Whole Foods Market (WFM, Financial) is a chief natural and organic food retailer. It is operating through a chain of well-spread supermarkets in the U.S. Like every retailer, Whole Foods has been pretty volatile over the past few quarters. The company has primarily struggled due to increasing competition in the organic food market and has lost value in the last couple of months. The company is facing stiff competition from the likes of Kroger (KR, Financial), Walmart (WMT, Financial) and Sprouts Farmers Market (SFM, Financial).
Fighting off competition
As health awareness increases, the demand for organic food is also increasing. As a result, many retailers have entered the organic food market to compete against Whole Foods. This has given rise to extensive price war among the companies and consequently, Whole Foods’ margins have suffered. However, Whole Foods is sitting back and has responded to the challenges.
Whole Foods presently operates 417 stores, including the 11 new ones included amid the quarter. Besides, it sees open door for 1200 stores and has arrangements to hit the 500 mark before FY 2017. For financial 2015, administration is focusing on square footage development in the scope of 9%–10% as an aftereffect of 38-42 new stores, including 5-6 relocations.
The company’s growth plans bode well with the industry-wide trend as the U.S. organic food market is anticipated to grow at a compound annual growth rate of 14% from 2013 to 2018. The market potential is huge and the company’s expansion plans bode well with the industry-wide trends.
New brand
The organization has reported to open a chain of new stores taking after the dispatch of another brand. The rationale behind the new marked stores is to open a different window for expense cost-conscious clients and protect the Whole Foods brands' premium perception to hold the current quality-consious clients. The organization won't just make a feeling of separation, additionally growing the client base; it will also fuel revenue from high-to-mid wage level client group. Also, the organization has wanted to take after a minimal effort plan of action in the new marked stores, which will be upheld by outline adjustments and innovative backing for the in-store operations.
Conclusion
While Wall Street is bailing on Whole Foods Market, long haul minded investors can utilize the downfall to initiate a position in Whole Foods Market. Whole Foods, with industry-driving overall revenues and profits for capital, stays best in class among supermarkets. The company’s new branding initiative will bring in more cost-conscious customers and will add to its top line. The company should witness significant revenue growth thanks to this strategy.
The company’s beaten down valuation makes it a very attractive pick for the long haul. Whole Foods should benefit from its expansion plans in the foreseeable future. Hence, I think investors should buy Whole Foods Market.
