Whole Foods' freshness starting to wilt

Has the big money already been made in the organic marketplace?

By Benzinga Nov 7, 2012 11:20AM

Harrison Eastwood Digital Vision Getty ImagesBy Ken Shreve

 

Whole Foods Market (WFM) has been one of the market's great success stories since its initial public offering in January 1992. But since the start of the bull market in March 2009, the stock has surged 700%. This prompts a question: Has the big money already been made?

 

Whole Foods reports fiscal-fourth-quarter earnings after the close Wednesday. The consensus estimate calls for profit of 60 cents a share, up 43% from a year ago. Sales are expected to rise 24% to $2.9 billion -- nice acceleration from 14% year-over-year growth in the second quarter.

 

Three months ago, fiscal third-quarter profit rose 26% from the year prior to 63 cents a share. Sales rose 14% to $2.7 billion. Same-store sales in the quarter rose an impressive 8.2%.

 

As of Oct. 26, the company operated 339 natural and organic food supermarkets in the United States, Canada and the United Kingdom. It opened nine in the third quarter and is expected to open seven in the fourth, for a total of 25 in fiscal 2012.

 

There's no reason to think Whole Foods won't deliver another exceptional quarter of growth, but whether or not it will be enough to boost the stock remains to be seen. After a massive price gains, WFM is starting to look long in the tooth.

 

Keep in mind that major averages remain in a distribution phase -- not an easy environment for high-multiple stocks like Whole Foods to make headway. Whole Foods currently trades at 42 times trailing earnings and 34 times forward earnings.

 

While Whole Foods' huge price in recent years makes it a much riskier buy at current levels, competitor The Fresh Market (TFM) could still be in the early stages of a move. It's a much younger company, still in the early growth stages, after its IPO in November 2010 at $22.

 

As of July 29, the upscale specialty grocery retailer operated 121 stores in 24 states in the United States. Most of its locations are located east of the Mississippi, so there's plenty of room for expansion, particularly in California.

 

In August, the company reported profit of 28 cents a share, up 27% from the year before. Sales increased 21% to $313 million. Same-store sales rose 8%. It opened five new locations in the quarter with plans to open 14 to 16 new stores in fiscal 2012. Earnings are due November 28 before the open. Analysts are looking for profit of 26 cents a share, up 37% from a year ago with sales up 21% to $318.1 million.

 

Recent price and volume trends in The Fresh Market look pretty good. It's been consolidating gains since late August and is back above its 50-day simple moving average, currently working on the right side of a base. It's climbed to within 7% of its all-time high.


Now that the election has passed, it's not out of the question the market could flash a buy signal soon. If it does, a fast-growing, new issue with solid institutional sponsorship like The Fresh Market could outperform.

 

More from Benzinga

31Comments
Nov 7, 2012 3:41PM
avatar
Whole Foods is SO expensive, here in California only the celebrities shop there.  It's an "image" thing.
Nov 7, 2012 3:48PM
avatar
Way too expensive, I can get many of the same brands at other stores much cheaper.
Nov 7, 2012 4:21PM
avatar
I personally would buy more if the prices were lower, they have a huge mark up on everything. I just won't pay those high prices
Nov 7, 2012 4:43PM
avatar

They are simply overpriced.   I go to Tunnies in Coral Srings, here in florida, for the exact same products that I use to purchase at Whole Foods and save on the average 25 to 30%.   Feel like a fool for all the years I paid that premium price.   As a "Heath Nut" I must have wasted literally many

thousands of dollars.  Everyone should do their pricing homework. 

Nov 7, 2012 4:25PM
avatar
Gluttony and so much waste!!!  Produce lined to the ceiling for effect.....and wasted.  How "green" or "organic" is that???? 
Nov 7, 2012 6:07PM
avatar
I used to shop there on occasion for items that I thought were hard to find elsewhere or extra ordinary in quality but that is simply not the case. Seeing that their garlic comes from China was the biggest turn off however realizing that most of what they stock can be found at other stores for so much less was the final straw. But again - garlic from china come on Whole Foods.
Nov 7, 2012 5:16PM
avatar

Grow  your own, home can, sun dry and/or freeze. 

Not cheap, just cheaper than stores.

It taste better too.

Nov 7, 2012 5:19PM
avatar
Perhaps it's because wholefoods uses GMO's in it's products. I refuse to shop there.
Nov 7, 2012 5:21PM
avatar
The store in Columbus OH is huge, beautiful and very EXPENSIVE!  The store is full  of customers so I assume plenty of people in Columbus have no problem paying the prices!  I take advantage of their markdowns and enjoy browsing.
Nov 7, 2012 5:02PM
avatar
tHE ONLY WHOLE FOODS WE'LL BE EATING SOON ARE THE ONES WE GROW. gET YOUR GARDEN READY. aND PACK IN SOME LEAD TO KEEP THE ENTERTAINERS OUT.
Nov 7, 2012 6:53PM
avatar

castignano

 Whole foods has always been overprice and really not that good. Bought shellfish and it was bad.

Nov 7, 2012 7:11PM
avatar
Many Whole Foods here in Colorado. I don't shop there. It's not nicknamed Whole Paycheck for nothing. I get quality produce and healthy foods from my local Safeway and King Soopers using coupons and store specials. I feed a family of 3 and 2 dogs for under $100 a week, have a fully stocked pantry, and nothing with hydrogenated oils or HFCS. Impossible to do at Whole Foods, where my $100 might fill two bags.  
Nov 7, 2012 6:59PM
avatar
Whole Food might as well use a gun on you
Nov 7, 2012 7:15PM
avatar
Shopping at Whole foods adds at least 30-40% to your typical box store store grocery bill.

That right there will destroy your health in the long run.

Nov 7, 2012 8:47PM
avatar
I shop at Whole Foods to meet good looking single chicks....
Nov 7, 2012 9:10PM
avatar
Whole foods is for people who don't really know what the word 'value' means.
Seven dollar lemonade?  Come on!

Nov 7, 2012 8:17PM
avatar
Prices way to expensive and quality of produce has went in the dumpster; so rarely do I shop at Whole Foods anymore.
Nov 7, 2012 4:47PM
avatar
I love our local WF. It's the most convenient grocery store for us to shop organic (which we mostly do). We also have a Walmart grocery nearby which has an awful produce selection (old and rotten), and also a Hen House, where you can buy conventionally-grown produce for the same high price as you would at WF. Also, the WF is always well-stocked, fresh, organized, clean and full of helpful employees. I usually shop there with coupons and on sale, and it's not that much more expensive than buying elsewhere. In fact, some things are cheaper at WF than other stores, you just have to look.
Nov 7, 2012 6:56PM
avatar
Man... bunch of haters here... Love my Whole Foods everyday!!!
Nov 7, 2012 6:58PM
avatar
This store must be owned by Mitt Romney and the 1%er's.  They are going down in flames due to not considering the balance of the world.  Our metro area of 500,000 have about 5,000 people who can really afford to shop there and a few others who are always trying to make you think the are more able to than the reality.
Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

124
124 rated 1
279
279 rated 2
471
471 rated 3
714
714 rated 4
642
642 rated 5
604
604 rated 6
614
614 rated 7
450
450 rated 8
303
303 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
ARCPAMERICAN REALTY CAPITAL PROPERTIES Inc10
BIDUBAIDU Inc10
CITCIT GROUP Inc NEW10
HPQHEWLETT PACKARD CO10
ITUBITAU UNIBANCO BANCO MULTIPLO S.A.10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.