Why Whole Foods Just Boosted Its U.S. Store Target by 20%

If you've followed my musings here at Fool.com, you probably know that Whole Foods Market (NASDAQ: WFM  ) is one of my favorite investments. After all, what's not to love about an solidly profitable organic grocery chain that sincerely wants to improve the lives of both its investors and customers?

In fact, even after the stock had returned more than 3,000% (not a typo) for early investors since its 1992 IPO, I decided to buy shares of Whole Foods stock for the first time in my personal portfolio in April. Then, when those shares had gained 34%, I added to my position last month when the stock pulled back after management turned in weaker-than-expected forward guidance.

Think longer-term, Fools
As suggested each time, I based those decisions largely on the fact that Whole Food Market's long-term growth story remains firmly intact. Management has long asserted that one of their end goals is to build at least 1,000 locations in the United States, or nearly triple the 367 total stores Whole Foods operated at the end of last quarter.

But yesterday, things got interesting when Whole Foods co-CEOs John Mackey and Walter Robb sat down with CNBC's Jim Cramer to discuss the long-awaited opening of their first Brooklyn location.

Whole Foods competes with The Fresh Market, Sprouts, Safeway, and Wal-Mart for grocery market share, Whole Foods stock

Whole Foods co-CEOs John Mackey and Walter Robb (far right) at Brooklyn store opening, Source: Whole Foods.

During the interview, when Cramer asked about their market opportunity and reiterated the 1,000-store goal, Mackey seemed to surprise even Robb when he stated:

Probably more than 1,000. The market continues to grow, and I think we're thinking internally that we could do maybe 1,200 stores in the United States at this point. Just because the world is continuing to change.

At that point, Robb began to laugh and chimed in,

That's an exclusive sound bite he just gave you right there [...] because we haven't said that before! There's a road map out there and it looks to us like all these markets are available to us. And we're gonna go for it.

Why not?
Call me crazy, but I think if anyone's in a position to speak to the world's shift toward healthier food, it's the leadership team at Whole Foods Market.

And they're right. The world is changing, and Whole Foods has largely survived and thrived by holding on to the higher-spending grocery customers who've remained willing as ever to pay up for its wares. 

But you don't need to take their word for it. Just look at the competition that has cropped up as a result, the most similar being fellow healthy grocers The Fresh Market (NASDAQ: TFM  ) and Sprouts Farmers Market (NASDAQ: SFM  ) , which held their own respective initial public offerings in late 2010 and August 2013.

With this in mind, I remain convinced that Whole Foods' long-standing clear end-goals and superior employee-, consumer-, and shareholder-friendly culture should allow it to continue winning for the foreseeable future.

But Whole Foods is also seeing increased competition from larger chains, as well. As fellow Fool Brian Stoffel pointed out yesterday, Safeway (NYSE: SWY  ) has done a decent job pushing its O Organics brand to grab market share, using its more than 1,600 locations, even if it only helped Safeway increase sales from continuing operations last quarter by a meager 1.9%.

Then there's the $250 billion retail behemoth that is Wal-Mart (NYSE: WMT  ) , which alluded to the changing grocery landscape back in June by unveiling sweeping changes across its sourcing, training, and operations to "ensure the quality and freshness of the fruits and vegetables that it offers customers."

And even though Wal-Mart admittedly serves a significantly different client base, the pressure from all sides has forced Whole Foods to place more focus on lower margin value-oriented items. This, in turn, should improve its long-term value proposition for increasingly cost-conscious shoppers. Nonetheless, Whole Foods has done an admirable job maintaining its margins while still expecting 2014 sales and earnings growth of roughly 12% and 13.5%, respectively.

Foolish final thoughts
 I think investors would be wise to continue keeping the bigger picture in mind, especially considering the company's freshly unveiled 1,200 U.S. store goal,

To be sure, it'll take awhile for Whole Foods to reach that number, considering it only built 32 new locations last fiscal year. But with 94 stores in development right now, they're also accelerating the rate of new openings with an expected 10 new units slated for completion in the current quarter alone. So rest assured, fellow shareholders, because Whole Foods will get there eventually.

In the meantime, you can bet I'll be happily holding my shares while collecting the company's recently raised dividend.

Whole Foods stock is great, but it's not alone
While I think Whole Foods stock will be a huge wealth builder going forward, it's not the only great investment out there. So if you're looking for more great stock picks for next year, you're in luck!

The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report: "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.


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