Whole Foods Market, Inc. (NASDAQ:WFM)

CAPS Rating: 4 out of 5

Whole Foods brings the world of natural and organic foods into the supermarket format.

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Member Avatar Torquepeak (74.08) Submitted: 8/14/2014 4:03:51 PM : Outperform Start Price: $38.83 WFM Score: -2.90

Organic foods and prepared foods growth are outpacing other parts of the grocery market. WFM price is down b/c of recent troubles with slowing growth. Don't be fooled into thinking Wal-Mart is taking away the organic business. It's a different demographic. WFM offers a differentiated shopping experience, a trusted source of organics and is a leader in prepared foods. Their strengths play neatly into industry trends, a great recipe for growth. Buy it now, while it's on sale.

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Member Avatar TMFNinjaPanda (< 20) Submitted: 8/12/2014 10:23:00 AM : Outperform Start Price: $38.96 WFM Score: -4.57

It's a solid business that makes people happy doing grocery shopping. Wall Street doesn't like the stock (it's been under performing the market for the last 2 years), which is a great news for individual investors to hold it for long term.

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Member Avatar CoachKip (< 20) Submitted: 8/8/2014 11:49:26 AM : Outperform Start Price: $37.90 WFM Score: -2.85

Whole Foods has a few minor issues to work out as the Organic and Natural foods movement moves into discount grocery stores but they are still the top of this niche and will be able to capitalize on this for a long time.

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Member Avatar LongShortIndex (30.31) Submitted: 8/4/2014 9:59:39 PM : Outperform Start Price: $37.86 WFM Score: -2.14

Redthumb CMG, green thumb wfm

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Member Avatar zharriott (60.92) Submitted: 8/4/2014 11:46:10 AM : Outperform Start Price: $36.87 WFM Score: +2.98

I love a little market overreaction. Gives value investors an opportunity worth writing about =].

Whole Foods is a household brand name grocery store in position to absolutely kill it in the organic retail industry. While I understand Mr. Market's worries about this stock, I don't exactly believe those worries are worth obsessing about when considering the long term potential of this company. I also don't believe he should have hammered this stock into the ground to the tune of -33% return YTD as of August.

So what I'll do is dispute the top reason bears run from this stock in an attempt to provide some long term context to their short term woes.

Bears believe intensifying competition from new market entrants (SFM, Trader Joe's, etc) will increase competition and pressure WFM margins, thus diminishing profitability. They argue that the necessary reactions Whole Foods will need to make as a result of competition lowering product pricing will result in WFM not sustaining the amazing growth that they has thus far demonstrated.

Maybe they're right? But what is the reality?

I say welcome to the world of business. Whole Foods has definitely found themselves in a profitable market and has certainly come under fire recently due to the previously mentioned entrants. To be blunt, this is to be expected and is something we all need to just get over. It does not mean that Whole Foods cannot continue to expand and remain profitable while both reducing their costs and protecting margins. WFM's gross margin currently sits at about 36% compared to SFM's 30% and the industry's 25%. I state this only to illustrate that WFM has the ability to reduce their prices while also preserving growth, profits, and overall expansion.

A quote from Co-CEO Walter Robb sums this point perfectly. He said in their Q3 2014 earnings conference script "We are not suggesting a race to the bottom, but rather a thoughtful, strategic, surgical approach to improve our relative value positioning." This meaning, that they aren't overly concerned with sacrificing 1-3% of their current margins because they know they have the ability to remain profitable and competitive. I don't believe such a decline to be a problem when their margins are so much higher than competition and the industry as a whole.

Also, it is worth noting that WFM has an all star management team that is about to completely shake the industry with aggressive growth initiatives and its industry innovation. Whole Foods is currently implementing a 5 point plan that I'll very briefly detail below.

1. They are focusing on aggressive expansion and profitability. They've opened 44 new stores in the last 3 quarters all of which have generated over $500,000/week since. This is compared to a $700,000/week revenue generated by existing stores, and is an amazing turnover for a new store opening. They have 116 stores currently in the pipeline and plan on opening 38 more this FY. Also return on invested capital is about 15% for those who believe they are growing for growth's sake. They currently are on track for 500 stores by 2017 which they estimate will bring in $1 billion in revenues. They also have an end goal of 1200 stores in the U.S.

