Texas-based organic and natural food supermarket Whole Foods Market (NASDAQ:WFMI) reports earnings this Wednesday. Let's take a quick peek at what is expected from this company, which Fool co-founder Tom Gardner called a favorite.

What analysts say:

  • Buy, sell, or waffle? Of 19 analysts listed, five rate this one a buy or strong buy, four call for selling, while 10 urge you not to squeeze the fruit too hard as you hold it.
  • Revenues. Having produced $1.09 billion in revenues a year ago, Whole Foods is now expected to grow sales more than 21%, to $1.32 billion.
  • Earnings. Consensus estimates call for $0.35 per share, 12.9% higher than last year's.

What management says:
The company posted 2005 sales of 4.7 billion, its aim is to grow to $12 billion by 2010. In a February 2005 article on Forbes.com, CEO John Mackey said of that goal, "On the one hand, that sounds ambitious, but on the other, that's not rapid growth. When we went public in 1992, we did $92 million in sales. Thirteen years later, sales are 40 times greater. Now we're talking about increasing sales two and a half times in five years. It's not that big a deal."

In the last earnings release, Mr. Mackey said, "We are very pleased with the 22% sales growth and 26% net income growth we produced in the first quarter. Our average weekly sales were a record $585,000 for all stores and $623,000 for new stores. Our 13% comparable store sales growth this quarter marked our ninth consecutive quarter of double-digit comparable store sales growth, and despite the fact that our average store size continues to grow, our annualized sales per gross square foot increased to an all-time high of just over $900."

What management does:
Gross margins have been inching up, while operating and net margins have fallen just a bit. Whole Foods will need a lot of sales growth to meet Mr. Mackey's ambitious goal, it has hovered around the low 20% level as of recent.

Margins %*

9/04

1/05

4/05

7/05

9/05

1/06

Gross

34.7

34.7

34.8

35

35.1

35

Operating

5.6

5.6

5.6

5.7

4.9

4.9

Net

3.4

3.4

3.4

3.5

2.9

3

Sales Growth %**

23.5

22.4

20.3

23.5

20.2

21.8
* Trailing-12-month (ttm) data for quarter ending in month indicated.
 ** Year-over-year comparison for quarter ending in month indicated.
All data from relevant company 10-Q and 10-K filings.

One Fool says:
Whole Foods had $4.7 billion in sales for the last fiscal year. In order to reach the goal of $12 billion in sales by 2010, they will have to compound revenue at 20.6% per year. According to their last earnings release, they have an average of 20.7% revenue growth over the past five years. Will they make it?

They plan to continue opening new locations, including one in my favorite city, Seattle. However, I'm still a bit wary as to whether that will prove enough to achieve such a lofty goal. The real question, in my opinion, is whether the company can sustain same-store sales growth (or organic sales growth, as some might call it) at the rather healthy five-year average of 11.1%.

Selling natural and organic food seems to resonate well with consumers, especially among those concerned about genetic modification. My local Kroger (NYSE:KR) store recently expanded its natural food section. While I have my own opinions about genetically modified food, one cannot argue with Whole Foods' success. The trick will be to keep up the pace as they maintain their fairly heady growth.

Competitors:

  • Wild Oats Markets (NASDAQ:OATS)
  • Kroger (NYSE:KR)
  • Safeway (NYSE:SWY)
  • Albertsons (NYSE:ABS)

Whole Foods is a Motley Fool Stock Advisor recommendation. Take the newsletter dedicated to the very best of David and Tom Gardner's selections for a 30-day free spin.

Fool contributor Jim Mueller does not own shares in any company mentioned.