Message Font: Serif | Sans-Serif
No. of Recommendations: 16
I am posting in response to the stock challenge report.

I am very bullish on Whole Foods Market, a member of the S&P midcap 400. I think it is a perfect stock--recession-proof with plenty of room to grow.

Whole Foods Market is the largest supermarket chain for organic and natural foods. It started with one store in Austin, Texas in 1980 and now owns and operates 133 stores throughout the US and Canada. It targets health conscious customers and those concerned about the environment. Products include organically grown produce, antibiotic/hormone free dairy and meat products, environmetally-friendly household products, dietary supplements and body-care products. Whole Foods also has developed several private label brands that account for 15% of total sales in their product categories. One of their labels,"365", offers quality products that are an alternative to the more expensive national brands. There is also a label for products targeted to children and a label for organic products.

Sales and Revenue Growth
Whole Foods' revenue growth has averaged more than 20% over the last 3 years. This week the company announced that third quarter sales rose 21% and quaterly earnings increased 37%. Sales from stores open at least a year rose 10.5% from the same quarter a year ago.

Profit Margin
Whole Foods has a Net Profit Margin of 2.6%, compared with an industry net profit margin of 1.5%. This is due to the higher mark-up on natural foods as compared to ordinary groceries. An argument could be made that consumers will seek less expensive groceries if the economy worsens. This hasn't happened yet and I don't think it will. People are doing more than purchasing groceries at Whole Foods; they are purchasing a lifestyle they are committed to.

Strategies for Growth
To date, about 40% of the chain's expansion has come from agressive acquisiton of competing chains. Now it plans to increase its market share primarily by building new stores in choice locations in urban, highly populated areas. It is currently in 30 of the top 50 US markets so there is plenty of room to grow. The Company plans to open 2 more stores in the fourth quarter.

John P. Mackey has been chairman and CEO since the company's inception in 1980. He follows a decentralized apporach, giving much autonomy to
the individual stores.

Personal Experience
I live in Seattle where Whole Foods opened a new store several years ago. It is in an urban, highly populated area. My experience shopping there has been a positive one. I appreciate the ample parking; there is both a large underground parking lot and an outside parking lot. There are some supermarkets that I avoid in Seattle during certain times of the day because I know it may be impossible to get a parking spot in their small lots. I've never had to wait long to check out. The store is usually busy but all the checkouts are open and the cashiers are friendly and efficent. As a cost-conscious consumer I buy a lot of the store's "365" label, which offers quality comparable or better than the national brands at less expensive cost. In fact, their "365" balsamic vinegar won a taste test conducted by Cooks Magazine a few years back, beating out vinegars that cost more than twice the price. Years before the Seattle store opened, I would stock up on canisters of Whole Foods Label Smoky Russian Tea on my yearly visits to the Charlottesville,VA store when visiting my dad.
There's also an in-store cafe at the Seattle store that recently got a favorable review in the daily newspaper. There's a large selection of freshly baked items, hot entrees and sandwiches, and hot and cold beverages.
There's also a classroom that offers classes in not only cooking but also in subjects such as how to buy a house, financial planning and alternative medicine. Many of the instructors are professionals from the community.

Whole Foods is the undisputed leader in a growing industry. It will continue to benefit from the increasing popularity of natural foods. The company's plans to expand into highly populated urban areas should guarantee continues strong growth for many years to come. I would not be surprised to see this Whole Foods become a Rule Maker Company in the future.
Print the post  


When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.