Whole Foods Market Inc.WFMI

Morningstar Rating

Stock Research and Analysis

by Michelle Chang

The deceleration in comparable-store sales, costly acceleration in store growth, and messy acquisition of Wild Oats have plagued Whole Foods' results in the past couple of years, but the straw that broke the camel's back was the macroeconomic woes that Read more

Bulls Say

Whole Foods possesses a strong brand that resonates with consumers not only seeking a high-quality shopping experience, but also desiring stores that deliver on demands for health and wellness, premium fresh foods, and environmental friendliness.

Even with the less productive Wild Oats stores, Whole Foods generated around $800 in sales per square foot in 2008, significantly higher than that of the average supermarket.

According to Natural Foods Merchandiser, sales of organic products increased 17.1% from 2007 to 2008.

Whole Foods derives nearly 70% of its sales from perishable products such as fruit and meats. The firm can charge a premium for these products over similar items stocked by conventional peers.

Whole Foods has plenty of room remaining to grow as it improves its density in large markets and expands further into secondary markets. Read more

Bears Say

Whole Foods has a much wider customer base than it had during past economic downturns, and its top line is proving to be much more sensitive to economic conditions, especially as it seems wealthier consumers are curtailing their spending.

Unlike low-price leaders such as Wal-Mart WMT, Whole Foods dominates because of its brand image, which is trickier to manage and less impervious to competitive threats.

The company has a high-price image among some consumers that may limit its long-term growth potential.

Conventional grocery chains such as Safeway SWY have remodeled stores at a rapid clip and attempted to narrow the gap with premium grocers like Whole Foods in terms of shopping experience, product quality, and selection of takeout foods. Read more

Strategy

Whole Foods has suspended its dividend, slowed internal growth plans, raised new capital, and is looking for ways to reduce costs to help it manage through a difficult economic environment. The firm Read more

Management

In many ways, overall corporate governance at Whole Foods is sound, but management's feet should be held to the fire amid some costly moves that have backfired and recently led to the firm suspending its dividend, reducing store growth for 2009, seeking Read more

Profile

Whole Foods Market is the largest U.S. retailer of natural and organic foods. The firm operates about 280 stores in the United States, Canada, and England. The stores sell Read more

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