2. They're refreshing stores over 10 years old. Always good for company image and branding.

3. They're refocusing the company on value which was discussed above.

4. For the first time ever they are running their own advertising campaign. This point is HUGE. To this day, WFM has less than 400 stores and spend less than 1% on ads, yet they have national recognition. An ad campaign is an extremely large and beneficial step forward.

5. They are launching a home delivery (yes, HOME DELIVERY OF GROCERIES) system for their stores, customer pickups, and an online subscription service. These initiates haven't even been introduced to the public yet.

To sum this all up, I'll say this. Don't pay attention to Wall Street and their short term earnings visions. This is a long term growth play, at an extremely reasonable price due to its decline.

I say outperform - over 5 years

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Member Avatar JuanGatos (32.78) Submitted: 8/3/2014 3:14:13 PM : Outperform Start Price: $37.83 WFM Score: -2.19

Market where I live is always packed and the employees happy.

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Member Avatar cryptelligence (69.78) Submitted: 8/1/2014 4:25:16 AM : Outperform Start Price: $38.47 WFM Score: -4.03

Timing play.

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Member Avatar mlarms (27.77) Submitted: 7/31/2014 2:08:03 AM : Outperform Start Price: $36.51 WFM Score: +2.91

OK, OK enough playing time to prove them wrong

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Member Avatar RedandBlack (99.05) Submitted: 7/30/2014 10:47:29 PM : Outperform Start Price: $36.51 WFM Score: +2.91

Superior management with excellent capital allocation ability. I believe they still have a nice runway ahead and at today's price we are getting a great company at a good price.

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Member Avatar Tmcxpac (< 20) Submitted: 7/24/2014 9:34:05 PM : Outperform Start Price: $37.28 WFM Score: +2.02

3rd q profits will exceed expectations

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Member Avatar MarketMartian (55.78) Submitted: 7/23/2014 1:43:10 PM : Outperform Start Price: $36.62 WFM Score: +4.19

Recent decline provides buying opportunity. Risks of further price reductions and increased competition appear to be priced in and the square footage growth discounted. Private label growth may offset price pressure as well. 365 tortilla chips are good.

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Member Avatar d89 (61.44) Submitted: 7/22/2014 10:27:58 AM : Outperform Start Price: $36.53 WFM Score: +4.24

Silly market...

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Member Avatar TMFCavalier (63.19) Submitted: 7/16/2014 2:01:43 PM : Outperform Start Price: $36.78 WFM Score: +3.43

Although WFM was a leader in the organic food and healthy eating trend, it has recently found out that a lot of others stores have caught up to them and even surpassed them on prices. I think WFM will meet its competitors on pricing where it must while still innovating and expanding its store count. Its brand is strong and I think management will continue to lead WFM in the right direction.

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Member Avatar chippe99 (< 20) Submitted: 7/14/2014 10:25:35 AM : Underperform Start Price: $37.63 WFM Score: -0.84

people should short sell it to make money

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Member Avatar bIlluminati (29.85) Submitted: 7/12/2014 1:38:49 AM : Underperform Start Price: $37.90 WFM Score: -0.10

Margin contraction likely.

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Member Avatar DPGuinee (32.12) Submitted: 7/10/2014 6:08:09 PM : Outperform Start Price: $37.49 WFM Score: +0.40

Outperform - a bumpy patch of late, but prices will adjust, customers will remain loyal, and a reasonable growth plan (number of stores) will allow WFM to outperform for the next year.

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Member Avatar forrestn20 (45.75) Submitted: 7/10/2014 11:53:28 AM : Outperform Start Price: $37.89 WFM Score: -0.63

Well run company with room to expand. New pricing strategy will attract additional customers and improve proceeds.

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Member Avatar 2gud2btrue (82.06) Submitted: 7/10/2014 10:12:19 AM : Outperform Start Price: $37.58 WFM Score: -0.05

Looks intersting at this rate.

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Member Avatar TMFBwithbike (67.56) Submitted: 7/4/2014 9:28:59 PM : Outperform Start Price: $39.27 WFM Score: -3.31

Whole Foods is so much more than a grocery store...

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Member Avatar rivahrat (79.14) Submitted: 7/4/2014 12:37:05 AM : Outperform Start Price: $39.27 WFM Score: -3.31

WFM is a good company. At $39 it is priced to outperform the market. It has good management and devout customers. It has room to grow.

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