Put together the vague perception of "disappointing" quarterly results, the impact of Superstorm Sandy, and ongoing macro uncertainty, and Whole Foods Market (WFM) shares are well off their recent lofty highs. That's why I'm taking the opportunity to add more of the stock to the real-money Prosocial Portfolio I manage for Fool.com.
Whole Foods' most recent quarter boasted one huge reason that I'm willing to pound the table on this stock: sales. The organic grocer's total sales surged 24% to $2.91 million, and same-store sales exploded a staggering 8.5%. In the grocery industry, such figures are pretty incredible.
It's not like Whole Foods' profitability took a big hit, either. Fiscal fourth-quarter net income increased 49.4% to $112.7 million, or $0.60 per share. The grocer has even increased gross margin to 35.3% from 34.5%.
Granted, Whole Foods did announce that it's going to take a one-time charge related to uninsured losses incurred from Hurricane Sandy, and the first five weeks of its fiscal first-quarter sales were affected by the storm. However, given the ferocity of the superstorm, this isn't a Whole Foods-specific problem.
Whole Foods' long-term outlook remains intact; its social consciousness and innovative business model make it one of my favorite stocks. Meanwhile, the grocer has an enviable balance sheet in the current economic environment, with $1.06 billion in cold, hard cash, and a negligible $19 million in debt. It also announced a 43% dividend hike.
Whole Foods, which trades at 31 times forward earnings, may look too pricey to some, but it's far more appetizing than many other grocery stocks, given its long-term growth outlook and innovative business model.
Take beaten-down conventional rival SUPERVALU (SVU); lately, its biggest selling point is that it may be bought out. This grocer is a casualty of the cutthroat industry, and has lost more than $2.5 billion over the last two fiscal years.
Another conventional grocer, Safeway (NYSE: SWY), isn't a tantalizing industry innovator, either. It's got difficulties differentiating itself on the competitive landscape, and it's already plopped 1,466 stores on the map in the U.S. and Canada. Whole Foods is targeting 1,000 total stores over the long term, but right now, there are only 342 stores. That's a lot of growth ahead.
Like fellow Prosocial Portfolio stocks Hain Celestial (HAIN 0.17%) and Chipotle Mexican Grill (CMG 0.53%), Whole Foods has been way ahead of the curve in fashioning its business for an emerging kind of foodie: the ethical consumer. These companies' offerings stretch beyond simply "healthy eating" (although that's a great trend in itself). The shoppers these companies cater to are also interested in factors like sustainable food sourcing and ethical supply chains.
Whole Foods is best in class at what it does, illustrating that positive value for consumers (and investors) goes far beyond simple price. Just look into its Whole Trade-certified products and you'll see what kind of bang consumers get for their buying buck. Whole Foods exemplifies the spirit of striving not only for healthy profits, but also for improved processes and innovations to make the world a better, healthier place.
I believe the future is as bright and strong as ever for Whole Foods Market's business. That's why I'm using current weakness to buy more shares of this super-positive grocer.
