Below, we've analyzed Whole Foods Market in preparation for tomorrow's live chat with Whole Foods co-CEO John Mackey. He'll be joining us on Tuesday, Aug. 10, from 3 p.m. to 4 p.m. ET on Fool.com. You're invited, too!
Whole Foods Market
The organic retailer is bucking the trends in the beleaguered grocery-stock universe. Investors should be shopping for stocks backed by strong fundamental businesses, and Whole Foods seems to fit the bill. The company has profitability, growing sales, and low debt levels down pat.
Last month, I compared Whole Foods against several grocery rivals. Let's update that matchup with last week's new data from Whole Foods' most recent quarter:
|
Company |
Earnings/Loss Per Share (TTM) |
Revenue Increase/Decrease (TTM) |
Gross Profit Margin |
Debt-to-Equity Ratio |
|---|---|---|---|---|
|
Whole Foods Market |
$1.33 |
9.3% |
34.7% |
22.3% |
|
Safeway |
($3.16) |
(3.9%) |
29.7% |
107.7% |
|
Kroger |
$0.01 |
3.8% |
23.3% |
147.3% |
|
SUPERVALU |
$1.63 |
(10.3%) |
22.6% |
261.3% |
*All data from Capital IQ; TTM = trailing 12 months.
Whole Foods exhibits solid profitability, a healthy sales increase, the highest gross profit margin in the table, and a manageable debt load. Granted, Whole Foods' shares command a lofty price, with a P/E ratio of 28. In comparison, SUPERVALU trades at just seven times earnings. Then again, Whole Foods has an excellent shot at achieving high growth for years to come.
There are only about 300 Whole Foods stores. Compare that to about 1,700 Safeway stores, 2,470 Kroger stores, and 2,350 SUPERVALU stores. Even if the chain's organic food and higher prices aren't for everyone, Whole Foods still has lots of room for expansion, both domestically and internationally.
Bulls, bears, questions, and answers
A nasty economic environment and flagging consumer confidence undeniably threaten Whole Foods and its rivals. So does low-priced competition, not only from the grocers above, but also from major-league discounters that sell groceries, including Wal-Mart
Still, Whole Foods boasts a solid brand, and it has worked hard to evolve its business, developing a value image to combat its old "Whole Paycheck" reputation.
In the recent quarterly earnings conference call, co-CEO Walter Robb attributed the company's healthy 8.4% same-stores sales increase to higher transactions and fuller shopping carts in the checkout line. He also linked that increasing figure to a successful improvement in Whole Foods' price-competitiveness, citing a Nielsen study that showed improving trends in customers' sentiment related to Whole Foods' value efforts. Indeed, Robb said Whole Foods is gaining market share.
Last but not least, Whole Foods' sense of purpose gives the company yet another competitive advantage. Co-CEO and founder John Mackey is a vocal proponent of conscious capitalism, which takes all stakeholders into consideration. The company offers its employees health care and other benefits, and has progressive policies, like capping executives' pay at 19 times the average pay of its workers. According to a recent examination at Standard & Poor's companies, CEO pay averaged 319 times that of the average worker in 2008.
By comparison, Mackey no longer takes a salary, having voluntarily given it up in late 2007. If you'd like to hear more from Mackey about his pay cut or his corporate philosophies, join him in a live chat with Fools tomorrow, Tuesday, Aug. 10, from 3 p.m. to 4 p.m. ET.
The most recent quarterly results imply that Whole Foods is still a winner, even if some investors got spooked. What do you think? Let loose with your bullish (or bearish) thoughts, or type in the questions you'd like us to ask Mackey in tomorrow's live chat, in the comments box below.
