisions. He began his career working as a financial advisor with Royal Alliance in 2001 and helped clients with portfolio management as well as buy-sell decisions before transitioning to the development, implementation, and execution of trading strategies for aggressive investors.

Source :http://moneymorning.com/2013/09/20/whole-foods-nasdaq-wfm-is-the-envy-of-peers-but-is-it-a-buy/

Money Morning/The Money Map Report

©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules