Financial And Other Initiatives
On the basis of net income growth from the same quarter one year ago, the company has significantly outperformed against the S&P 500 and exceeded that of the Food & Staples Retailing industry average. The net income increased by 20.7% when compared to the same quarter one year prior, going from $117.67 million to $142.00 million. Net operating cash flow has increased to $287.00 million or 12.20% when compared to the same quarter last year. Whole Food's revenue growth has slightly outpaced the industry average of 3.9%. Since the same quarter one year prior, revenues have risen by 13.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
A table is being provided below for different ratios of this Austin based company.
|Improved earnings per share||18.8%|
WFM's debt-to-equity ratio is very low, and is currently below that of the industry average, implying that there has been very successful managing of debt levels. The company maintains an adequate quick ratio to avoid short-term cash problems. The company has improved earnings per share in the most recent quarter compared to the same quarter a year ago. Over the past two years, WFM has demonstrated a pattern of positive earnings per share growth. It also increased its bottom line by earning $1.26 versus $0.97 in the prior year.
Whole Foods Market has taken a lot of steps in the right direction like launching new products and making opportunistic acquisitions. It has launched a new product line "Engine 2 Plant strong" of plant- based, minimally processed snacks, breakfast items and pantry staples in collaboration with Rip Esselstyn, author and founder of "Engine 2 Diet". WFM has also agreed to buy 6 stores, and planning to reopen them as Whole Foods' stores during 2013 followed by some e-commerce initiatives. It also has taken some initiatives like GMO labeling for seafood, welfare rating for meat, eco-rating in cleaning products etc. which are hard to replicate for its competitors.
There are certain threats for this high-end grocer. The company is heavily reliant on the U.S. market. If consumer spending declines or unemployment rises here at home, WFM has little opportunity to soften this blow by making up its sales elsewhere.
Another risk has to do with same store sales growth. With fewer than 400 stores nationwide, Whole Foods certainly has room to expand. This would normally provide a strong boost for a stock. However, as WFM has added new stores, same-store sales have suffered. This is going to limit the company's ability, and willingness, to expand if it cannot maintain sales in existing stores prior to opening new ones.
On A Concluding Note
The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, impressive record of earnings per share growth, compelling growth in net income and good cash flow from operations.
This grocer has very conscious management, high employee satisfaction, a simple but strong business model, good financials, and excellent growth opportunities. Other strategies are investment in price to broaden its consumer base, shrink control, supply chain infrastructure improvement, leveraging economies of scale. Overall I am pretty bullish about this grocer, and it won’t let its investors down.