It was easy to discount a company dedicated to selling high-end groceries in the midst of a terrible global downturn. And Whole Foods (NASDAQ: WFMI) has indeed suffered from investor fears. Shares of the company fell from year-ago levels of about $22 per share to lows of near $8 per share in the dark days of December 2008. They have since rebounded to the $22 level on green shoots speculation. On Monday, however, they tumbled again to $18.80. Is it time to buy?
That's a tricky question. First, the positives. Whole Foods is a well-managed grocery chain. It has been extremely disciplined in its expansion push, choosing good locations. It has also overcome relatively low revenues per employee by posting higher margins on items and much higher average cash register rings.
No doubt, Whole Foods has a far more loyal customer base than most other supermarket brands. In short, Whole Foods has managed to build itself into iconic status. The company remains relatively underpenetrated in the U.S. and its U.K. expansion should buoy growth as well. Not surprisingly, investor sentiment on Whole Foods has popped recently, pushing the company into the Piqqem Top 10 in terms of Rising Sentiment.
All of that said, Whole Foods has some big hurdles to overcome. Its same-store comparable sales growth has been shrinking, from 12.5% in 2005 to 4.8% in 2008, according to Wikinvest. Net sales have been falling since 2006. Meanwhile, Wal-Mart (NYSE: WMT), Target (NYSE: TGT), and others are moving steadily into the organic and healthy foods market. Even cheapie dollar stores are now stocking some foods that compete with Whole Foods, making the segment a very crowded market.
So is this latest dip a buy opportunity? In all likelihood, with the summer investing lull settling in, there's little upside to buying Whole Foods now versus later in the summer.
Alex Salkever is the Director of Research at Piqqem.com, a stock prediction community powered by the Wisdom of Crowds.
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Reader Comments (Page 1 of 1)
7-01-2009 @ 12:10PM
boris said...
Whole Foods Market has not been well managed. They opened extravagently lavish and costly new stores. The sandalous president illegally slandered a competitior on the internet hundreds of times and was busted. The merger was a failure. They company ran out of money and had to rise $400 million in the dark days of Novemeber at an outragous price.
On the plus side, the company has a drastically better "in season special" pricing strategy that favors customers. The specialist-employees that work there are way better then most employees in retailing. Sometimes even stellar. This is the greenest company in retailing by far. Shopping there leads to social change for green causes. The company final got real (economically) and formulated a effective and smaller 40,000 square foot format which is their chance to make a fantastic multi-year comeback, if the stakeholders band together.
7-01-2009 @ 5:02PM
Patrick said...
Hey Alex,
Thanks for using Wikinvest's new data platform! Keep in mind that you can embed charts with Whole Foods same store sales data, either over time or compared to its competitors, to help mix up your posts and display this information visually.
Looking forward to seeing other ways that you're using the new features at Wikinvest!