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Whole Foods Market Inc (NASDAQ: WFMI) is showing multiple signs it is not time to jump into this stock, yet. Comp sales are slowing while costs are increasing--a margin squeeze which could be with the company for a while.Comparable store sales grew 6% which appears solid considering it came off a 12% increase in the prior year. However, it was below the 8% to 10% long-term goal Whole Foods has been targeting.
Private label grew 16%, which is another sign of increased competition. A&P, plus others, are coming out with some nice remodelings which can compete against Whole Foods. Also, one must remember, the organic food company sells expensive stuff, although that has not dissuaded consumers in the past.
Another sign of growth moderation is that average transactions per week increased approximately three percent to 3.4 million, and average basket size increased approximately three percent to $34.
Overall, Whole Foods is a company that can still make a lot of money for investors when its increased investment in new store opening proves fruitful. Wait for management to indicate margins have bottomed and comps are about to ramp after the new-store openings begin to show up in results.
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