Whole Foods Market (WFM, Financial) ended the previous fiscal year on a strong note with robust performance in the fourth quarter. The company is witnessing favorable market conditions, which puts the company's expansion on track. The company is now working on some key strategic initiatives which are expected to contribute to its growth.
Strategic initiatives
Under its pool of strategic initiatives, the company is mainly focusing on its customers. It is engaged in expanding choices for the customers by also reinforcing its values as America’s healthiest grocery store. With every new store opening, Whole Foods Market is engaged in providing different customer experience in every store. It is making many innovations in this regard. Furthermore, this evolving and differentiated shopping experience is expected to be a key attraction to new customers, helping it to uniquely position itself in the market. This is a good sign for Whole Foods Market and with this it is expecting to hold a leadership position in the retail innovation.
This innovative approach by the company has been its key driver in the past as well. What makes it different from other stores in the market is its distinctiveness. The company has already banned the sale of 75 items which the other stores are selling. This approach reveals a concerned approach by the company to the customers which is a strong reason for attraction of new customers and holding the existing.
Investing in technology
To further enhance itself in the innovations, Whole Foods Market is investing meaningfully in the technology. Under this, it is well positioned to introduce its new and robust mobile app. This will further improve its customer’s digital and mobile experience. In addition, it is also putting efforts to unify its POS system. With this POS system, Whole Foods Market is trying to establish a common platform for a seamless buying experience. This will also be a good advantage for Whole Foods Market’s long term growth.
Moreover, the company is also focusing on keeping an attractive cost structure in order to improve its margins. In the last five years, Whole Foods Market has already achieved a reduction in the operating expenses by 180 points. The company is further thinking to improve its costs to maintain a healthy profit margin. Moreover, Whole Foods Market is also renovating its stores by brining décor updates, adding or remodelling venues etc. This is expected to benefit the overall comps.
Conclusion
With a trailing P/E of 34.21, the stock seems reasonable and the forward P/E of 27.66 indicates good earnings growth in the near term. However, in the long term the stock might disappoint marginally as its earnings for the next five years are growing at a CAGR of 12.67% which is just less than 14.31% of the industry. I suggest investors to pick Whole Foods Market now and for the long run, they should wait and watch for some concrete signs of the stock gaining market share.
