Investors who think the whole hippy-trippy, organic-food thing is conceptually at odds with the whole, like, capitalism thing. man, probably aren't keeping an eye on Whole Foods Market
The biggest retailer of organic and natural foods runs a very tight ship, and it has mesmerized Fools for a while. It was once a Motley Fool Stock Advisor pick, and recently drew the attention of Salim Haji, who judged it a bargain despite the sky high-looking P/E ratio. (To be fair, competitor Wild Oats Markets
As yesterday's first-quarter numbers show, Whole Foods growth appears phenomenally well managed, and it has been getting better. The success almost becomes boring in the retelling.
Revenues are up 24% to $902 million. Comps growth, which has accelerated from 8.5% over the past decade to 16% over the past two quarters, reached an official terminal velocity of 17% this quarter. As enthusiastic as management is, it warned that such a rate cannot continue.
Couple the organic sales growth per store with new locations and improving net margins, and you end up staring at a bottom line that shows earnings up 32% to $0.54 per share. In light of the strong growth, the firm upped its full-year EPS guidance to around $2.07 per share.
With further expansion provided by the firm's ample cash flow -- meaning there's little debt and little to fear from an upcoming raise in lending rates -- Whole Foods is a champion. The game is theirs to lose. Wild Oats might score a few, but competition from the likes of Kroger
I never thought I'd write anything like this, but yeah, if you're in it for the long haul, the grocery store chain trading at a P/E of 42 still looks like a pretty smart investment.
Whole Foods is no longer a Motley Fool Stock Advisor recommendation, but there are lots of solid companies that are. Sign up for six months, risk-free, to learn more.