Analyzing Whole Foods (WFMI)

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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