Analyzing Whole Foods (WFMI)
Posted: November 21, 2006 at 4:20 am
By Yaser Anwar, CSC of Equity Investment Ideas
WFMI is to organic food market what SBUX is to the coffee market. Both portray, if I may say, a high end ambiance with focus on the customer, their shopping experience and one of the most important aspects- their employees (SBUX giving stock options even to temporary employees and WFMI taking lots of care of their employees too).
The Street is doing to WFMI what it did to SBUX. First they shoot the expectations to the sky, once a company , and one day they all fall short (even the mighty GOOG will one day) and Wall St. takes them to the cleaners.
A lot of people doubted SBUX’s growth, but they have constantly found new markets [i.e. China, Middle East etc], similarly I think WFMI will too.
Given that WFMI is the fastest growing public retail food chain in the US, I expect its shares to trade at a significant premium multiple to supermarket peers and the S&P 500.
Although the street anticipates a slowdown, rightfully so, in near term earnings growth due to a significant rise in expenses related to expansion plans, I continue to believe the company will lead the retail food industry in long-term earnings growth.
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