After struggling for months due to intensifying competition, Whole Foods Market (WFM, Financial) has finally started to resurrect. The company is making headway into the organic foods market and is fighting off stiff competition from the likes of Kroger (KR, Financial) and Costco (COST, Financial). The company’s recent quarterly result is a proof of its improving position and the company can continue this trend.
Financial Growth and Future Plans
The working atmosphere for Whole Foods Market has been challenging due to intense rivalry in the industry. The company has been taking calculated development initiatives by adding branded foods, reducing the prices and increasing advertising activity. The attainment of calculated development efforts were reflected in the company's 1QFY15 outcomes, as the company stated a strong performance.
In 1QFY15 results, the company’s comparable store sales and total sales escalated by 4.5% and 10% respectively along with square footage growth of 9.4%. Additionally, their 1QFY15 EPS of 46 cents rose by 9.5%, year-over-year, and overtook analyst estimations by 2.22%. Decline in gross margin by 20-basis point was marginally balanced by a 4-basis point enhancement in SG&A. WFM’s intention is to balance the impact of their calculated initiatives with developments in their price structure over the longer term.
margin was 8.5% and EPS improved 10% to $0.46. For the past eight quarters, average sales per square gross square foot of $709 has transformed the productivity levels of 82% on a weighted square footage basis in WFM’s new store classes.
Improving comparable store-sales
In the company’s last reports, the market was improving in on a same-store sales decrease in Q3. That number had originated in at 3.9% and was much worse than the past. The management did not provide a pure answer as to why the problem had arose, but they pointed that older stores weren't performing as well any longer. That plea came after Q2 when they claimed that value foods were causing problems with same-store sales as well.
Whole Foods is enduring to combine customer feedback as they are upgrading and adding new features to this program, and have newly added a number of new talent to lead their efforts in this region.
In Q1, they unfolded nine new stores mounting into Ottawa, Canada, and uplifting their brand with new hefty flagships in both Houston and Boston. After opening their first taproom in 2010, they now have above 100 taprooms and wine-bars companywide.
The demand for fresh healthy foods remains to rush and WFM is best placed to benefit as the top retailer of natural organic foods in America’s healthiest grocery store. The company is dedicated to continuing to progress and evolve. And with 400 Nat-stores and 116 signed contracts, they have confidence that they will cross the 500-store mark in 2017 and triple their store-base over the longer-term. They remain to see unit lift from the lower produce price they’re examining in several markets, which comprised external marketing to back these investments
Conclusion
Despite the fact that gross margins are falling, they are still by a long shot the most noteworthy in the business, at around 35% contrasted with 25% for the business. To a great extent on account of that high margin, and in addition reasonable money administration, Whole Foods is in the best money position of any of its rivals.
With just about zero debt, Whole Foods' operating income could cover its long haul debt more than 246 times. Contrast that with only 0.62 times for Sprouts, which has over $400 million in debt with just $180 million in operating income. These numbers are imperative when you consider that they make Whole Foods more agile as it looks to build its store tally. On the off chance that Whole Foods was attempting to forcefully construct by tackling debt that may be a worry. Rather, the organization is in an awesome financial position amid its current development - which incorporates arrangements to triple its store number by 2030. Thus, Whole Foods looks will continue to outperform despite stiff competition.
